Hawaii DROA Purchase Contract Made Simple

Hawaii Real Estate Purchase Contract

The Hawaii Association of Realtors (HAR) recently published an updated type of its standard form of contract for the purchase and sale of residential property in the State of Hawaii.  No question, the most visible change to the standard form is its new title - “Purchase Contract” - which took the place of the form known as “Deposit Receipt Offer and Acceptance” or “DROA.”  This article is meant to assist real estate brokers and salespersons, lawyers, and Buyers and Sellers to better understand the new Hawaii DROA or Hawaii Purchase Contract.

HAWAII PURCHASE CONTRACT OVERVIEW

The old Hawaii DROA now called the Purchase Contract is is made up of an introductory section followed by four major sections.  The four major sections are entitled Section A, Section B, Section C, and Section D.  The terms of the Offer are located in Section C and is the “meat” of the Purchase Contract.  Section C starts on page two of the Form and is seventy-nine paragraphs long.

The major sections in brief:

• Section A contains “Agency Disclosures,” which each Brokerage Firm is required to make to the Parties when that Firm serves as an agent or other representative of a Party in the transaction.
• Section B serves as a receipt of the Buyer’s initial deposit and is usually signed by the Buyer’s agent.  Section B also addresses whether the Buyer or Escrow will earn interest on the Buyer’s deposit in instances when the deposit is put into an interest bearing account.
• Section C, as aforementioned, is the major part of the Purchase Contract.  It constitutes the Offer to buy the Property and contains the Offer’s terms and conditions, numbered C-1 through C-79.  Section C also includes a list of additional documents (called “addendum” if one document and “addenda” if more than one).  Those documents may be physically adhered or incorporated by reference.  They are intended, in either case, to become part of the Purchase Contract.
• Section D is the portion of the Purchase Contract where the Seller will have the option to accept the Buyer’s Offer or make a Counter Offer to it (thereby rejecting the Buyer’s original Offer) .  If the Seller would like to submit a Counter Offer, the Seller would usually do so by attaching HAR’s standard form of “Counter Offer.”  Section D also confirms the Seller’s agreement to pay the commission they agreed to pay to the Brokerage Firm handling the selling of the Property.

Lastly, although not legally portion of the Purchase Contract, the HAR standard form “Cooperating Brokerage Firm’s Separate Agreement” is usually attached to the Purchase Contract by a Hawaii Real Estate Lawyer.  This agreement is between the Seller’s Brokerage Firm and the Brokerage Firm (if different) that represents the Buyer.  It includes a provision for the sharing of the listing commission to pay the Brokerage Firm providing services to the Buyer.  Typically, but not necessarily, the commission is divided equally between the two Brokerage Firms.