What Canadian Buyers Need to Know When Buying in Hawaii

In addition to what every buyer needs to know when buying in Hawaii, here are a few tips and items Canadians should be aware of. 

If you have some additional items or comments, please email us at barb@alohapotts.com. 

Title and Escrow

In Hawaii we use title companies and escrow officers to handle the transfer of the property, including the deed.  This is different from the process that you are used to in Canada.  The escrow officer, in addition to you Realtor, will communicate with you regarding issues of title, signatures, sometimes inspection time lines and other issues dealing with ownership and title.

This process can take 45 to 60 days or longer to complete. 

Fees

There are a variety of fees and taxes that are customary in the US that you may not be used to and are in addition to the purchase price.  These may include:

• Escrow fees
• Title insurance
• Appraisal fees
• Attorney fees
• Inspections

Your Realtor should be able to give you a breakdown and estimate of all the fees that apply to you and your transaction.

Loans

• Mortgage Rules are different in the US where you can finance up to 30 years or more.
• Lenders must be licensed in Hawaii, so you can’t use a Canadian lender to finance a Hawaii  However, you can get a loan such as a second on your home, in Canada and use the money from that loan to make a cash purchase in Hawaii. property.
• Do you have established good US credit?  If so, that could make the lending process go more smoothly.
• Canadians typically need at least 30% down to get a loan.
• Canadians also typically pay ½ to ¾% higher loan rate than standard domestic buyers

Tax Issues

• Non-US citizens are subject to FIRPTA (Foreign Investment in Real Property Tax Act of 1980 http://www.irs.gov/businesses/small/international/article/0,,id=105000,00.html ).  The act requires that 10% of the amount realized from the sale to ensure US taxes on the gain are paid.

• HARPTA  is sort of the Hawaii state version of FIRPTA.  In the case of HARPTA, 5% of the amount realized by a sale
  

• I’m looking into this further for details, but I understand from Resort Quest and our clients that there is withholding on rental income to assure that US taxes are paid.

• All foreign investors will need a TIN number in the US. If they are not renting out their property they may not need this immediately, however it will be required when they sell the property.  Pam Teal of Island Title recommends Canadians get the TIN at the time of purchase.
  

Signing Documents

Some documents will have to be notarized by a US notary.  The instructions will likely direct you to do the signing at the US Embassy.  That will likely require scheduling an appointment and can be time consuming.  It may be simpler to make the drive across the border to a notary in the US.

Utilities

If the utilities are to be in the name of the new foreign owner, as opposed to a condo-tel, Maui Electric will require notarized ID’s in order to open an account.

Terms and Definitions

Strata fees = AOAO fees        

Subjects = contingencies:  I’m told that in Canada they typically remove the subjects within 7 days.  Our contingency and inspection periods can be much longer. 

As is - I’ve heard that in Canada when a home is sold the seller must bring all aspects of the home up to code.  In Maui, the seller is supposed to disclose anything that is not “in compliance” and the home inspector may identify items that do not meet current code. 

Thanks to Pam Teal at Island Title.

Special thanks to the best Real Estate Team in Greater Vancouver area, Team Josh Bath, Matt, Terri and Josh.

Call 808.344.5008

barb@alohapotts.com