Common Mistakes in Real Estate DealsSep 2020 19 / 0 Comments
It is often the case that unsuspecting property buyers fall into some booby traps, only discovered after closing the transactions. Buyers recount their ugly experience with dubious or inexperienced property agents/speculators, which usually leave them high and dry after fleeing them of their hard-earned funds. It is very advisable that in buying a property, prospective buyers must note the following mistakes and avoid them at all costs.
Mistakes in Buying
- Use of individual agents: To cut corners and avoid costs most buyers prefer to use the individual property agents in their hood. The talk often is “it is cheaper purchased from that agent through which my neighbor Olamide bought his, rather than incur extra cost on corporate agents. After all Olamide is enjoying his property without problems”. Buyers as exemplified above are impressionable and highly susceptible to fraud. It is better to spend a little more with assurances of impeccable deals than gamble with Olamide, and perhaps, spend much more in litigation. But the reverse is often the case. With a professional organization, you are sure of getting back your fund, for a transaction-gone-wrongly. You are double-sure that all searches and investigations (due diligence, including the search and confirmation from the land authorities) are completed. Expert organizations get you the best prices through strategic negotiation. In the long run, you spend less.
Assuming the all-fees-inclusive: Dubious property agents present unbelievably low prices with the mantra “All-fess-inclusive”. This supposes that once the buyer pays the listed price, no other fees are expected. Such buyers are made to pay the cumulative, only to be faced with demands from persons, communities, government agencies or groups that he/she never envisaged. Clins Chaplin noted that fees/price and extra costs are like cockroaches. If you see one, be sure there are probably twenty more lurking around the corner, yet unseen. We advise that in preparing the cumulative cost of a property, the buyer should insist that it consists of a breakdown. Such breakdown must capture all the deliverables; all the other expenses supposedly covered by the total cost. Buyers must obtain individual receipts for each of the costs. Below are some of the extra costs (depending on location):
- Community development levies
- Site approval fees
- Land/property registration fees
- Lifting /delineation fee (not applicable in all)
- Bush entry (Mostly applicable in Rivers State)
- Survey plan charge
- Building approval/permit charge
- Inadequate knowledge of Restrictions: Most unorthodox land agents do not give full information about restrictions to their clients. This leads to the mistake of buying a piece of land that is unfit for the purposes of the buyer. Some areas have building/land-use restrictions applicable to them. Some restrictions are state-imposed, others are community-imposed. There are areas where high rise buildings are restricted. In such areas only building below one-storey are allowed. In some, restrictions apply as to land use. The government may designate the area as industrial layouts, and so residential buildings may not be allowed. Some communities place such restrictions on certain ambiance of noise or movement time. Buyers are advised to make further enquiries as to restrictions on their neighborhood before consummating land transactions.
- Not embarking on physical inspections of property: Buyers, especially those living far off the location of the property they wish to buy are often tempted to pay without first going to the site. The use of such applications as google-earth is quite good and necessary. Real maps are also good and up-to-the-minute. But they are often more fanciful as they are in reality. Buyer may use it to view the locality of a property and its history, but it can never take the place of physical inspection. It’s advisable to take a walk around the property to identify such matters that the computer aided applications may be unable to spot .Where it is hard for the prospective buyer to make a trip to the site, he/she may nominate a trusted person or organization like Zaram Realty Services to do so on his/her behalf, take relative videos and pictures for the prospective buyer and submit a comprehensive report to him/her. Nothing takes the place of physical inspection of properties.
MISTAKES IN RENTING/LEASING
- Poor documentation:
It is very important that in property renting both the landlord and potential tenant define all agreements in black and white. There should be no room for speculations. Phone conversations do not take the place of a signed agreement. Tenancy is a contract defined by law. The laws of tenancy must be followed strictly in drafting agreements. The agreements may state when to raise rent; periodic rent increment is agreed. Restriction on renting of livestock etc, may also apply.
- Unverifiable Transaction
It is necessary that in making and receiving payment for the rental, there should be legally admissible evidence of transaction. Cash-on-hand payment is a “no,no”; bank transaction is the game. To avoid claims and counterclaims, all payments should be done through the bank. The landlord must insist that deposits are made into their account. This clears all doubt.
- Underestimating Repair costs
Landlords often underestimate the cost of reports in renting out a property. This manifests in low-cost renting and the subsequent reluctance to keep the property in top form; thereby leading to bickering with the tenants. It is also the case where tenants undertake to repair properties. The issue of underestimation of the cost of repairs for a tenant may lead to the exorbitant cumulative cost of rental in the long term. Estimates for repair must be thoroughly considered in fixing rent and in agreeing to a given sum for rental. Where in doubt, the concerned party may engage the services of a quantity surveyor/valuer.
- Illegal Eviction
Landlords run into problems by engaging in the eviction of tenants with the use of thugs or by other unorthodox means, such as de-roofing of property. Illegal eviction can cost the undertaker a fortune and grant the tenant the opportunity to overstay in the estate during the pendency of a case before the courts. Landlords and tenants are to define their engagements properly and where there are issues, consult their estate agency for alternative dispute resolution mechanisms.
- Not considering neighborhood issues
Tenants run into problems by failing to consider factors associated with their environment. It is often the case that tenants overlook certain salient issues as soon as they find a property that has the amenities that suit their taste. Failure to consider past and present securing situation of the area; wet/raining-season environmental challenges, such as flooding and roofing, leakages, power supply, and waste disposal may turn out to be the tenant’s undoing. These factors would help tenants understand the hidden costs of renting property such cost are security and waste management fees. Tenants are advised to visit the property they wish to rent at different periods of the day to evaluate the environmental situation of the area.
- Renting without physically inspecting
A lot of people rely on pictures to rent a property. This may be tricky. Photos can be very deceptive. One needs to embark on the physical inspection so as to know if the apartment smells if there are structural defects such as dangerous cracks and leakages. The physical inspection also helps one to avoid scammers who put up rental advertisements on the internet, posing as the agent only to collect commitment fees and flee. Seeing the apartment and the neighborhood grants the tenant the opportunity for interaction.
- Not documenting the state of the property before renting
Where a security deposit applies, it is necessary that both the landlord and tenant document the condition of the property pre-renting. The failure to do this is a source of one of the most frequent clashes between tenants and landlords. To avoid arguments over security deposits, both landlords and tenants are expected to document the status or condition of every fitting and to take as many pictures of them as they can. If a tenant observes that any fitting is bad or not functioning optimally, it is incumbent on the tenant to draw the attention of the landlord to it. Pictures/notes should actually dwell more on noticed imperfections/faults and where possible such faults should be fired before the tenant takes over the property.
- Not confirming compatibility of existing home properties with apartment
Tenants, in many instances, fail to give attention to minute issues such as whether or not his/her household properties can fit into the new apartment. It is a difficult moment, when after consummating a rental transaction; one finds that the door is too small for his upholstery to pass in or that the room is too small for the bed. This harrowing experience can be avoided with the tenant taking an accurate measurement or confirming compatibility before renting