The Hawaii Association of Realtors (HAR) recently released a new version of its standard form of contract for the purchase and sale of residential property in the State of Hawaii. By far the most obvious change to the standard form is its new title, “Purchase Agreement,” which replaced the form known as the “Deposit Receipt Offer and Acceptance,” or “DROA.” This article is intended to help real estate brokers and sellers, attorneys, and buyers and sellers better understand the Hawaii DROA or Hawaii Purchase Agreement.
PURCHASE CONTRACT SCHEME
The Purchase Agreement is broadly organized into an introductory section followed by four main sections. The latter are designated Section A, Section B, Section C, and Section D. Section C contains the terms of the Offer and is the “meat” of the form. Section C begins on page two of the For and its seventy-nine paragraphs continue almost to the end of what has now become a single-spaced twelve-page document.
Looking briefly at the main sections:
- Section A contains “Agency Disclosures”, which each Brokerage Firm must make to the Parties if that Firm is acting as agent or other representative of a Party in the transaction.
- Section b serves as Buyer’s initial deposit receipt and is usually signed by Buyer’s agent. Section B also addresses whether Buyer or the Trust will earn interest on Buyer’s deposit if the deposit is placed in an interest-bearing account.
- Section C, as noted above, is the major part of the Purchase Agreement. It constitutes the Offer to purchase the Property and contains the terms and conditions of the Offer, numbered C-1 to C-79. Section C also includes a list of additional documents (called an “exhibit” if it is one document and an “exhibit” if there is more than one). Those documents may be physically attached or incorporated by reference. They are intended, in any case, to form part of the Purchase Contract.
- Section D is the part of the Purchase Agreement in which Seller will accept Buyer’s Offer or make a Counter Offer (thus rejecting Buyer’s original Offer). If Seller wishes to make a Counter Offer, Seller will normally do so by attaching HAR’s standard “Counter Offer” form. Section D also confirms the Seller’s agreement to pay the brokerage firm’s agreed commission with the listing to sell the Property.
Finally, although not legally part of the Purchase Agreement, HAR’s standard form “Cooperating Brokerage Firm Separate Agreement” is generally attached to the Purchase Agreement. This contract is between the Brokerage Firm representing the Seller and the Brokerage Firm (if different) representing the Buyer. Provides for the distribution of the listing commission to compensate the Brokerage House that provides services to the Buyer. Usually, but not necessarily, the commission is divided equally between the two brokerages.
