Buying a Home or Condo on Maui
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Buying a home or a condo on Maui is a big undertaking and to be successful in the endeavor, it requires a great deal of information to make an informed decision. Maybe this is your first time or perhaps you’re a seasoned real estate veteran with a diverse portfolio of properties.
Whether you are looking to buy your primary home, a vacation home, or an investment property, buying on Maui comes with a list of important items to consider along the way. The following list will help you to take charge of your finances, understand your budget, and determine the right area, community, and realtor that can best help you.
When it comes to buying a home or condo in Maui, being familiar with the island and the various areas and communities within them is also important. If you are not local to Maui, then connecting with an experienced Maui realtor, like myself, early in the home buying process is crucial. Now with the buyer representation agreement required before viewing properties anywhere in the US, selecting your buyers agent is more important than ever.
Once you have made the decision to pursue a property purchase on Maui, these following 10 steps will get you started in the right direction.
Know Your Buying Power
Before jumping into a huge purchase like a home, you need to have a solid grasp of your buying power. To start off, let’s talk about debt and savings. If you have a lot of debt and very little savings then turning this around first would step number one. Homes are a costly investment, even after the purchase. There is always maintenance, repairs, renovations, and more. Not to mention that you need more than a down payment. Closing costs and moving expenses also add up fast. The easiest way to know your buying power on Maui if you're not a cash buyer? Speak with a local Maui lender.
Often you can get a down-payment as low as 3% if you're a first-time homeowner. However, you may need 20% or 30% down, especially if you're buying a condo at a short term rentable complex such as Papakea or Wailea Beach Villas. Banks typically recommend that buyers aim to purchase a home that is not more than three to five times their annual income. Especially so if they are making a 20% down payment. Unless you inherited the property or are paying cash, you'll want to look at financing.
And yes, this is not the most exciting part of home buying but it is essential. If you fall in love with a home and over-extend yourself, it’s a recipe for stress and often disaster. So, taking the time to truly evaluate your finances is crucial.
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Get Pre-Approved For a Loan (If You're Not Paying Cash)
The earlier you get pre-approved for your mortgage the better. Knowing how much you can spend is the base point when looking for a home. In order to get pre-approved, you’ll need to have a conversation with your local mortgage broker about your income, your savings, and investments. Once all your financial information checks out then your bank will be able to tell you how much of a loan you are approved for. This number represents the price range of the homes you can look at.
Before you can be pre-approved, you’ll want to understand the various mortgage options. There are several different mortgage options and knowing which is right for you is an important step. Here are some options to consider:
- A fixed-rate conventional loan: With this option, your interest rate is secured throughout the life of the loan. This means that even if interest rates go up, you are protected and the rate of your loan remains constant.
- A 15-year term: In this option, your mortgage payment will be higher within those first 15-years. However, the bonus to higher payments at the beginning is that you’ll pay your mortgage in half the time of a 30-year term and save thousands in interest in the process.
- Monthly payment of a maximum of 25% of your monthly net pay: This is a smart option because it ensures that you won’t be committed to paying amounts that leave you cash strapped. You can still pay your mortgage and have room in your budget for everything else that life brings up.
It’s never too early in the game to get pre-approved and it shows potential sellers that you are a serious buyer.
Determine Which Communities You Prefer
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This is where the research becomes fun! Knowing what you are looking for in a home and finding potential communities that have the items on your list will save you time once you start visiting homes. A good way to start is to make a list of everything you know you like and the things that might be of interest to you. In the case of buying a home or condo on Maui, many particulars come to mind.
Are you or your partner an avid golfer? There are many stunning golf courses on the island and several communities built around them. Do you prefer the beach? If so, is it a surfer’s paradise or a quiet secluded beach that fits you best? How much privacy is important to you?
The answers to all of these and many more questions will help you to narrow down your search. There are many nuances between the different communities on Maui, the homes for sale in Kihei are much different than the homes for sale in Paia, and so is the lifestyle.
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Contact a Maui Realtor
Finding the right home simply cannot be done without a realtor. In fact, it’s one of the most important steps when buying a home or condo on Maui. Having a real estate agent like Evan Harlow at Coldwell Banker Island Properties on your side who is familiar with the Maui market and can advise you on all the best options within your price range is best.
Narrowing down your search early on and committing to a realtor right out of the gate will be beneficial for you as a buyer. A realtor’s knowledge of the Maui areas, communities, and experience working within them is crucial. As well, realtors ensure that your investment is well protected and you pay the best possible price for your home
Make An Offer
When you have seen enough homes and are confident that you have found the one you want to make an offer on; then the time has come for your realtor to write the purchase contract. You’ll want to negotiate an offer that is based on comparable sales in the area, the current real estate market on Maui, and with terms that best protect you as a buyer. Then once an agreement has been reached, the home will go into escrow.
When you are ready to make an offer, your realtor will guide you so that your offer is a solid one. This is one of the advantages of having a strong real estate agent on your side. Emotion is removed from the context and they help you to submit the best possible offer and negotiate the terms.
It will also include details such as:
- Information on both the buyer and the seller
- The address of the property
- The purchase price, bank information and down payment amount
- The amount you will be making for the deposit
- Inclusions such as appliances, furniture, light fixtures, water tanks, etc…
- Contingencies such as the home inspection, appraisal, and final mortgage approval
- Official closing date
Negotiate and Get Your Offer Accepted
Not all offers go through right away and sometimes, it’s a tough ride. Typically, the seller will want to negotiate the price that you offered. This is to be expected. Therefore, when you make your offer know that this will happen and make your offer accordingly. Your realtor should know the Hawaii purchase contract backward and forwards as there are many ways to use it to your advantage to win the property.
When and if things start to get strained between the two parties, it’s important to remember that everyone involved, is actually looking for the same outcome. However, in order for that to happen, everyone also needs to be flexible and often meet each other halfway. This is where your real estate agent will be able to guide you. Sometimes the right answer is to hold firm on your demands but other times, it’s best to relax and accept a compromise.
Doing Your Due Diligence When Buying Maui Real Estate
Doing your due diligence is essential to buying a home and not getting stuck with problems down the line. When your home is in escrow, it is your time to make sure that there aren't hidden defects or issues with the property that could affect the value.
Generally, purchase offers are contingent on having a home inspection. Inspectors check for anything that needs fixing, structural damage as well as potential hidden defects. Typically, you’ll want to have an inspection booked not long after your offer has been accepted by the seller. Having this contingency protects you as a buyer because it gives you the opportunity to withdraw your offer should the inspector find issues with the home.
After the inspection, you and the seller will receive a report and then you can decide if asking the seller to fix a few things or perhaps re-negotiating the price is in order.
Beyond the inspection, we will review the seller's disclosure with more details about their ownership and we will also review any applicable condo or home association documents that could reveal future costs such as assessments, repairs, and maintenance fee increases.
Complete the Steps of Finalizing the Loan
At this point, you will be seeing the light at the end of the tunnel and it’s an exciting prospect! But there are still a few final steps to go before moving day.
If you have applied for a loan, the bank will require an appraisal to evaluate the value of the property. The value of an appraisal is that it protects you from paying more than the market value. If the bank’s appraisal ends up being lower than your offer, your realtor will guide you through the process of renegotiating or you'll need to pay the difference in cash.
It’s time for your final mortgage approval. Obviously, the best way to pay is in cash but that’s not always practical for many people. Therefore, the bank will now go through all your financials again and give you your final mortgage approval. In the beginning, you received a pre-approved one but nothing is final until this last step. Make sure that there haven’t been any drastic changes in your financial situation that would hinder this step.
Sign All Necessary Paperwork in a Timely Manner Along the Way
All home sales have several stages of escrow and responding in the appropriate timeframe is imminent so that you can close on time. This means a lot of paperwork coordination that needs to be done in a timely manner. Any delays could cause the deal to be out of contract, but with an experienced agent you'll never have to worry about that..
Closing Day! Get your keys and move in.
Closing on your new home is exciting but it’s also the time to dot all the i’s and cross all the t’s.
The following is a list of the documents that you will receive and be expected to review before the closing day:
- All closing costs
- All property taxes
- The homeowner’s association fees -if this applies to your condo or community
- Your homeowner’s insurance
A trip to the escrow office, or having a mobile notary come to you, will have you signing all the documents to complete the purchase as well as for your loan. A few days will be needed in order for your loan to be funded. Then once your check has been given to the seller, you are done and ready to go!
Once this last step is all said and done, you will be ready to move in!
Buying a home on Maui can be a fun process, but there is a lot to consider. In order to make it an enjoyable experience and not a stressful one, it helps to go through each of the above steps with care. Taking the time to have your finances evaluated, working within your budget, and with a realtor who has your best interests in mind, are all key factors.
Get In Touch With Evan!
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Evan Harlow ranks among the best real estate agents on Maui annually and is in the top 1% of Coldwell Banker agents worldwide in production. Evan has the expertise, experience, and work ethic to help you achieve your real estate buying and selling goals. We promise exceptional service and support from the beginning of the process through closing and beyond. See what Evan's clients are saying on Google.
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