The escrow process in Hawaii is distinctly different from many mainland states, and understanding these differences is crucial for a smooth transaction. Whether you're a first-time buyer or relocating from the mainland, here's what you need to know about how escrow works in the Aloha State.
What Is Escrow?
In Hawaii, escrow is a neutral third-party process where a licensed escrow company holds funds, documents, and instructions from both the buyer and seller until all conditions of the purchase contract are satisfied. Think of the escrow company as a trusted referee ensuring fair play for both sides.
Hawaii vs. Mainland Escrow
The most significant difference is that Hawaii uses escrow companies rather than attorneys for real estate closings. While some mainland states require attorney involvement, Hawaii's escrow officers handle the coordination of the entire closing process.
Another key difference is the closing timeline. In Hawaii, closing occurs two full business days after all documents are signed. This is different from many mainland states where signing and closing happen on the same day. This "gap" allows time for document recording with the Bureau of Conveyances.
The Escrow Timeline
A typical Hawaii escrow runs 30-45 days from accepted offer to closing. Here's the general flow:
Days 1-3: Escrow is opened. The buyer's earnest money deposit is delivered to the escrow company. Title search begins.
Days 3-14: Home inspection period. The buyer conducts inspections (general, termite, and any specialized inspections). Negotiations on repairs or credits may occur.
Days 7-21: Loan processing. Your lender orders the appraisal, processes your application, and works toward final approval.
Days 21-30: Final loan approval and preparation of closing documents. The escrow company prepares the settlement statement.
Days 30-35: Document signing. Both parties sign closing documents at the escrow office or through mobile notary.
Days 32-37: Recording and closing. Documents are recorded with the Bureau of Conveyances. Funds are disbursed. Keys are transferred.
Land Court vs. Regular System
Hawaii has two systems for recording property titles. The Land Court (Torrens system) provides a government-guaranteed title, making title searches straightforward. The Regular System is similar to recording systems used in most mainland states. Your escrow officer will determine which system applies to your property and handle the recording accordingly.
Closing Costs in Hawaii
Typical closing costs in Hawaii range from 2-5% of the purchase price and include escrow fees (split between buyer and seller), title insurance, recording fees, transfer taxes, prorated property taxes, and lender fees.
Your lender will provide a detailed Closing Disclosure at least three business days before signing, outlining every cost.
Tips for a Smooth Escrow
Respond promptly to requests from your escrow officer and lender. Don't make any major financial changes during escrow. Keep all parties informed of any issues or delays. Review all documents carefully before signing. Ask questions — your escrow officer and lender are there to help.