Aloha. I’m George Krischke with Honolulu HI 5.
Today, we’re going to talk a little bit about the standard deposits with a real estate Purchase Contract. In Hawaii, it is customary to have three deposits. It’s the initial earnest money deposit, the additional deposit and then there’s a final deposit just before the transaction closes. The initial earnest money deposit is customarily between as little as $1,000 and sometimes maybe about 5% of the offer price, and the check that the buyer writes is not going to go actually to the seller. It will be held in the buyer’s agent’s file until escrow is opened and then deposited with escrow.
So, initial deposit may be $1,000 to $5,000. Then, the additional deposit becomes due usually within just maybe two business days after the home inspection contingency expires. That is in the purchase contract that is paragraph J-1, the Home Inspection Contingency, and that time period for the home inspection contingency is usually between 10 to 15 days. So, 15 days plus 2 business days after that the additional deposit goes into escrow, and that deposit could be anywhere between as little as $2,000 and as much as maybe 15% of the purchase price. Then there’s a final deposit that gets deposited with escrow just before recordation, so that would be at the end of the transaction, and that will make up the difference between whatever is not financed and the total purchase price amount.
Now with brand new projects, with new construction high-rise condominium buildings, we have quite a few here, the deposit schedule is a little different. It’s quite often there are four deposits. There might be an initial deposit at time of signing of the contract that is quite often 5% of the purchase price. Then, there is a second deposit that’s due within 30 days after the buyer receives the final public report which is a set of documents that explains the project in detail. So that’s the second deposit within 30 days after the buyer receives the final public report, and that’s usually quite often another 5%. Then, quite often there’s a third deposit that’s due when the building is maybe 50% completed, and that’s usually another 5 to 10%. Then, at the time the project is finished which could be sometimes two years after the buyer signs the contract, so when the building is finished and when the building gets turned over to the buyer, then the final deposit is due which is the difference between down payment and loan amount.
Now, what actually happens with those deposits during that time frame? It’s held by escrow. Now, Hawaii is an escrow State so those deposits will be applied towards the buyer’s down payment. They will be held by the escrow company which is an independent third party, and they act as the safe keeper of the funds. The amounts for the resale purchase contract that I mentioned, like 1,000 or 2,000 or 5% or so, those are just guidelines so they do vary, but that’s a good guideline to think about. That’s it for today.
Thanks for watching. ~Aloha.