When purchasing real estate in Hawaii, much of the process it the same as it is on the mainland. Namely, you are still likely to need to secure financing, to complete certain inspections and to go through a very similar closing process. There are, however, a few terms and scenarios that are largely unique to Hawaii and, therefore, should be addressed before you begin your search for the perfect Hawaii home. In this way, you will be better prepared to select the property that is best suited to you.

Understanding Fee Simple Vs. Leasehold Real Estate

Perhaps the one feature about Hawaii real estate that is most confusing for people who are new to this particular market is fee simple vs. leasehold real estate. If your real estate experience has thus far been limited to purchasing a property on the mainland, you are likely only familiar with purchasing a fee simple property. With a fee simple property purchase, you are given ownership of the structures as well as the land on which they sit. This means you can do what you like with the land, including selling it, giving it away, trading it, leasing it or passing it on to someone else in the event of your death.

With leasehold real estate, you do not own the land when you purchase a home. This means you only have the right to use the land for a pre-determined amount of time. In addition, if you transfer the land to a new owner, the new owner only is only allowed use of the land for the remaining number of years provided under the original lease agreement. At the end of this period, the land reverts back to the lessor and, in some cases, the buildings may also revert back to the lessor. It is quite common for property in Hawaii to be leasehold real estate. Therefore, you need to learn more about the type of ownership as well as when the lease will expire on a leasehold property before you make a purchase in Hawaii. 

Watching for Lava Zones

Lava zones are also a feature that is mostly unique to Hawaii. These hazard zones are identified based on the location and frequency of historic and prehistoric eruptions. If the property you are interested in purchasing is located in a lava zone, you may have difficulty finding a lender who will provide you with a loan. 

Locating a Local Lender

While it is not a requirement to use a local lender, it is generally considered the best practice when purchasing real estate in Hawaii. This is because Hawaii is a “Good Funds” state, which means the title company needs to have physical possession of the funds before the transaction can be completed. Since mainland banks sometimes do not wire the funds until the actual closing date, you could run into delays if you do not choose a local bank. Therefore, it is a good idea to discuss your financing options with a local Realtor before you start your search.