Laws of Eve | Avoiding pitfalls in real-estate transactions
In last week's article, I outlined the steps that are usually followed in most real-estate transactions, and promised to identify some of the things that could go wrong this week. Below, I will do that, and also indicate how many of the pitfalls may be avoided.
Choosing the right professionals
Choosing the right attorney, surveyor, and mortgage broker may be the most important steps to take when purchasing a property, and these decisions tie into some of the pitfalls that are listed below.
There is no guaranteed way to avoid challenges in this area. Recommendations from persons who have purchased property, advice from professionals who are involved in real estate, and consultations with various professionals may be the best ways to try to identify the right persons to handle this important transaction.
Insufficient funds to complete the transaction
Some prospective purchasers do not know that the agreed purchase price is not the total amount that needs to be paid to complete a transaction; so they fail to make adequate provision to pay for stamp duty, registration fees, attorneys' fees or charges associated with the mortgage.
The right attorney and mortgage broker will ensure that a prospective purchaser has a clear idea of all charges that will need to be covered to complete the transaction and make arrangements for them to be paid.
Problems with the title
Once a property is identified for purchase, it is important for the prospective purchaser to not only visit the property to see what it looks like, and ensure that no squatters are there, but the attorney should conduct a search at the titles office to ensure that there are no caveats or liens against the title that could prevent the registered owner from transferring the property. It will also be important to have a surveyor's identification report prepared to ensure that there are no breaches in terms of the boundaries for the property.
The word of advice is to ensure that the right professionals are on board to provide proper advice.
Purchasing a property in a new development
Purchasing a property that is under construction is different from purchasing a property that has already been built, especially because the payment structure is usually different and, in many cases there are two contracts involved - a construction contract and a real estate contract. The problem is that some developers run out of money to complete the construction, end up not completing the project and default on payments to the lenders who are financing the development.
It is important to ensure that the developer has a solid reputation and that the development is registered with the real estate board, which will prevent the developer from using purchase money to fund the development.
Unable to get vacant possession
When a property is purchased from a mortgage company and the owner is still in possession, or from the owner and a tenant or squatter refuses to leave, a purchaser may get the title registered in his or her name and not enjoy the use of the title for a long time. Sometimes, the purchaser never gets possession and is instead tied up in a court action.
This can be avoided by not purchasing a property that is occupied by a third party. This cannot always be avoided, and the best option will be to take prompt legal action in order to minimise delays.