In a Hawaii home sale, who pays closing costs breaks down along well-established local customs: the seller covers the conveyance tax, deed preparation, the termite report, the real estate commission, and the larger share of title insurance, while the buyer covers lender-related charges, recording fees, inspections, and their smaller share of title and escrow. The escrow fee itself is split evenly. Every one of these defaults can be renegotiated in the purchase contract, and the escrow officer follows whatever the signed contract says.
Shared Costs and the Standard Split
Two of the biggest line items on a Hawaii settlement statement are divided rather than assigned. The escrow service fee is customarily split fifty-fifty. The owner’s title insurance policy follows a different convention: the seller pays sixty percent of the standard premium and the buyer pays forty percent.1FNTIC NCS. Real Estate Laws and Customs By State – Hawaii Commercial transactions typically split title insurance fifty-fifty instead.
These are defaults, not rules. A buyer in a hot market might offer to pick up more of the shared fees to make an offer stand out. A seller facing a slow market might agree to absorb more to close the deal. Whatever the two sides write into the contract is what the escrow company follows.
What the Seller Pays
Conveyance Tax
The conveyance tax is usually the seller’s largest closing expense after commission. It applies to nearly every real estate transfer in the state under Hawaii Revised Statutes Chapter 247.2Justia. Hawaii Revised Statutes Title 14, Chapter 247 – Conveyance Tax The rate is progressive and depends on the sale price and on whether the buyer will occupy the home as a primary residence.
For owner-occupant transactions, the rate starts at $0.10 per $100 of the sale price for properties under $600,000 and climbs through several tiers as the price rises. When the buyer does not qualify as an owner-occupant, typically investors, non-residents, or second-home buyers, a higher schedule applies, reaching up to $1.25 per $100 at the top tier. On a $900,000 sale, the gap between the two schedules can run into thousands of dollars. Certain transfers, including those between spouses or to the state, are exempt.3Justia. Hawaii Revised Statutes 247-3 – Exemptions
HARPTA and FIRPTA If the Seller Lives Elsewhere
Sellers who are not full-time Hawaii residents face a mandatory state withholding under the Hawaii Real Property Tax Act. The buyer is required to withhold 5% of the amount realized on the sale and send it to the Hawaii Department of Taxation as an estimated income tax payment on the seller’s behalf.4State of Hawaii. HARPTA FIRPTA Handout HARPTA withholding does not apply when the seller is a Hawaii resident, or when the property was the seller’s principal residence and the sale price is $300,000 or less.5State of Hawaii, Department of Taxation. Tax Facts 2010-1 – Understanding HARPTA
Foreign sellers face an additional federal withholding under FIRPTA at a general rate of 15% of the amount realized.6Internal Revenue Service. FIRPTA Withholding A full FIRPTA exemption applies when the buyer plans to use the property as a residence and the sale price is $300,000 or less. Neither HARPTA nor FIRPTA is an added tax. Both are estimated payments against the seller’s eventual tax liability, and sellers can file for a refund if the withheld amount exceeds what they actually owe.
Commission, Deed, and Termite Report
The seller pays the real estate commission negotiated in the listing agreement, which typically compensates both the listing agent and the buyer’s agent. The seller also pays a qualified attorney to prepare the deed transferring ownership.
Hawaii custom puts the termite, or wood-destroying insect, inspection report on the seller’s side as well. Reports generally run between $250 and $500 depending on the size and location of the property.
On the shared items, remember that the seller’s share is fifty percent of the escrow fee and sixty percent of the owner’s title insurance premium.
What the Buyer Pays
Lender-Related Fees
Most of what the buyer brings to closing is driven by the mortgage. An appraisal is required to confirm the property’s value, and in Hawaii a single-family appraisal runs roughly $900, higher for complex properties, condominiums, or homes in remote locations. The buyer also pays for the credit report and a loan origination fee that covers the lender’s processing and underwriting work. Discount points, if the buyer chooses to buy down the interest rate, are paid at closing too. All of this is separate from the down payment.
Title Insurance and Recording
The buyer pays the forty-percent share of the owner’s title policy and the full cost of a lender’s title insurance policy, which protects the bank’s interest and is required by virtually every mortgage lender.
Recording fees at the Bureau of Conveyances are a standard buyer expense. For documents of fifty pages or fewer, the fee is $36 under the Land Court system or $41 under the Regular System. Longer documents cost $101 or $106, respectively.7Bureau of Conveyances – Hawaii.gov. Recording Fees A typical closing records at least a deed and a mortgage, so budget for more than one charge.
HOA and Condominium Documents
When the property is a condominium or sits inside a homeowners association, the buyer pays for the transfer of association records and the delivery of governing documents such as bylaws, financial statements, and house rules. These fees vary by management company and commonly run from a few hundred to several hundred dollars. Read what arrives, because it reveals the community’s rules, reserve fund health, and any upcoming special assessments.
Home Inspection
A general home inspection is not legally required in Hawaii, but it is strongly recommended and almost always paid by the buyer. Costs vary with the home’s size, age, and location and typically fall in the $400 to $650 range. Specialized inspections for mold, sewer lines, or structural concerns add to the total. The inspection contingency gives the buyer a window to negotiate repairs or walk away if serious problems turn up.
Property Tax Prorations
Hawaii property taxes are assessed annually and paid in two installments. In the City and County of Honolulu, the installments are due by August 20 and February 20.8Office of the Mayor. Treasury Division – Department of Budget and Fiscal Services The other counties follow similar schedules with slightly different dates. When a closing lands in the middle of a tax period, the escrow officer prorates taxes so each side pays only for the days they actually own the home.
If the seller has already paid taxes covering days after closing, the buyer reimburses the seller through a credit on the settlement statement. If taxes for the period up through closing have not yet been paid, the seller credits the buyer instead. Either way, the proration shows up as a matched debit and credit so neither side overpays.
Extra Costs on Leasehold Purchases
Hawaii has a significant number of leasehold properties, particularly on Oahu, where the buyer purchases the right to use the land for the remaining term of a ground lease rather than owning the land outright. These deals carry closing costs that fee-simple purchases do not.
The lessor, meaning the landowner, may charge fees to consent to the lease assignment, provide an estoppel letter, or update their records to reflect the new leaseholder. Hawaii law generally prohibits transfer fees imposed by deed restrictions but specifically exempts fees payable to a lessor under a lease, including assignment consent fees and estoppel certificate charges.9Justia. Hawaii Revised Statutes 501-232 – Prohibition of Transfer Fees These lessor charges can add several hundred to over a thousand dollars for the buyer. Lenders may also tack on documentation requirements before approving a mortgage on a leasehold, which can push underwriting costs higher.
The Contract Controls
Local custom sets the starting point, and state law locks in a few items like the conveyance tax, but the final allocation of every negotiable fee lives in the signed purchase contract. Read the settlement statement line by line before signing, compare it to what the contract calls for, and ask the escrow officer about anything that does not match. That is the moment to catch a misallocated charge, not after funds disburse.