Buying Real Estate? 7 Important Points to Consider Before You Make that Purchase

Buying real estate is the single largest investment many people will make.  Whether it is a home for their family or commercial property for the operation of a business, the important points to consider are largely the same.  Below is a list of the 7 points you should consider before you make that purchase.  

  1. Work with a good Realtor.  When you are trying to find real estate to purchase working with a good real estate agent is very important.  This is true if you are trying to identify a new home for your family or a new commercial property for your business.  Most real estate agents are very good.  However, just like any profession, some are not as good.  If you have never worked with a real estate agent ask your friends, your co-workers or your attorney for a recommendation.  A good real estate agent earns their commission. 
  2. Get an Inspection.  Once you identify a property it is important that you get the property inspected to make sure that you are aware of any issues that may go unnoticed by an untrained eye.  Is the property structurally sound? How many more years are left before the roof needs replaced?   Has there been water damage in the basement?  Are the electrical and plumbing systems in good shape?  These are questions that you need to have answered before you buy real estate and are all questions that a licensed inspector can help you answer. 
  3. The purchase and sale agreement – read it and understand it!  If you put in an offer and it is accepted by the seller, you will need to enter into a purchase and sale agreement.  The terms of the purchase and sale agreement are very important because they will control the ultimate transfer of the property from the seller to the buyer.  The purchase price is an obvious term that is contained in the purchase and sale agreement but there are many others.  When will the transaction close?   If the seller wants to take items that may normally stay (e.g. a plant in the yard that has sentimental value) then those items should be in the purchase and sale agreement.  Will the seller pay any closing costs for the buyer?  It is important that you read the purchase and sale agreement completely and understand it all.  If you don’t know what the terms mean and don’t know if there are other terms that are needed to protect your interest you should consult with an attorney. 
  4. What are your escape options?  The most important provisions of the purchase and sale agreement are the terms that allow you to walk away from the transaction and get your deposit (which is typically thousands of dollars) back under specific circumstances.  If you are not able to get the loan will you be able to get your money back?  The answer to this question depends upon the terms of the purchase and sale agreement — that is why you have to read and understand the purchase & sale agreement.  If the survey comes back and you find out that your neighbor’s house is one foot on the lot you intend to purchase what happens?  Again – the terms of the purchase and sale agreement will control what your rights and obligations are when buying the property.    
  5. How will you take title?  If the inspection looks good and the purchase and sale agreement is signed you then have to decide how you will take title at the closing.  Simply put, you need to determine whose name will be on the deed.  Will it be you and your spouse?  Will it be you and your business partner if you are buying this for your business?  Should you set up a corporation or limited liability company to own the real estate?  If you own property with your sibling or parent and you want the property to go to the survivor automatically on the death of either of you then you need to be careful how the deed is written.  There are many issues related to how you will take title and they each have significant implications.    If you don’t understand all the implications resulting from how title to the property is held you should discuss this with your attorney. 
  6. Look out for unique issues – e.g. Easements.   Does the property you are buying have the benefit of an easement over the neighbor’s property or does your neighbor have an easement over the property you are buying?  Easement disputes can be very frustrating to land owners and you need to fully understand the benefits or burdens of any easement BEFORE you own the property. You also need to review the plot plan to make sure the location of the building on the property is acceptable and there are not issues related to parking or traffic (especially for commercial properties) that could be caused if your neighbor put up a fence. 
  7. Are there limitations on future use?  If you are buying the property with a specific purpose in mind, make sure you investigate whether that use is possible before you close the purchase.  If you want to operate a business on the property make sure the zoning allows for such use.  If you want to put in a pool you need to make sure there are no restrictions to prevent you from installing a pool.  Do you have enough room to put a pool on the property and comply with any setback requirements?  Also, are there any deed restrictions which prevent building a pool?  Some golf courses have deed restrictions on the adjacent property that prevent a pool or even a swing set from being placed on the property.  The time to learn about any limitations is before you take title to the property. 

 The above list is not meant to be exhaustive but rather address some of the more important issues to consider when purchasing real estate.  You should always work with knowledgeable professionals to protect your interests.

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