A Broker’s Standard Addendum is designed to reduce the liability for the Broker.

For example, paragraph one of the OahuRE.com Standard Addendum states that Brokers are released from any liability in areas in which professional services have been recommended and where we are not experts. The termite inspection is an example of this. We always recommend a termite inspection from a professional inspector, and we are not qualified to do one. The termite inspectors are really good and I can’t remember ever having a home with live termites where tenting was not recommended because the inspector did not notice the infestation, but if a mistake was made we are not liable as the buyer picked the inspector and the inspector would be liable for any mistakes made. Inspectors normally have a clause in their contract that states their liability is capped at the total amount spent on the inspection, and I have seen cases where the home inspector refunds the inspection fee.

The Standard Addendum also gives the buyer some more ways to cancel, which again reduces the liability for the Broker.

For example, if the termite inspection finds a live infestation or damage the buyer could cancel the contract. This right is the OahuRE.com Standard Addendum, but not in the standard Hawaii Purchase Contract. This right is important because buyers might be uncomfortable with the extent of the termite problem the inspector finds and should have the right at that point to cancel.

Another area we want to make sure the buyer has the right to cancel if they can’t get the loan. While the Hawaii Purchase Contract also gives them this right, it is a bit confusing as there are certain dates that must be met, and if one is missed the seller could claim they waived the financing contingency and try to keep the buyer’s deposits even when they can’t get the loan. On the OahuRE.com Standard Addendum, we give the buyer the right to cancel if the loan does not come through or the appraisal is low and we do not restrict the time period they can do so. This means the seller can’t claim the buyers lost their right to cancel because they missed a deadline in the Purchase Contract.

In many cases the seller’s agent will counter the offer to replace our Standard Addendum with their own Standard Addendum which they are more comfortable with. We do not have an issue with this. It happens a lot, and the buyer still has all their rights to cancel built into the contract and I have not seen any Standard Addendum that removes the buyer’s right to cancel and get their deposits back as stated in the Hawaii Purchase Contract.

If there are any special assessments that being paid monthly paragraph F-8 is very important. Buyers will want sellers to pay any lump sum assessments prior to the Acceptance Date. They might want sellers to pay off any special assessments they are paying monthly on.

Sometimes this can be a lot of money depending on the size of the assessment, so if there is a special assessment being paid monthly sellers might want to ask that the buyer keeps paying that assessment after closing rather than paying the entire assessment at closing.

Reviewing this is critical because you don’t want to think the buyer will keep paying the assessment, then once in escrow you find out you need to pay $10K to $20K extra to pay off the special assessment.

Regarding paragraph c this rarely happens but if it does and an agreement is not reached the buyer has the right to cancel and get their deposits back.

If the 2nd blank is checked then a professional cleaning is needed for the entire home with receipts provided to prove it was done.

If the 2nd blank is not checked then only the carpets need to be professional shampooed. The other cleaning items can be done by the seller or a professional cleaning service.

We suggest using a professional service even if it is not required. Sellers have enough to worry about without having to worry about cleaning, and many buyers are not satisfied with the cleaning that sellers do themselves.

We always check K-2 for our buyers. It is a complete survey. K-1 is normally NA. For condos surveys are not possible. If the home is a CPR sometimes surveys are possible and sometimes they are not possible.

K-3 Boundary Encroachments

If a property has encroachments most of the time to buyer will continue anyway.

Most encroachments have been in place for years without an issue, so the new buyer will accept them.

Sometimes they want the seller to try and get an encroachment agreement and if so the attorney at escrow can draft one.

Encroachment agreements are not automatic, the neighbor must sign it, and many times they are not willing to do so.

The buyer can terminate the Purchase Contract if they are not comfortable with the encroachments and the seller is not able to get an encroachment agreement signed by a neighbor.

Paragraph J-8 shown below dictates when your stuff needs to be out, but it specifically says you can stay there until closing, although with all your stuff out of the house it is more like camping in your own home should you decide to stay until closing.

Some agents will say 5 days for J-8 as they want to conduct the final walk through with everything out of the property.

Before sellers plan to move out they should have their agent confirm the closing date. If the buyer decides they need an extension to close, there is no sense moving out 5 days prior to closing. For example, most extensions are 10 to 15 days and the buyer can automatically choose to extend. If there is a 15-day extension, and the seller moved out 5 days prior to closing, now the seller is out 20 days prior to closing. As there is no guarantee the buyer will close, moving out too far ahead of time could be an issue if the buyer ends up not closing.

Each seller has to make the decision on when to move out based on the contract and based on their personal situation in terms of where they are moving to.

Unfortunately there is a risk for sellers if they do fall out of escrow they could end up paying rent at their new place plus their mortgage payment, or 2 mortgage payments if they bought a new home. To prevent the two mortgage payments situation many sellers make the purchase of their new home contingent on selling their current home. This way if the home they are selling falls out of escrow, they are not obligated to buy the new home.

Additional Search Terms: Removal of Items from Property, J-8, J8, trash, junk, personal belongings

Escrow is most likely to fall out during the inspection period, but that happens early on in the escrow, normally within the first 2 weeks. After the inspection is approved and you are getting close to closing the most common reason escrow is cancelled is using the financing contingency.

Simply put, if the buyer can’t get their loan there is no way they can close. As long as they have not breached the contract prior, they can cancel and get all their deposits back.

This type of cancellation is the most frustrating for the seller, because the seller might have already moved out, rented or purchased another place, or maybe has a place in escrow and is counting on the funds from the home they are selling.

As bad as it is, there is really nothing that can be done when the lender says they can’t fund. You could look for another lender, but most likely the same reason the current lender can’t fund will come up and be an issue with another lender too.

One would wonder how the buyer got pre-approved only to find out they now can’t get the loan. Various factors can contribute to this, such as job loss, change of jobs, surprise on the tax returns, surprise liabilities, low appraisal, etc.

So what can a seller do to prevent falling out of escrow at the last minute from the finance contingency?

Typically the more money a buyer is putting down the less likely they are to fall out. Also you want to make sure you have a pre-approval, hopefully from a local lender, and you want to make sure they meet all the finance contingencies on time.

The biggest contingency is the conditional loan commitment letter. If this is late it could be a sign that the lender is having trouble committing to the loan and the reason it is late should be looked at closely.

We use 12 days before closing for the buyer to get the conditional loan commitment letter.

Getting a conditional loan commitment letter on time is one thing that is out of the buyer’s hands and relies on the lender.

Keep in mind if the lender is going to be late an extension must be requested, otherwise the buyer has breached the contract and the seller may elect to terminate the Purchase Contract.

If the buyer misses any of their loan deadlines the seller can cancel. However, normally it makes more sense for the seller to inquire as to why the deadline was missed and provide the buyer extra days if needed to prevent having to start again with a new buyer.

Low Appraisals – If the appraisal is low the first thing to do is to get a copy of it to look at the comparables used. Getting an appraisal changed is very difficult. If you have a strong issue with one of the chosen comps you can bring it up with the buyer’s agent and the buyer’s lender. Appraisers will have very good arguments on why they did what they did. Their job depends on doing it right, so they will be prepared to back up the appraisal. Having a bad appraisal is like saying they do not know how to do their job. That is why it is so difficult to get one changed.

If the appraisal is not changed the buyer will most likely request to pay the appraised price. Sellers can either accept this request, negotiate, perhaps to something mid-way between the appraised price and the Purchase Contract price, or stick with the price on the Purchase Contract.

If the buyer can’t get the loan at the Purchase Contract price because of the low appraisal, then they would have the right to cancel. If they can still get the loan even though the appraisal is low, then they do not have the right to cancel using H-3.

Additional Search Terms – Finance Contingency, H1, H2, H3, H-1, H-2, H-3

A complete disclosure is the most important thing a seller can do to protect themselves from being sued in the future.

The rule I go by for the disclosure is if you must think about whether an issue is important enough to disclose, then you should disclose it.

The rule our attorney gives us is you won’t get sued for something you disclosed, it is only when you don’t disclose something that you could get sued.

Almost all lawsuits from unhappy buyers have to do with something that was not disclosed.

There is a comprehensive disclosure statement with many questions that sellers will answer and provide to the buyers, normally within 10 days after acceptance.

If a new disclosure comes up, or one that makes a previous disclosure statement not accurate, and this disclosure substantially affects the value of the property, then the seller needs to provide an Amended Disclosure Statement to the buyer. Substantially is a keyword as minor issues that can easily be fixed do not create the need for an Amended Disclosure Statement.

If the buyer is not satisfied with the disclosure statement or amended disclosure statement, they have up to the number of days in I-3 to cancel the escrow and get their deposits back.

The “As Is” Conditional Addendum does not change the seller’s responsibility to disclose everything.

So sellers make sure you disclose everything. This is the most important thing you can do to make sure you are not sued after the sale closes.

View Complete Hawaii Real Property Disclosure Statement

Additional Search Terms – I1, I2, I-1, I-2

Sellers should have the buyer to select the termite inspector. This is for the seller’s protection. If the seller selects the inspector and there is a mistake now it is the seller’s problem. If the buyer chooses the inspector and there is something missed it is the buyer’s issue.

Normally the inspection is done 15 days before closing. Some lenders won’t allow it to be older than 30 days and there is no need to do it right away in case the buyer cancels you don’t want to pay for it and then have the buyer cancel as you will need a new one for the next buyer.

We can order the termite inspection when the time comes, and it can be billed through escrow.

The seller almost always pays for the termite inspection. Some put actual cost which is OK because we have never seen a termite inspector charge too much.

If there are live termites then you will need to pay for the treatment, which is tenting unless tenting is not possible. If tenting is not possible spot treatment would be recommended.

Seller’s select the company to do the termite treatment.

Per paragraph L-3 if substantial termite damage is found than it has to be disclosed. This new disclosure then gives the buyer a chance to cancel if they are not comfortable with the damage found. If the damage is minimal and does not affect the property value then the buyer can’t cancel.

Additional Search Terms: L1, L2, L3, L-1, L-2, L-3