What you Need to Know…..
Understanding the process of buying real estate & avoiding the common traps
Real estate can be a good investment but it pays to do your homework. As recent times have shown, it is just as easy to lose money as to make money in owning real estate. There are lots of things that can go wrong when purchasing real estate. And it is when you are purchasing that you make your money in real estate. In real estate you make your money when you buy, not when you sell. If you pay too much upfront or buy the wrong property, you will not make money on or even lose money. Real estate is a relatively large and expensive transaction compared to buying appliances or a car. Because of the big dollars involved, any serious mistakes have the potential to be catastrophic.
Taking the right steps can help you avoid the most common traps. This guide will take you through what you need to know, and answers most of the questions commonly asked by purchasers. Before we get into that, I have included a list of the common terminology below.
Buying Real Estate – Legal Essentials
What’s the worst that can happen?
In a real estate transaction it’s the purchaser that has to take care about the property they are buying. The purchaser has to check everything to make sure all is in order. In practice it’s the purchaser’s solicitor who takes care of this for the purchaser, so it pays to get a good one.
Some of the things that can go wrong are:
· You lose your entire deposit.
· You end up with the wrong property, or no property at all.
· You pay outlandish penalties, interest, and the vendor’s unpaid taxes and council rates.
· You discover after you bought a property that you cannot use in the way to intended.
· You discover something seriously wrong with the property after you have become the owner and it’s too late to do anything about it.
Having a good lawyer acting for you and making all the necessary inquiries means that these disastrous scenarios can be avoided.
Surely there’s a law against it!
Many people believe that there is some system vaguely referred to as ‘consumer protection laws’ that protect them from rip-offs or being hoodwinked in a real estate transaction. Or better yet, a system for compensating them for when they buy a dud property. This is not so. The over-riding consideration in all real estate transactions is the old and estabished legal principle of caveat emptor –translated as ‘let the buyer beware’. In law, you know it’s an important principle when there’s a latin word for it like ‘caveat emptor’. In other words, the law requires that the purchaser make prudent enquiries of a property (or engage an experienced solicitor to do so on their behalf). This must be done before buying the property. You are stuck with the deal once you’ve made it.
I’ve found a property! What do I do?
Legal Essentials when Buying Real Estate
1. Get a copy of the contract.
The law requires that before real estate can be offered for sale, there must be a contract prepared and made available for any interested purchaser. Most contracts are available as an email attachment. Have the contract emailed to you. This will make it easy for you to forward the email to your solicitor for advice.
2. Have your solicitor check it.
Your solicitor can advise you about
unfavourable terms. In my experience every contract has some terms that favour the vendor at the expense of the purchaser. This is
because it is the vendor’s solicitor who drafted the contract. It is the
purchaser’s solicitor’s job to find out which of these terms are a ‘try on’ and ask for them to be removed.
3. Has your offer been accepted?
If you cannot agree on a selling price with the vendor, there is no point in doing anything further. Look at more properties and make more offers in the meantime. When your offer has been accepted, the real estate agent will send a ‘sales advice’ to your solicitor.
4. Call your mortgage broker
Can you afford to buy the property? (i.e.can you get finance)? If you do not have a broker, your solicitor should be able to put you on to a good one.
5. Conduct a building and pest inspection
(for a house) or commission a strata report (for a unit). This is something your solicitor can arrange.
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