What do you want? Everything.  When do I want it? 5 minutes ago. 

Sound familiar? If yes, then congratulations. You are what most would call a human, not just any human, but one that is ambitious.  A human that has goals and dreams.  Having this trait is both a blessing and a curse.  Ambition is the same great force that pulls you out of bed every morning to fearlessly take on the unknown future that lies in store for you that day.  Ambition drives the unprecedented competitive stamina, to endure the highs and lows. The competitive stamina that carries your forward and through in order to just keep moving forward.  This ambition is also the same force that leaves you sleepless at night thinking about that deadline, or that one missed element. Enabling you to push through out sleep and perform. Ambition is also responsible at times for us getting down on ourselves when we do not perform to our optimal level. This is when the anxiety creeps in.

There are times when I will get frustrated with myself for getting tired and wanting to take a nap after I have had my nose to the grind stone for some amount of time.  As I said before, having this burning ambition can be both a gift and a curse.  It is fairly common for ambition to be considered “fiery” right?  I do not think that this is by chance.  This ambition can be very similar to a fire.  As we all know fires can be very powerful, in both positive and negative manners.  Fires have the ability to warm an entire building in subzero temperatures, but fires also have the ability to burn up that entire building if that fire is not correctly controlled.  When fiery ambition goes south this is when we start to feel that anxiety.  In buying property or making another big life decision it is completely normal to feel fears of the choices we have made.  We just have to focus on what we can focus on, and control what it is that is in our control.  

What is the control that we have in our own practical life? Patience is the control of our fire.  Patience is often easier said than done, but patience is an attainable skill. How do you hone a skill? The same way you would any other skill. PRACTICING! 

Have you ever not gotten what you NEEDED when you NEEDED it? It is my firm belief that the timing of the forces that may be are always right for those who are just in their intentions.  Solutions for controlling ambition? Here are a few:

• Revisit  previous wins, this helps remind yourself that you do win when the time is right.

• Look into your past, remind yourself of the times when you felt that you were down and out.  Then recall how you rose up from that time and situation.  Is what you are going through now worse than where you were at that point? See the proof is in the past, and that this too shall pass.

• Focus on what you can focus on, this seems silly but there is someone out there who needs to hear this.  

• Make a list with two columns.  The left column consists of your troubles.  The right column consists of all the things you can do today to make today a successful day.  Is there any correlation between the columns? If yes, you just found the answer to your own problem.  If not, then you see that these troubles are out of your control.  Thus meaning that they truly are not YOUR troubles, because you have no control over them.

• Do the little things really well.  

• Just like interest on dollars, little things in your daily life.  What do I mean? An example would be, if someone isn’t able to keep a clean room and make their bed everyday how could they possibly organize and care for an entire house or property.  In order to receive something you must first be fit to receive it.   

Lastly, just know that you are not alone in feeling these things.  I as well as many others feel them as well.  It is completely normal to feel the entire range of emotions as a human. In fact, that is what makes us human.  In the words of Master Ugway from Kung Fu Panda “You must let go of the illusion of control.”  We cannot control every element of life, because we have other people in our life! So take pride in who you are, take pride in what you do.  At the end of the day that is truly who we are. The decisions we make have to be final. Even though anxiety may rise from our decisions on the property we buy, we cannot go back on our judgement. If we do go back on our own decisions then the anxiety will have even more room to grow and compound onto its-self. Be ambitious not anxious.

This week I am back on the topic of escrow, in particular I am looking at the escrow process  from the seller's perspective. Recently I have been assisting with the coordination of an escrow on a beautiful property. Now do you recall that escrow is a process in which the contract is given to a 3rd party, so that they may conduct the terms that were agreed to by the buyer and seller?  Conduction of the terms of a  purchase contract, like many plans, can have its setbacks.  These setbacks could also be both minor and major.  In the case of a major setback it is not uncommon that the contract be terminated.  Minor setbacks occur commonly and oftentimes can be navigated via communication. 

What is a minor setback you ask?  It can come in the form of an inconvenience to the time table of the transaction that is brought about at no fault of either the buyer or seller.  For example, the contract states that the termite inspection is due within 10 days of agreement of the purchase contract.  This is all fine and dandy until the selected termite inspection company has zero availability to even send someone out to the property for the next two weeks.  Now what do we do?  

COMMUNICATE! 

There is no reason for this to be a deal breaker, while yes technically in this instance this failure to meet the date set within the agreed upon terms would make the current purchase contract voidable as it is currently written.  There is no need to do that however, as long as the buyer still wants the property and the seller still wants to sell there are alternative options that can be taken to move this transaction forward.  The best option in my opinion is what is legally known as an addenda.  For practical reasons, think of an addenda as an add-on to the contract that was originally agreed upon.  The addenda gives us the ability to now take the agreed upon 10 days and add an extension.  Making the new date the termite report is due after the newly agreed upon date.  Now the transaction can be conducted forward and everyone may continue the transaction happily.  In this case the buyer got a full termite report and inspection prior to closing, which in Hawaii I would HIGHLY recommend having done,  or without terminating the contract. The seller got an extension from the buyer inorder to deliver the inspection at a date that is achievable for the seller.  

When such large sums of money are being transacted upon such as in a home it is very common for both buyers and sellers to get nervous, thinking the other half of the deal is trying to “get one over on them”.  For this reason, having a real estate professional by your side is incredibly helpful.  If you as a buyer/seller were to run into this sort of a situation with a termite report and you were not represented by a real estate professional, one  could easily be overwhelmed by the apparent complexity of the situation and void the contract entirely.  When there was a rather easy option as I explained earlier.  Just communicate.  

I speak for our firm in particular when I say that in the instanceof one of  our transactions running into these types of setbacks, we go at them head on both legally and effectively.  Acting as a direct communication/advisory channel for our clients to make the best decision in their interest.  As your representative, we  also communicate directly with the other side of the deal.  If the other side of the deal also has a representing agent, then we communicate directly with the agent.  If the other side of the deal is self represented we work directly in contact with them.  We handle most of the complexities of the contract and escrow coordination while our clients are able to sit back and relax, as long as they are able to give us the proper documentation that we need according to the contract at hand; sellers disclosures, warranties, preferred inspection companies, land stakings/ surveys, etc.

There is a lot that goes on behind the scenes in an escrow. As real estate professionals, it is our job to filter through all of that stuff so that you as the affected transactor only need to worry about what you need to worry about, like your  life, family, what's for dinner, you name it. 

This week's blog will be on the lifestyle side of property.How do these two topics correlate you may ask? As shelter is a necessity in life, I believe that the two tie in together rather well and not having one makes success and fulfillment within the other very difficult.  The inspiration for this week's blog comes from circumstances around me in my own life.  This crazy wild ride we call life is full of ups and downs as well as a fair amount of in betweens where we can feel kind of gray and confused,   

Professionals in the psychology field will call the energy and vibrations that you as a human emit “a force in the electromagnetic field.” Hippies will call it an “aura” or a” vibe.” No matter which camp you yourself fall into, one thing is for certain, we all have energy that we emit.  This energy affects us as well as those around us.  Every one of us has been involved with individuals who have a very positive energy, they leave us excited and ready to take on the fires of hell with a squirt gun.  We all also have had experiences with people who drain us of all positivity. After being in their presence we feel like the world is collapsing around us, and now all we want to do is go home and go to bed eating the whole tub of ice cream. 

The question that begs to be asked by each and every one of us is, “which one am I?”  There are days when I myself am a complete drag to be around.  Where my attitude sucks, I am mad at the world, and plain and simply you would not want to be around me.  This is very unfortunate, but these days happen. Having bad days or moments is normal human behavior.  We are emotional creatures, and if every day was the highest of highs, either you have unlocked whatever it was that Indiana Jones was looking for, or maybe rehab should be considered as an option.  The problem lies not in being in a bad mood, the problem rather exists in STAYING in a bad mood.  I have recently tried to make a point of whenever negativity begins to rise within me, trying to take three deep breaths, sorting my thoughts from my emotions, and conducting a critical analysis as to why it is that I am feeling sour.  Qhat I usually find is pretty consistent.

Usually, whatever it is that is making me such a Debbie Downer is either not a real tangible fear or problem for me, or is out of my control.  An excellent exercise that I have found personally is to make a list with two columns.  In column 1 I write all of my troubles and problems, in column two I list things that I can control today during the next hour and within the present moment.  Seldom do the two lists correlate at all. 

I tie this into property because I feel and hear an immense amount of unhappy folks in the market today. “This market is ridiculous.” “There is no way we can afford a home right now,” ect.  While yes you may feel this, and it may even be true.  I am a firm believer in what we emanate out to the universe will come back to us. So in turn, you become correct in what you are thinking and saying, you will not be able to afford that home.  I also think this is how an energy vampire comes to be.  Radiating their negativity all around them, everywhere they go.  

The Solution

Be grateful today, these problems too will come to pass. Stress not about the things you cannot control, because I promise you we are all out here trying to play the same game on the same field with the same rules.  Be bold and dare to think.  Challenging yourself in order to create discomfort.  It is through the discomfort that you will be able to find yourself. In life and property there are a multitude of possibilities and creating happiness and fortune is probably a lot closer than you would think. A great line by property mogul Grant Cardone that I love is to “keep going, you never know when you are just one meeting, one connection, one project, ect. away from your goals.  This week's blog was a bit different than most, but this has been on my heart and mind recently and I felt the need to share it with all of you. 

This week's blog is going to be a shorter one.  I just wanted to put out a shorter post on some of my thoughts that came up after reflecting on the disaster that happened in Maui. Contemplating on the fires' effects after the last flame was extinguished. These words are also my attempt at understanding and piecing together a perspective to the situation that is not from a news station, just a mere man.  I lead with compassion in hopes that someday, it is possible for there to be optimism around the fires, and that all that was lost was not for nothing.  

I truly believe that after these horrible events Hawaii and its people are too resilient to be held down by the wildfires.  Instead, we will rise back up making Lahaina greater than it has ever been, in honor of those that we have lost.  The wildfires that took place in Maui, and Lahaina especially were terrible and currently we are at a loss for words for what happened to our Ohana there in Maui.  If you are looking to donate to get involved in relief here is a great link:

Hawaii community foundation Maui Strong Fund

These wildfires were incredibly unexpected and impactful, destroying hundreds of homes and taking numerous lives.  I personally have no clue how it has to feel to be a part of a disaster as powerful as this wildfire, but the stories that are surfacing every day of our brothers and sisters in Maui are both terrifying and inspiring. Inspiration and fear are drawn from hearing of folks having to jump into the ocean to seek refuge from the flames to the unity of the Hawaii community coming together to have Maui’s back.

To my Big Island friends,  it is in times like this that we as HUMANS are called to come together, it does not matter what differences we are led to believe we have. At the end of the day, we are all here on earth with the calling to love one another.  Is this not the root of the Aloha Spirit and what makes our state and home the best place to live? Spreading kindness and joy is our obligation, especially in times like the present when hope seems to be dwindling.  

The fires are incredibly tragic, and also serve as a reminder to cherish your time on earth.  We know not when or how our calling day is coming, and life is too short and fragile to live with anger and transgression toward others.  Let us lead with compassion and understanding.  Let us offer up what we can for our Maui ohana.  

To my Maui friends, we share in your sadness.  I feel as if the vast majority of us here on the Big Island have been shocked and deeply saddened by what has happened.  We offer up our thoughts, our prayers, and whatever else it is that you need at this time.  Hold strong, there is always a rainbow and the sun shines brightest after the storm.  These events make no sense, I know, but there is good that can come from such horrific events.

I have no answers to these, and I don’t expect anyone to have answers to them already at this point.  They do come to mind, however.  How do we rebuild better than before and bring back what was destroyed even better? Can we? How does this affect the already evident housing shortage here in Hawaii?  Where do we go from here, and what is the first step in healing as well as commemorating those who lost their homes, lives, and much more.   

You all  may or may not be aware of the upcoming endeavor by Hawaii County to amend the current and future status of currently permitted and future applications for what is currently named by the zoning code as a Short-Term Vacation Rentals (STVR’s).  An STVR currently in the zoning code is considered to be a rental of less than 30 days. The STVR’s permitted today in Hawaii County have been a great stream of revenue as a secondary income for a lot of local people who call the Big Island home, as well as a source of business for many people of well. Whether that be cleaners, property managers, or lawn and landscaping professionals ect.  Owners have been able to rent out their additional dwelling units (ADU’s or Ohana units) as they pretty much very well please, being that the zoning and STVR permit has been granted by the county. 

The Transient Accommodation Rental draft 4 is now proposing to remove all of the past rules and regulations, and replace them with an entirely new set of rules and regulations.  Owners/operators of short-term rentals  are being challenged by the current administration in an attempt to make it more difficult to attain an STVR permit as well as more burdensome to operate an un-hosted STVR (an AirBnb with no host in the home along with the guests. The 4th draft of the bill has been released as of June 19th, 2023. This caught many real estate professionals by surprise as the changes from draft 3 to draft 4 were allegedly more aggressive towards owners/operators of STVR’s.  This sudden change has been taken on by many within the real estate space as an infringement on an individual's property rights.  

In my opinion there are certain propositions with-in draft 4 that personally make sense to me. One of the most prevalent of these is the requirement for a timely response from a host, if the property owner is not on island, the need for an in lieu host who is held to a high standard of assisting the guests as well as accommodating the property.  This makes sense for a couple reasons, safety being number one. Personally, I have run into this scenario a couple of times with the condominium complex that I reside in.  It is not uncommon for visitors to arrive at the airport late and get to their lodging accommodations later in the evening, at hour there could be a number of problems that the guests run into.  The guests get in past 9 am, having no one or anything to coordinate their stay and access their room with but an email that was sent to them from the owner or operator of the AirBnb.  This creates fear and confusion, as it would for all of us, given that we were in an unfamiliar place with this unfamiliar problem. The guests then try to call the host with the number that they have from the email, but there is no answer. This is most likely because the host lives and operates the AirBnb from the mainland and is fast asleep at this point given time zone differences, or some sort of negligence from the operator thinking that it is past 9 pm, that is no time for a business call.  

There is always a possibility for some other extenuating circumstances being the reason for the owner/operator of the AirBnb, but if the issue lies within either of the first two cases then there is no real excuse for this, and this is something that I believe should not go unaddressed and requires some sort of consequences. Plain and simple that is just bad business on the behalf of the host and they should be reprimanded for leaving their customers (short-term renters) out to dry like this.

To summarize, what the new draft is intending to do is replace the current rules and governances put in place with the STVR rules and regulations that have been set in Chapter 25 of the Hawaii County Code. I personally disagree with the proposition to replace the current STVR rules and regulations. I, too, see draft 4 as an infringement on personal property rights.  With that being said, I also believe that there is nothing wrong with a potential revision or amendment to the current code as I have stated earlier.  I will attach a link to the 4th draft so that you can take a look at the proposed change yourself, and I do encourage you to read it through so you may  formulate your own thoughts and opinions. 

As always feel free to reach out to the real estate professionals at the Island Land Company Inc. with thoughts and opinions that you may have.  If you are the owner of a current STVR, and would like to learn more  about taking your rental to the next level with professional management. Check out our sister company Island Resort Properties for all of your short-term rental management needs and questions.

 Draft 4- Transient Accommodation Rental

https://files.constantcontact.com/b42863ab001/81f7f042-5d13-4271-9ba1-066cae2bfdc9.pdf?rdr=true

Buy or Rent? 

 A very popular option, especially in Hawaii, has been renting your home rather than buying. By now we are all aware that here in Hawaii home prices are higher than most other states especially in the mainland.  The question that taunts many buyers today is “should I buy or continue to rent”.  To preface, situations are entirely situational and there is no right or wrong clean-cut answer to this question.  It is with that in mind that this week's blog has the intention of arming and informing you with some facts and statistics that you may find make it easier to answer this question yourself.

• “While less volatile than home prices, the median rent in the state has grown steadily. Official American Community Survey data from 2021 estimates the median monthly rent in the state to be $1,755, the highest of any state in the nation.”

First off, let us break down the first portion of this statement: “while less volatile than home prices, the median rent in the state has grown steadily.”  As we talked about in last week's blog, if you were to look at Hawaii counties housing market prices as if they were stock trends over the last 30 years, you would invest yesterday! This is not always the case for buyers however, why is this?  While housing prices have risen, so too has the cost of renting. The rates at which these have risen are not equal, with the price of homes growing at a rate that is  a touch higher than the price of renting at this current time. The rates have risen at a very similar pace,  especially if the pandemic market effects  were out of the pricing equation.  Another factor to consider is the current status of interest rates.  Interest rates can play a huge role in a buyer's decision to enter the market or not.  

Today a very common thought for most renters would be to question whether the money spent on rent would be better suited as a mortgage payment.  Here is a little exercise to show an example of how interest paid on a loan vs renting affects wealth: if the median rent is $1,755/month (number taken from above in the statistic), what would this amount qualify for as a monthly mortgage payment with the rates where they are currently (7.7% as of July 28th, 2023)?

Example Loan Specifications:

Down payment of 10%, 30 year fixed conventional loan, and a credit score of 700-719.

In this scenario an individual would qualify for a $250,000 loan! (given other loan application qualifications are met per the lender) This means that the same individual could find themselves in a home priced around $280,000 as soon as tomorrow while putting $1,797/ month towards the loan as  payment for the duration. (This is still subject to other loan specifications and types.)

While this home price may seem low in the current Hawaii County area, a property priced as such is a great place to start or build, and these properties are still out there in abundance.  Another key factor that is important to remember and understand is the amount of equity that is built up during the life of this loan.  For those of you unfamiliar with the term equity, here is a brief explanation.  Equity is the amount of money that goes towards the principal (the amount of money within the loan that goes directly to paying down the physical property at hand).  Home equity is what grows exponentially with time, see last week's blog for more info on the rising of home prices in Hawaii County. 

On the flip side of this coin, what equity lies within a property that an individual is renting? The simple answer is, none.  

To conclude, it is my opinion that if someone were short term living in a location (under 3 years), renting may be the best bet financially, given that housing prices and markets can rise and fall within that short of a period of time.  If you are planning on occupying a particular location for 8+ years however, I would strongly recommend looking at buying property.  Putting the money towards a down payment gives the individual a much better position to gain equity that grows exponentially over time. Then when you do find that it is time for you to change locations, that money has in turn worked FOR you rather than the other way around.

Continuing from last week we will go over some other interesting bits and pieces from the Hawaii Housing Factbook from the current year.  This week’s summary goes out to the buyers, some good news in the factbook for buyers who are currently looking for their dream property or even the next step in diversifying their portfolio. The Factbook says: 

• “Hawai‘i County is an outlier in terms of home prices. Median single-family home prices on Maui and Honolulu have hovered near the $1 million mark for the past year. Prices on Kaua‘i are comparable, with a median price near $900,000. Contrastingly, the median single-family home in Hawai‘i County sells for $400,000. Median condominium prices in Hawai‘i County ($550,000) actually exceed that of single-family homes.”

While the numbers here need to be considered using a deeper analyzation.  It is important to remember that these numbers are averages of the home prices here on the Big Island, but  the spectrum of homes and the prices of those homes vary greatly, accompanied by outliers on both the high and low priced ends.  If you are not familiar with the Hawaii housing market I will provide a little MLS comparison of two similar homes in two different  areas here on the Big Island that have sold within the past month (sold in the month of June 2023).   I think this comparison summarizes the difference in pricing based on location, view,  and other amenities well.   I ran a comparison of a couple of 3 bed/ 2 bath homes, with about 1,200 square feet of living area.  The two areas that I chose to compare were in the Hove subdivision within Ocean View Estates and Honokohau 1st & 2nd subdivision within Kailua-Kona.  

Property 1 Hove Subdivision

Sold 6/13/2023

Price- $240,000 

Year Built- 2022

Square Footage- 1,200 sq. ft.

Lot Size- 4 Acres

Property 2 Honokohau 1st & 2nd Subdivision 

Sold 6/13/2023

Price- $1.185M

Year Build- 2001

Square Footage- 1,256 sq. ft. living area

Lot Size- 1.03 acres

While there is a drastic difference in price,  it is true that both of these homes exist not all too far away from one another. These two properties are 49 miles apart (just under an hour drive) from one another yet their price tags were separated by $945,000. Something that is underlying within these two properties that creates a bit of a premium when it comes to the price of a home here on the Big Island is the view that the home/property has.  Property 2 has a beautiful ocean view that makes the Hawaiian evenings and sunsets something to behold. When you accompany this view with the proximity to Kailua-Kona that provides for a much higher priced home, no matter the date in which the property was built.   This is what we mean when we say that the spectrum of home prices vary greatly here on the Big Island. 

• “A single-family home bought in 2000 is now priced nearly four times higher”

Wow, another statistic that is truly mind boggling.  Also another statistic that can be taken as a positive or negative.  If you are in the “home poor” mindset, you would think that this is why you cannot afford to get into a house today in 2023.  However, if you are an opportunistic buyer you see this as an excellent opportunity to get in on a trend that has occurred over the past 23 years! Think of looking at stock prices that over the past 23 years have quadrupled, you would be blown away and invest as soon as possible, right? This principle goes beyond real estate into many other aspects of life we do believe as well. This principle is that we are not victims of the circumstances, rather we are subject to our own perception of the circumstances that we are put in. As was written by Seneca in the days of the roman empire: “We are often more frightened than hurt; and we suffer more from imagination than from reality.”

To wrap up I will summarize by saying that at Island Land Company Inc. it is much like Seneca that our belief that fear and opportunity often look very similar from afar, so fear not and progress forward. 

Statistics/Information Taken From:

The Economic Research Organization at the University of Hawaii. “The Hawai‘i Housing Factbook.” The Hawai’i Housing Factbook, 28 June 2023.

In this week's edition of the Island Land Company Blog, we will  analyze and review this year's Hawai’i Housing Factbook, put together by The Economic Research Organization at the University of Hawai’i. To begin I will list out some of the major fact points that I found to be interesting. I would like to preface by saying that these facts are provided by an Academic Institution, the opinions on them however, are mine, and are best to be treated as such.  

“Median housing costs are 2.7x the national level… (and have) more than tripled since the mid 90’s.” Per Hawai’i Housing Factbook, 2023.

This statistic is something that I think catches us off guard, and yet makes sense to those of us who call the Big Island home.  This statistic is also part of the reason why we see so many of our loved ones move away from the island, the discrepancy between cost of living and household income makes affordable housing opportunities fewer and further between.  I do feel  that this statistic can and should be looked at through an optimistic lens. What I mean by this is; that it is very easy to develop a victims mentality upon reading this statistic initially. It is very easy to think “I am a working class individual, I cannot afford a home in the price ranges that you currently see single family residences at.” 

This may not actually be the case, “opportunistic” buyers are very heavy in the market right now as we are in a bit of a more aggressive spike in what is a market that naturally trends upwards at a more aggressive rate due to the overall lack of land and new housing opportunities. What is the difference between a buyer who says, “I cannot afford a home in this market,” and an opportunistic buyer? Simply put: mindset. Seeing the overall trend of the market can make an individual think, “if the statistics prevail, if I buy a single family residence for $800,000 today, that would be worth upwards of $2 million in 30 years, the lifespan of a long term home loan.

Oftentimes home prices and interest rates work on inverse scales, when one goes up the other goes down. This is not necessarily the case right now however, but lending institutions have a job to do as well.  It has been my experience that there are a lot of local lenders who are able to get very creative to get good people in homes.  While rates may be incredibly high right now (between 6.5-7.5% day to day) lenders are finding new ways to create more favorable loans all the time.  Even as simple as 3.5% down.  That means that in theory, someone could buy an $800,000 home with just $28,000 down. There is a lot of equity that can be made from just $28,000 down in 30 years.

“Before the pandemic, the median single-family home price in the state was $650,000. Between 2019 and 2022, prices rose by 35%, before leveling off in 2023. Median condo prices saw a 30% pandemic increase, jumping from $453,000 in 2019 to $587,000 in 2022, and have since risen further to $600,000.”

I’ve included this statistic merely for the spectacle. While another pandemic is both unwanted and unlikely, it caused a whirlwind of supply and demand on the Hawaii housing market.  This reminds me of a talk I had with a buyer of mine the other day. She told me, “I don’t want to go over this number because I do not want to be house poor.”  This made me think, what is house poor? It seems to me, the term house poor is a mentality as well.  Seeing your home as something that could be an opportunity vehicle rather than a liability is the difference between an investor and someone who is “house poor.” The opportunities that can lie within a property and the structures that exist on that land are oftentimes more extensive than meets the eye.  In these situations, it becomes critical to partner with the correct real estate professionals in order to find out about the opportunities that lie not only in owning your own home, but developing the property that you have purchased!

Statistics Taken From:

The Economic Research Organization at the University of Hawaii. “The Hawai‘i Housing Factbook.” The Hawai’i Housing Factbook, 28 June 2023.

What is Escrow?

This question is one that if you are a real estate professional, you think; “That is a very simple question.” If you are not a real estate professional however, fear not you are not alone. This is a VERY common question around first time home buyers especially and even some second time home buyers. The Term "Escrow" commonly pops up in phrases you will hear your agent say including: “the contract is moving into escrow,” “the house got put into escrow,” ect.

These can be daunting phrases to some and can become a moment of reality where the buyer or seller may realize the weight of the transaction. There is something innately within us as humans that makes us anxious whenever we think about an unknown institution coming into our transaction.

But, is there something to fear with escrow?

ABSOLUTELY NOT, that is the opposite reason that escrow is brought in!

Primarily, one of the most important things to understand about escrow is that escrow is not a place or thing, rather it is a process. Escrow, put simply, is a third party institution with zero interest in the property at stake, who has been put in place to hold onto the finances within the transaction of real estate and the given property. This organization will then disperse and delegate out the finances how they have been instructed via the purchase contract for that particular property.

A story to help better explain this in practical terms:

When I was a child, my cousins and I would help my grandmother bake. We would make cookies, breads, cakes, you name it. We were a true homestyle Little Debbie outfit. When we would bake, all of us kids would gather our ingredients into the bowl: the flour, eggs, brown sugar, butter, ect. In this scenario we, the kids, were just like the buyers or sellers in a real estate transaction, bringing what we had to bring to the offer. The ingredients were called upon by the recipe, and I want you to think of the recipe as the purchase contract for property. Grandma would then take the bowl, check that every thing on the recipe list was present and then follow the baking instructions that were laid out in the recipe. After the goodies were baked, she would take the treats out of the oven and dispurse the baked goodness. (She would even pack some to go for our parents if the work we had done in helping prepare the treats deemed that was appropriate.)

Grandma acted a lot like escrow in that instance, she was incharge of analyzing, checking, and then proceeding to distribute what the kids had started and put together from the recipe.

To conclude, don’t be afraid of escrow or the potential anxieties these words can bring as a buyer or seller. Remember as well, that you can and should ALWAYS ask your real estate professional who is tasked with guiding you, to help explain the steps you are going through with your property.

Aloha and Happy 4th of July,

The Island Land Company team hopes that your day is full of sunshine, good times, and good grindz with those you love. May today also  be a reminder of the freedoms that we have been given due to those who came before us.  One of these liberties being the right to own and use property!

With 24 years of experience on the Big Island, we understand buying or owning property can be one of the most confusing and intimidating transactions that people go through in their life. We are here to help shine some light on property, home buying, and development through a series of blogs EVERY Tuesday.  Our goal behind these blogs is to share knowledge with our community in hopes to make the Island the best place possible to call home.  You come in by becoming an educated buyer or seller, you now are more equipt to go into any future real estate transaction.

Please feel free to reach out to us in the comments or in person with any current topics or questions that you may have for our team regarding real estate transactions.  In these blogs we will be addressing various topics and frequently asked questions that arise in interactions with clients.