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Real Estate Purchase Agreement: Essential Guide for Landlords, Investors, and Tenants

Comprehensive guide to understanding real estate purchase agreements for tenants living in properties being sold, real estate investors with multiple rentals, and individual landlords selling rental properties.

Introduction

A Real Estate Purchase Agreement is a legally binding contract that outlines the terms and conditions of a property sale between a buyer and seller. Whether you're a tenant concerned about your living situation when your landlord decides to sell, a real estate investor expanding your portfolio, or a landlord looking to sell your rental property, understanding this document is crucial to protecting your interests and ensuring a smooth transaction. This guide breaks down the key components of a Real Estate Purchase Agreement and provides specific insights for tenants, investors, and landlords navigating property sales.

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Key Things to Know

  1. 1

    A Real Estate Purchase Agreement is legally binding once signed by all parties, so review it carefully or have an attorney review it before signing.

  2. 2

    Tenants generally maintain their rights under existing leases when a property is sold, as the new owner must honor the terms until the lease expires.

  3. 3

    Contingencies protect buyers by allowing them to back out of the deal under specific circumstances without losing their earnest money.

  4. 4

    Landlords selling rental properties must disclose existing leases, security deposits, and any known property defects to potential buyers.

  5. 5

    Real estate investors should include contingencies for reviewing tenant payment histories, lease agreements, and property financial records.

  6. 6

    The purchase agreement should clearly state whether the property will be delivered vacant or with tenants in place at closing.

  7. 7

    Security deposits must be transferred from the seller to the buyer at closing, with proper accounting and notification to tenants.

  8. 8

    Financing for investment properties typically requires larger down payments and carries higher interest rates than primary residence loans.

  9. 9

    Local landlord-tenant laws may impact how a property sale can proceed, including requirements for tenant notification and rights of first refusal.

  10. 10

    Tax implications of selling rental property differ significantly from selling a primary residence, including potential capital gains tax and depreciation recapture.

Key decisions before you file

Before you file a Real Estate Purchase Agreement in Hawaii, a few decisions shape the document: which option to choose and what each one means. The Real Estate Purchase Agreement guide walks through them.

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Hawaii Requirements for Real Estate Purchase Agreement

  • Statute of Frauds (Hawaii Revised Statutes § 656-1)

    Real estate contracts must be in writing to be enforceable, as required by the Statute of Frauds. This applies to all real estate purchase agreements in Hawaii.

  • Disclosure of Material Facts (Hawaii Revised Statutes § 508D-1 to 508D-20)

    Sellers must disclose all material facts that could affect the value or desirability of the property, including any known defects or hazards.

  • Lead-Based Paint Disclosure (42 U.S.C. § 4852d; 40 CFR Part 745)

    For properties built before 1978, sellers must disclose known lead-based paint hazards and provide buyers with a 10-day period to conduct a risk assessment or inspection.

  • Residential Condominium Property Regime (Hawaii Revised Statutes § 514B-1 to 514B-162)

    Special disclosure requirements for condominium properties, including providing buyers with association documents, bylaws, and financial information.

  • Escrow Requirements (Hawaii Revised Statutes § 449-1 to 449-24)

    Funds and documents must be held by a neutral third party (escrow) until all conditions of the sale are met. Hawaii has specific requirements for escrow companies.

  • Foreign Investment in Real Property Tax Act (FIRPTA) (26 U.S.C. § 1445)

    Withholding requirements for foreign sellers of U.S. real property to ensure payment of capital gains taxes.

  • Hawaii FIRPTA (HARPTA) (Hawaii Revised Statutes § 235-68)

    Hawaii's version of FIRPTA requires withholding of a percentage of the sales price for non-resident sellers to ensure payment of Hawaii state taxes.

  • Conveyance Tax (Hawaii Revised Statutes § 247-1 to 247-13)

    Hawaii imposes a tax on the transfer of real property based on the property's value and whether the buyer intends to use it as a primary residence.

  • Real Estate Commission Disclosure (Hawaii Revised Statutes § 467-14)

    Disclosure of real estate commissions and agency relationships between brokers, sellers, and buyers.

  • Landlord-Tenant Rights in Property Sales (Hawaii Revised Statutes § 521-45)

    When selling tenant-occupied property, the agreement must address existing lease agreements and tenant rights, which generally survive the sale.

  • Fair Housing Act Compliance (42 U.S.C. § 3601-3619)

    Prohibits discrimination in real estate transactions based on race, color, religion, sex, disability, familial status, or national origin.

  • Hawaii Fair Housing Law (Hawaii Revised Statutes § 515-1 to 515-20)

    Hawaii's fair housing law extends federal protections and also prohibits discrimination based on sexual orientation, gender identity, HIV infection, and marital status.

  • Coastal Zone Management Requirements (Hawaii Revised Statutes § 205A-1 to 205A-71)

    Properties in coastal areas may be subject to special regulations and disclosures regarding shoreline setbacks, erosion hazards, and special management areas.

  • Lava Zone and Natural Hazard Disclosure (Hawaii Revised Statutes § 508D-15)

    Disclosure requirements for properties located in lava flow hazard zones, flood zones, tsunami inundation areas, and other natural hazard areas.

  • Electronic Signatures (15 U.S.C. § 7001 (Federal E-SIGN Act); Hawaii Revised Statutes § 489E-1 to 489E-19 (UETA))

    Recognition of electronic signatures as legally binding for real estate transactions, allowing for remote execution of purchase agreements.

  • Real Property Tax Proration (Hawaii County Code § 19-2; Maui County Code § 3.48; Honolulu Revised Ordinances § 8; Kauai County Code § 5A)

    Requirements for prorating real property taxes between buyer and seller as of the closing date, with specific calculation methods.

  • Homeowner Association (HOA) Disclosure (Hawaii Revised Statutes § 508D-3.5)

    Sellers must provide buyers with all HOA documents, including CC&Rs, bylaws, financial statements, and pending special assessments.

  • Historic Property Considerations (Hawaii Revised Statutes § 6E-1 to 6E-15)

    Special disclosure and compliance requirements for properties on the Hawaii Register of Historic Places or in historic districts.

  • Agricultural Land Use Restrictions (Hawaii Revised Statutes § 205-4.5)

    Disclosure of agricultural district zoning and related restrictions, including farm dwelling requirements and limitations on subdivision.

  • Residential Leasehold Disclosure (Hawaii Revised Statutes § 516-71 to 516-73)

    Special disclosure requirements for leasehold properties, including lease terms, renegotiation provisions, and lease-to-fee conversion rights.

Frequently Asked Questions

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