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Real Estate FAQs

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Free Simple vs Leasehold

Fee Simple (aka Free Hold) is the most complete form of ownership and most common throughout the United States and the Hawaiian Islands. Fee Simple ownership includes the land and the buildings. A Fee Simple condominium includes the actual condominium unit, and the proportionate interest in the land underneath plus the proportionate interest in the common and limited common elements of the project. Common elements could include the lobby, elevator, walkways, swimming pool, etc.
Fee Simple owners are responsible for their property taxes and sometimes association dues and or maintenance fees in case of a condominium. The vast majority of all Honolulu properties are Fee Simple; however, Leasehold properties remain.

Leasehold ownership only includes the buildings, but not ownership of the land! A Leasehold condominium includes the actual condominium unit and the proportionate interest in the common and limited common elements of the project but not the ownership of the land. Someone else (the fee owner) owns the land and the Leasehold owner only leases (rents) the land at terms defined in the lease document. Leasehold properties, at first sight, may appear very affordable, but remember, the value of the land is not included.

There is a considerable risk of not owning the land underneath: Leasehold owners pay a monthly lease rent to the landowner. Per the terms of the lease, the lease rent could increase over time and is payable above and beyond the property taxes and any possible association dues or maintenance fees. Per the terms of the Lease, there may be restrictions on property usage, alterations, and maintenance.

Financing for Leasehold properties could be more difficult depending on how short the remaining lease term is. The terms and details of the Lease can vary for different properties and the risks of ‘Step-Up Lease Rent’, ‘Lease Renegotiation’, and ‘Lease Expiration’ need to be carefully considered. On occasion, the landowner may offer the land for sale (Leased Fee Interest), but often at a high ‘take it or leave it’ price. On occasion, a Lease may get extended but sometimes at less favorable modified terms.

Leasehold ownership could be more of a lifestyle choice. The investment aspect is speculative at best with many unpredictable variables. Make sure you understand the terms of the lease before signing on the dotted line. Depending on the surrender provision in the Lease, at the time of lease expiration, the landowner may take back the improvements and buildings on the land (reversion). Leasehold owners need to be prepared for this worst-case scenario of surrendering their interest in the building or condominium. In short, ‘move out and give it all up!’ Remember, Leasehold after all means you are just renting the land.

Why Get Pre-Approved?

There are many reasons to get a Hawaii Mortgage pre-approval. Here are a few of the most important ones:

Pinpoint Your Buying Power: While there are many reasons to get pre-approved before you start shopping for a home, the most important and practical reason is that you will get an accurate idea of how much home you can afford. This will allow you to narrow your search to the homes that actually fit your budget. The home search process can feel overwhelming, we don’t want you to waste your time and energy looking at homes that don’t fit your budget.

Put Together a Game Plan: One common thing we hear from potential borrowers is “I think I need to work on my credit first.” If you are not sure if you can qualify for a loan, that is even more reason to start your home buying journey by speaking with East Oahu Properties professional. Even if you don’t qualify for a loan right now, by talking with us and connecting you to a mortgage professional you can at the very least find out where you stand and what hurdles you may need to clear before buying a home.

Another comment we hear is “I’m not going to be ready to buy for another 6 months or a year, so I don’t need to talk to a lender yet.” The pre-approval process is free and doesn’t take much time to complete. Even if you are not ready to buy now it is still a great idea to get pre-approved or at least pre-qualified just to make sure that you will be ready when the time comes. In some cases, we will be able to identify potential red flags or “hurdles” that need to be cleared prior to buying a home and that extra time will allow you to put together a solid game plan.

Strengthen Your Offer: In today’s “Seller’s Market” it is very common for a seller to receive several similar offers from seemingly qualified buyers. In these cases, the seller and their East Oahu Properties Realtor have to decide which offer they should accept. One of the main factors in their decision-making process is the “strength” of the buyer.

When comparing offers on a home, we will consider a buyer with a pre-approval letter much “stronger” (less risky) than a buyer who just provides a pre-qualification letter with their offer. Because the pre-approved buyer has provided documentation to verify the accuracy of the information provided in their loan application, the lender is able to run their loan application through an automated underwriting system.

This extra step allows the lender to confidently state the “buying power” of the borrower. We always want the best outcome for you!

Who Pays Closing Costs?

“I have my down payment saved, I am ready to start looking.” is something that buyers say often. Most first-time home buyers and even some sellers forget they need to save a nice chunk of change for their closing cost.

Closing costs are fees and charges due at the closing of a real estate transaction. They are usually anywhere from 1-4% of the purchase price. Closing costs are different for buyers and sellers in every transaction. You can try to negotiate and ask the seller to pay for a portion of your closing costs, but it’s unlikely you’ll get out of paying them altogether.

Cost Included?

Below is an example of the verbiage from a Purchase contract:

Charge to Buyer, if applicable:

  • 40% of the premium for standard coverage title insurance and any additional costs relating to the issuance of extended coverage policy (including a lender’s policy)

  • Cost of drafting mortgage and note or agreement of sale

  • Cost of obtaining Buyer’s consents

  • Buyer’s notary fees

  • All recording fees except documents to clear Seller’s title

  • 50% of Escrow fee

  • Condominium and Association ownership transfer fees

  • FHA or VA discount points and any mortgage fees


Charge to Seller, if applicable:

  • 60% of the premium for standard coverage title insurance

  • Cost of drafting conveyance documents and bills of sale

  • Cost of obtaining Seller’s consents

  • 50% of Escrow fee

  • Seller’s notary fees

  • Cost of required staking or survey

  • Recording fees to clear Seller’s title

  • FHA or VA mandatory closing fees

  • Conveyance tax

  • FIRPTA (Federal withholding tax)/HARPTA (State withholding tax)


Closing costs can easily add up. It is always a good idea to account for these costs when planning on saving for the purchase of your next home. If you would like to know how to get an estimate on your closing cost, per your specific transaction, please email us. 

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