How Much Are Closing Costs in Hawaii?

Real estate transactions in Hawaii involve various additional expenses known as closing costs, which are distinct from the property’s purchase price. These costs represent a significant financial component for both buyers and sellers, encompassing fees for services, taxes, and other charges incurred during the transfer of property ownership. Understanding these obligations is important for anyone engaging in the Hawaii real estate market.

Understanding Closing Costs

Closing costs are fees and expenses paid at the conclusion of a real estate transaction, separate from the down payment or the property’s sale price. These charges cover services and actions necessary to finalize the sale and transfer of ownership, typically including fees for processing loans, title services, government recordings, and escrow management.

These costs are often calculated as a percentage of the loan amount or the overall sale price, but exact amounts can vary widely. While some fees are standard, specific costs and their allocation between buyer and seller can differ based on local customs, property type, and negotiated terms.

Buyer Closing Costs in Hawaii

Buyers in Hawaii typically incur closing costs ranging from 2% to 5% of the home’s purchase price. These expenses cover loan-related fees and costs associated with transferring property ownership.

Lender fees are a notable portion of buyer closing costs. A loan origination fee, covering loan processing costs, is commonly around 1% of the loan amount. Buyers also pay an appraisal fee, typically $300 to $500, to assess the property’s value for the lender. A credit report fee, usually around $30, allows the lender to review the buyer’s credit history.

Other lender-related costs include loan discount points, upfront fees paid to reduce the interest rate. If the down payment is less than 20%, private mortgage insurance (PMI) may be required, involving an upfront fee at closing. Prepaid interest, covering interest from the closing date to the first mortgage payment, is also collected.

Escrow fees cover the services of a neutral third party that holds funds and documents until all sale conditions are met. In Hawaii, the buyer typically pays about 40% of the total escrow service charge. Title insurance is a significant cost for buyers, protecting the lender and homeowner from ownership disputes or liens. While not legally mandated for the owner, it is highly recommended. Buyers commonly pay for both lender’s and owner’s title insurance policies, which can cost between 0.5% and 1.0% of the sale price.

Government recording fees register the transfer of ownership and any new mortgage with the state’s Bureau of Conveyances. For documents up to 50 pages, the recording fee is typically $41 under the Regular System. Buyers may also pay a survey fee if required by the lender or desired for boundary verification. Home inspection fees, typically $300 to $500, are paid by the buyer to assess the property’s condition.

Prepaid expenses are part of the buyer’s financial outlay at closing. This includes prorated property taxes, where the buyer reimburses the seller for taxes paid for the period of buyer ownership. The first year’s homeowners insurance premium and prorated homeowner association (HOA) dues, if applicable, are collected at closing to establish escrow accounts for future payments. Buyers may also choose to retain an attorney, incurring legal fees up to $248 per hour.

Seller Closing Costs in Hawaii

Sellers in Hawaii bear closing costs averaging around 2.57% of the home’s sale price, not including real estate commissions. These expenses are typically deducted from sale proceeds at closing. The most substantial cost for sellers is the real estate commission.

Real estate commissions typically range from 5% to 6% of the sale price, covering fees for both the listing and buyer’s agents. This is usually the largest single expense for a seller. Escrow fees are split between parties, with the seller typically covering about 60% of the total.

Sellers are responsible for recording fees to clear any property liens or encumbrances, such as releasing an existing mortgage. Prorated property taxes cover the property taxes for the portion of the year the seller owned the home up to the closing date. Any outstanding mortgage balance is also paid off from sale proceeds at closing.

Hawaii has specific state-level taxes impacting sellers. The Conveyance Tax, under Hawaii Revised Statutes Chapter 247, is a tax on real property transfer. This tax is based on the property’s consideration, with rates varying by sale price and property type. For instance, rates can range from $0.10 per $100 for properties under $600,000 to $1.25 per $100 for properties over $10 million.

Two significant withholding taxes, HARPTA and FIRPTA, may apply to non-resident sellers. The Hawaii Real Property Tax Act (HARPTA), under Hawaii Revised Statutes Section 235-68, requires buyers to withhold 7.25% of the amount realized from the sale when the seller is a non-resident. This withholding is a prepayment of the seller’s potential state income tax liability. Similarly, the Foreign Investment in Real Property Tax Act (FIRPTA) is a federal law requiring buyers to withhold 15% of the gross sales price from foreign sellers. Both HARPTA and FIRPTA are withholdings, not taxes themselves, designed to ensure tax compliance from non-resident sellers.

Sellers may incur attorney fees if they retain legal counsel, typically up to $248 per hour. If the seller offers a home warranty to the buyer as part of the sale agreement, this cost is borne by the seller.

Factors Affecting Closing Cost Totals

Total closing costs fluctuate based on several factors unique to each real estate transaction. Property value and loan amount directly influence many percentage-based fees. Higher sale prices or larger loan amounts result in higher costs for items like title insurance, loan origination fees, and the Conveyance Tax.

The type of loan secured by the buyer plays a role in determining specific fees. Different loan programs, such as FHA, VA, or conventional loans, have varying fee structures and requirements. The choice of lender also impacts costs, as financial institutions may charge different rates for services and administrative fees.

While many fees are statewide, variations in local taxes or recording fees may exist depending on the county. Negotiated terms between the buyer and seller also influence the final distribution of costs. For example, parties may agree to deviate from traditional splits for certain fees, impacting each party’s total outlay.

Specific transaction details, such as cash versus financed purchase, or new construction versus resale, can alter the types and amounts of applicable closing costs. Transactions involving homeowners associations may include additional prorated dues or transfer fees.