Anytime you sell a property, closing costs are one of the biggest expenses that can make it difficult to calculate exactly how cash you will actually walk away with. In today’s market we’ve been getting a lot of calls from sellers wanting to take advantage of the current market and get the most for their property. But after listing their home or condo with a Realtor they were disappointed to learn that a big chunk of that high sales price was going to be eaten up by commissions, closing costs, and sometimes taxes. Hopefully I can help shed some light on this topic by sharing some of what I’ve learned after 15 years in the real estate business.
How much will I pay in Realtor commissions to sell my condo on Maui Hawaii?
First and most notable are commissions. For most sellers, calling a Realtor is the best option. But it’s not the best option for everyone. There are many situations when a seller could benefit greatly, and often get more net cash in their pocket by selling directly to us off market. Realtor commissions in Hawaii are almost always either 5-6% of the gross sales price. So if you sold your house for $950,000 for example, you’d be paying around $57,000 just in commissions! Again, if you’re not in any hurry, and living in the house in the meantime, and the house is fully renovated or new and in move in ready condition, then this might be the best option for you because you can put the house on the market and wait until the right buyer comes along that just falls in love with your house particularly over all other options and is willing to pay top dollar for it.
Most of the time that buyer will need to get a mortgage, and in Hawaii getting a new mortgage to buy a home typically takes between 45-60 days. But keep in mind that lenders have been getting increasingly stricter about who they lend to, and there are many reasons a buyer might not qualify even if the lender initially preapproved them for the loan. So you have to be ok with the possibility that you might find out a week before you thought the sale was going to close that the buyer was denied their loan and cannot buy the house. The lender may also require repairs to be made before they will approve the loan, and you as the seller would need to make those repairs or the sale could cancel.
Lastly, the bank will need to see a professional appraisal showing that the appraiser agrees that the house is worth the sales price amount. Appraisals alone are taking on average between 5-8 weeks in Hawaii currently, and because prices have increased recently, many appraisers are valuing the property based on the sales over the last 3-6 months, or sometimes even 6-12 months, so if those older sales were going for around 750k, the appraiser might not care that there was one house that sold recently for 900k, even if your house is more desirable. This process can be frustrating. But again, for most sellers that aren’t in any hurry, it’s often the best choice.
If you’d rather get the sale done quicker, call Maui Home Buyers. Most of the time can make you an offer within a matter of hours, and if you need or want the sale to close fast we can close as quickly as 10 days. The only reason we can’t close sooner is because the title company usually needs 10 days just to prepare the title for transfer. With us you won’t need to make any repairs, wait for an appraisal or a loan to get approved, and most notably, you won’t pay any commissions! So the price we offer is what you actually get!
How much are closing costs to sell my house or condo on Maui Hawaii?
Closing costs can range from a few thousand dollars to tens of thousands of dollars when selling a house or condo in Hawaii. We bought a condo in Lahaina a couple years ago and we paid over $17,000 in closing costs! And we’ve bought houses for all cash where we paid even more in closing costs! At the same time, we’ve bought condos with only $4,000 in closing costs. It all depends on the property and the terms of the sale.
Some of the variables that effect the amount of closing costs are:
Sale price – the escrow fees, title fees, conveyance fees, etc. all increase drastically as the price gets higher.
Inspections, surveys, cleaning, appraisals, engineer reports, lawyer fees, notary fees, recording fees, etc. – these are just some of the other expenses that are often included in closing costs.
When you sell a house in Hawaii you’ll almost always have to pay for things like a survey, which typically costs around $1,000 and shows the buyer details of the property, like where the property lines are. Another expense that’s easy to forget to factor in is the cleaning; the purchase contract used by Realtors in Hawaii requires the seller to have the entire house deep cleaned by a professional cleaning company with all carpets shampooed and receipts provided to the buyer as proof. For a small clean house this might only be $500-1,000. We recently sold a medium sized house in Kahului and we spent a week doing most of the cleaning ourselves so the cleaning crew would be cheaper, but the deep cleaning was still over $3,000! So again, these costs can vary greatly.
I mentioned the Hawaii Association of Realtors Purchase Contract above and wanted to expand upon that a bit. The HAR PC is a 14 page document that outlines all of the terms of the sale. All Realtors are required to use this document when they help someone buy or sell a house. However it may not always be in your best interest. This document is considered to be very “buyer friendly”, meaning that it provides a lot of benefits to the buyer, but not so many to the seller. For example, if you’re selling a condo you’ll be required to purchase “condo docs” from the AOAO management company that disclose everything the buyer needs to know about the association, including the financials, CC&Rs, house rules, board of directors meeting minutes, and more. These condo docs often cost over $500, and are usually only valid for a matter of weeks. The buyer then has the right to cancel the sale after reviewing those docs, but you as the seller still have to pay for them! At Maui Home Buyers we offer an alternative. Since we are not licensed Realtors we are not required to use this purchase contract (unless the seller would like to). Instead we almost always use a very short and simple one page word document that outlines the sales price, terms of the sale, closing date, and any other terms we agree on.
It’s common for the buyer to pay for the home inspection in Hawaii, so sellers usually don’t have to worry about this expense, which typically runs around $1,000-2,000 depending on the property. However another one of the biggest expenses sellers often face are repair costs. Even if your house looks good, and is in good working order, a home inspection will invariably pinpoint a long list of problems. Usually it’s a combination of these things: repairs that are needed, unpermitted work that has been done to the home, and anything that is not up to code (for example there’s a good chance your breaker panel won’t meet with the inspectors approval, they are very strict about demanding that all aspects of the home be completely up to date, no matter how unrealistic that may seem). The inspector will provide a report to the buyer, which is often 50-80 pages long and explains everything that needs to be fixed, permitted, or brought up to code along with pictures. At that point it’s customary for the buyer to forward this report to the seller requesting that the seller either have all of these corrections performed, or credit the cost of the repairs back to the buyer at closing. This means that if you agreed to sell someone your house for 725k, and they estimated that the issues found would cost 47k to address, they could get a credit for the 47k back at closing; so the sales price might as well be 678k. Since the buyer just gets that money right back. If you refuse, the buyer may simply choose to cancel the sale and walk away. This is another reason why listing your condo or home for sale is a great option for someone who’s home is brand new or has just been fully renovated, because if you hired a reputable General Contractor the you should have a very short list of repairs needed. If you sell to Maui Home Buyers you don’t have to worry about this. We have seen and bought enough homes to have a pretty good idea of what kind of repairs we’ll need to make, so we can just factor that in to our original offer up front. In fact, we almost never even hire a professional home inspector! We consider all of the costs that we already know we will have, we calculate them all for you so there’s no guessing games, and we make you an instant all cash offer to sell your condo or home as is, and you can rest assured that you will actually be getting that amount of cash when the sale closes!
Similar to commissions, there are many times when a seller might not mind paying closing costs. But if you’d prefer to not have any closing costs you should consider calling Maui Home Buyers. We’ll make a quick all cash offer to buy your house or condo completely as-is, with no repairs, vacant or with tenants, we can close as fast as you’d like, and we can pay all of the closing costs for you so that you know the number we agree on is the exact amount of cash you will receive in your pocket on the day we close!
How much tax will I pay to sell my house on Maui Hawaii?
There are two main tax expenses that are deducted from your proceeds at closing. Conveyance tax and HARPTA/FIRPTA withholding.
The first is conveyance tax which every seller has to pay. It’s also based on the sales price, and can be easily calculated. But for most properties in Hawaii it’s often somewhere in the range of $1,500-3,000. The good news is we can also pay that for you if you choose to work with us here at Maui Home Buyers.
The second is HARTPA/FIRPTA, which only applies to sellers that are not residents of Hawaii, and it is not actually a tax, it’s a withholding. So don’t get too scared by this one, it’s just a way for Hawaii to make sure that when someone that doesn’t live here sells a house they pay any taxes they owe when they file their tax return. If you have been paying all of your taxes, then there’s a good chance you will get all or most of the withholding back in April. There’s also a form you can submit to get the withholding back sooner. But again, this only applies if you are not a resident of Hawaii.
Conclusion
There are many expenses associated with selling a house, condo, or even vacant land on Maui, or anywhere in Hawaii. You can make a general estimate, for example you could just calculate that you will end up paying about 10% of the total sales price between commissions and closing costs; but you never really know exactly how much your expenses will be until you’re ready to close the sale.
If you want to sell a house in Hawaii without paying closing costs, commissions or taxes call us today. Often sellers find themselves saying “I need to sell my house but I don’t want to pay commissions and closing costs and I don’t want to make repairs or kick out the tenants”, but they don’t know where to turn. Well that’s where we come in! We’re happy to help, it’s our job! Call us now for a quick all cash offer to sell your house in Hawaii for all cash, as is, without paying any commissions or closing costs – what do you have to lose? There are absolutely no obligations.. in fact, we can tell pretty quickly if our service is a good solution for what you’re looking for and if it’s not the best solution we won’t waste your time; we’ll say so and we will even refer you to other companies that would be a better option for helping you sell your condo/house on Maui now.
I hope you’ve found this article helpful. If you have any questions or any other topics you’d like us to write about please feel free to reach out and let me know! I’m very passionate about real estate, and even more passionate about helping people! So I love to share the things I’ve learned from my experience working in real estate.
Disclosure: I am not a licensed Realtor, CPA, or attorney, and thus no statements, opinions, or facts in this post shall be considered real estate, tax, or legal advice. I am only sharing what I have learned in an effort to help others understand this complicated process and hopefully make it just a little easier on you.