Hawaii note holders often carried financing on a condo, a house lot or acreage on a neighbor island. We take the note to more than one buyer and show how each offer was priced.
Island-specific issues that make a buyer cautious.
The same worksheet comes with every offer.
| Remaining balance | $129,400 |
|---|---|
| Payments left | 168 |
| Buyer’s target yield | 8.0% |
| Purchase price | $115,000 |
| Discount from balance | 11.1% |
| Our fee | shown on every offer |
| Sell the whole note | Sell 60 payments | Keep it | |
|---|---|---|---|
| Cash today | $115,000 | $56,200 | $0 |
| Payments still coming to you | None | 108 payments of $1,140 | 168 payments of $1,140 |
| Total you receive | $115,000 | $179,320 | $191,520 |
| What you give up | Every future payment | The next five years | A lump sum now |
Illustrative example. Totals add up the payments as scheduled; they assume the payer keeps paying and are not adjusted for the value of money over time.
The promissory noteThe mortgage or deed of trustA payment historyThe closing statement from the saleHawaii has high property values and features found in no other state, and a buyer who has not met them before may pass or bid cautiously. The people holding notes here are long-time owners who sold a Honolulu condo, a house in Kailua or Kaneohe, or a second home on Maui or Kauai and carried part of the price. Others sold land. On Hawaii Island, the Puna and Kau districts hold thousands of subdivision lots that changed hands on monthly payments, some with a simple cabin or off-grid home on them.
Some holders left the islands years ago and still receive a check each month from a property they have not seen since. Living elsewhere is no barrier, because selling a note on a property in another state follows the practice of the place where the property sits.
Mortgages are the commonly used security instrument in Hawaii. The mortgage is the recorded document that ties the payer’s promise to the property. Hawaii keeps two recording systems, a regular system and a registered one known as Land Court, and a property may sit in either or both. A title company sorts this out at closing, though it helps to know which yours is.
Foreclosure, the legal process of recovering the property after a default, can run through the courts or outside them in Hawaii. The court route is the one generally used, and practice has shifted over the years. How it would apply to your note is a question for a Hawaii attorney or title company.
A buyer works back to a price from the return they need on the money they pay you. The less certain the security looks, the more return they ask for and the lower the price. In Hawaii the doubt comes from a handful of local sources.
| Feature | Why it affects the price | What to have ready |
|---|---|---|
| Court foreclosure | Recovery through a court generally costs more time and money than one outside the courts | The recorded mortgage |
| Leasehold | The owner holds a long lease on the land, and the property loses value as the lease runs down | The ground lease, the years left and the lease rent terms |
| Lava hazard zone | On Hawaii Island, lots in the higher-risk zones can be hard to insure, which leaves fewer buyers willing to bid | The district, the zone and the current policy |
| Agreement of sale | This is the local form of a land contract: you keep title until the payer finishes, so the buyer must see who holds title today | The agreement and your deed |
One buyer declining a Hawaii note says little about the next, since a buyer who already holds island property may be comfortable where another was not. If you have had one refusal or one cautious bid, send us your Hawaii note details so the note can be put to other buyers. Strong equity, meaning a property worth well above the balance owed, and a steady payment record still do most of the work on any file.
Collect the note, the recorded mortgage or agreement of sale, the ground lease if there is one, and your payment record. Whoever prices the note will need the island and the district, and whether the land is owned outright or leased, so write those down and keep them with the documents. Find out which recording system the property sits in as well, since the title company will ask.
Mortgages are the commonly used security instrument in Hawaii. Your payer signed a note and a mortgage, and the mortgage was recorded with the state. A sale transfers both to the buyer by endorsement and a recorded assignment.
Sometimes. A buyer will want the ground lease, the years left on it and the lease rent terms, because the security is the right to use the land for the lease term. A leasehold note can draw fewer bids than one on property owned outright.
In many cases, yes. An agreement of sale is Hawaii's term for a sale where you keep legal title while the buyer pays over time. A note buyer generally takes an assignment of the agreement and a deed, and will check whether an underlying mortgage sits ahead of it.
Yes, because values and demand differ a great deal between islands and between districts. A buyer looks at recent sales nearby, how the property is insured and, on Hawaii Island, which lava hazard zone it falls in.