Hawaii is an escrow state with some of the highest property values in the country and a set of transaction requirements you won't find anywhere on the mainland. The Hawaii purchase contract, typically the DROA (Deposit Receipt Offer and Acceptance), governs residential deals across all islands. But the contract is just the starting point. Good funds requirements, mandatory termite inspections, leasehold vs. fee simple property distinctions, and inter-island logistics all shape how Hawaii transactions actually close.
This guide covers the Hawaii purchase contract, the escrow process, and every Hawaii-specific requirement that agents and TCs need to manage. For a deeper look at how escrow-state closings differ from attorney-state and title-company closings, see how escrow works in real estate.
Key takeaways
- Hawaii uses the DROA (Deposit Receipt Offer and Acceptance) as its standard purchase contract.
- Hawaii is an escrow state. No attorney is required for residential closings.
- Good funds requirement: all closing funds must be collected (cleared) before escrow can disburse.
- Termite inspection is required on most financed transactions due to Hawaii's tropical climate.
- Leasehold vs. fee simple is a Hawaii-specific distinction that changes financing, pricing, and escrow timelines.
What is the Hawaii purchase contract?
The standard residential purchase contract in Hawaii is the DROA (Deposit Receipt Offer and Acceptance), published by the Hawaii Association of REALTORS. The DROA is used across all islands for most residential transactions, including single-family homes, condominiums, and townhomes. Attorneys also draft custom contracts for luxury transactions, complex leasehold deals, and international buyer transactions.
The DROA includes provisions specific to Hawaii that don't appear in mainland contracts:
- Leasehold vs. fee simple property classification and disclosure requirements
- Termite (wood-destroying insect) inspection contingency
- Flood zone and coastal hazard disclosures
- Volcanic activity and lava zone disclosures (Big Island)
- Master lease review period for leasehold properties
- FIRPTA (Foreign Investment in Real Property Tax Act) provisions for international buyers
- Good funds acknowledgment for closing
Hawaii's DROA has been updated to reflect post-NAR settlement requirements, including explicit buyer broker compensation language and written buyer representation agreements. Forms are available through the Hawaii Association of REALTORS member portal at hawaiirealtors.com.
How does the escrow process work in Hawaii?
Hawaii is one of six escrow states in the US (along with California, Arizona, Oregon, Nevada, and New Mexico). Closings are handled by licensed escrow companies, not attorneys or title companies acting independently. The Hawaii Department of Commerce and Consumer Affairs regulates escrow depositories.
The escrow process in Hawaii:
- Escrow opens: The buyer's earnest money is deposited with the escrow company upon contract execution. The escrow officer opens the file and sends escrow instructions to both parties.
- Escrow coordination: The escrow officer collects all required documents (title report, lender package, disclosures, inspection reports, amendments).
- Title work: A title company or title division within the escrow company conducts the title search and issues the title commitment.
- Pre-closing: The escrow officer prepares the settlement statement, confirms all conditions are met, and schedules the signing.
- Good funds receipt: All closing funds must arrive in collected form before disbursement.
- Signing and recording: The escrow officer runs the signing, records the deed with the Bureau of Conveyances, and disburses funds.
- Escrow closes: The escrow officer confirms recording, sends final statements, and closes the file.
| Escrow phase | Typical timeline | TC checkpoint |
|---|---|---|
| Escrow opens, earnest money deposited | Days 0 to 3 | Confirm receipt with escrow officer |
| Inspections (including termite) | Days 5 to 14 | Schedule and track completion |
| Title commitment issued | Days 14 to 21 | Review for exceptions |
| Lender conditions cleared | Days 21 to 40 | Weekly lender follow-up |
| Good funds received | Days 40 to 55 | Confirm wire timing with buyer |
| Signing, recording, disbursement | Days 45 to 60 | Coordinate signing schedule |
For a detailed explanation of how escrow officers, title companies, and TCs interact throughout this process, see how escrow works in real estate.
What is Hawaii's good funds requirement?
Hawaii requires that all closing funds be in collected (cleared) form before the escrow officer can disburse. This is a strict requirement that affects the closing timeline.
In practice, good funds means:
- Wire transfers must arrive at the escrow company's bank account and be confirmed as collected before the escrow officer can proceed with disbursement. This typically requires the wire to arrive one full business day before the scheduled closing.
- Cashier's checks are accepted but must be drawn on a Hawaii bank or a mainland bank with a Hawaii clearing arrangement. Out-of-state cashier's checks may face a hold period.
- Personal checks are not accepted for closing funds. This catches buyers and agents who are accustomed to mainland practices where personal checks may be allowed for smaller amounts.
The good funds requirement means that wire timing is a primary TC concern on Hawaii files. A buyer who wires funds on closing day morning may not clear in time for same-day recording. Quill's coordinators route wire timing with the buyer's lender and the escrow company starting 72 hours before the scheduled closing to prevent last-day delays.
Is a termite inspection required in Hawaii?
Yes, for most financed transactions. Hawaii's tropical climate creates significantly higher termite activity than mainland markets. The standard DROA includes a termite (wood-destroying insect) inspection contingency, and most Hawaii lenders require a current termite inspection report as a loan condition.
The termite inspection must be performed by a licensed pest control operator. The report covers:
- Active termite infestations
- Evidence of previous termite damage
- Conditions conducive to infestation (wood-to-soil contact, moisture accumulation)
- Recommended treatment
If the inspection reveals active infestation or damage, the seller is typically responsible for treatment under the standard DROA terms. The cost of treatment varies widely (from a few hundred dollars for localized treatment to $5,000+ for whole-structure fumigation, commonly called "tenting").
For agents coming from mainland markets, the termite inspection is not a formality in Hawaii. It's a genuine transaction risk. We've coordinated Hawaii files where termite findings led to $8,000+ treatment requirements and renegotiation of the purchase price. We schedule termite inspections within the first week of the contract alongside the general home inspection.
What is the difference between leasehold and fee simple in Hawaii?
This distinction is unique to Hawaii and has no meaningful equivalent on the mainland.
Fee simple: The buyer owns the land and all improvements (buildings). Ownership is permanent with no expiration date. No ground rent payments. Fee simple properties make up the majority of Hawaii transactions and are preferred by lenders and buyers.
Leasehold: The buyer owns the improvements (buildings) but leases the land from a landowner for a fixed term. Lease terms range from 30 to 99+ years. The buyer pays ground rent to the landowner, and the lease has an expiration date. When the lease expires, ownership of the improvements can revert to the landowner depending on the lease terms.
The practical differences are significant:
| Factor | Fee simple | Leasehold |
|---|---|---|
| Land ownership | Buyer owns land | Buyer leases land |
| Ground rent | None | Monthly payment to landowner |
| Lease term | Permanent | Fixed (30, 50, 99+ years) |
| Financing | Standard mortgage | Restricted if fewer than 30 years remain |
| Title insurance | Standard policy | Specialized leasehold policy |
| Resale | Standard market | Declining value as lease shortens |
| Escrow timeline | 45 to 60 days | 60 to 90 days |
| Disclosure requirements | Standard | Extended (master lease + amendments) |
Leasehold transactions require the buyer to receive the master lease and all amendments, plus a leasehold disclosure statement. Hawaii statute provides an extended review period (30+ days) for the buyer to review the lease terms. If the buyer is unsatisfied with the lease terms, they can exit the transaction during the review period.
For TCs, leasehold files are materially more complex than fee simple. The master lease review period extends the escrow timeline, ground rent verification adds a coordination step, and specialized leasehold title insurance may require additional underwriting time. We flag leasehold properties at intake and adjust the deadline calendar accordingly.
How do inter-island logistics affect Hawaii transactions?
Hawaii's geography creates logistical challenges that no mainland market faces. The state consists of eight major islands, with Oahu (Honolulu) handling roughly 75 percent of the population and transaction volume. Maui, the Big Island (Hawaii Island), and Kauai are the other active real estate markets.
Inter-island coordination affects transactions in several ways:
- Escrow company availability: Oahu has the widest selection of escrow companies. Maui, the Big Island, and Kauai have fewer options, and scheduling can be tighter during peak season.
- Document transfer: Physical documents that require original signatures may need to be couriered between islands. Remote Online Notarization (RON) has reduced this friction, but not all escrow companies or lenders accept RON for all documents.
- Inspection scheduling: Home inspectors and termite inspectors on the neighbor islands have smaller pools. Scheduling may take longer than on Oahu.
- Signing logistics: Buyers purchasing a neighbor-island property from Oahu (or from the mainland) may sign through a remote notary or travel to the island for signing. The escrow officer coordinates the signing format.
On our Hawaii files, we confirm escrow company capacity and inspector availability within the first 48 hours, particularly for neighbor-island transactions. Oahu files move on standard timelines. Neighbor-island files need an extra 5 to 7 days of buffer in the escrow calendar for logistics.
What does a TC manage on a Hawaii file?
Hawaii is an escrow state, which means no attorney involvement is required. The TC manages the transaction end to end, coordinating with the escrow officer, lender, inspectors, and all parties.
TC scope on Hawaii files:
- Contract intake, deadline calendar, and file setup
- Escrow opening coordination with the escrow company
- Earnest money delivery confirmation
- Termite and general inspection scheduling
- Leasehold disclosure tracking (if applicable)
- Lender follow-up, condition tracking, and appraisal coordination
- Good funds wire timing coordination (72 hours pre-close)
- Closing disclosure review
- Signing coordination (in-person or remote)
- Recording confirmation with the Bureau of Conveyances
Escrow officer scope:
- Escrow instructions and fund holding
- Title search coordination
- Settlement statement preparation
- Signing conduct
- Fund disbursement and recording
- Final escrow closing
The TC-to-escrow-officer relationship is the primary coordination channel on Hawaii files. Clear communication with the escrow officer from day one keeps the transaction on track, especially for leasehold deals and neighbor-island transactions where timelines are less predictable.
For an overview of how the escrow process works and where the TC fits in across all escrow states, see how escrow works in real estate. For agents evaluating TC options for their Hawaii files, the state-specific coordination guide covers Quill's Hawaii service in detail.
How does Quill coordinate Hawaii files?
Quill handles Hawaii transactions end to end, coordinating with escrow companies across Oahu, Maui, the Big Island, and Kauai. We manage the full deadline calendar from escrow opening through recording with the Bureau of Conveyances, including termite inspection tracking, leasehold disclosure review periods, and good funds wire timing. For neighbor-island files, we build in the extra buffer for inter-island logistics and confirm inspector and escrow availability within the first 48 hours. Hawaii's escrow-state model means no attorney is required, so the TC coordinates directly with the escrow officer on every milestone. Our flat rate is $350 per file, billed at close, and we waive the fee on your first file so you can see the workflow before committing. For agents building a Hawaii pipeline or managing transactions across multiple islands, the Hawaii coordination guide covers how we handle island-specific requirements in detail.
Quill coordinates transactions at $350 per file, billed when the deal closes. First file free. Hawaii-specific coordinators handle the forms, deadlines, and closing conventions your files need.