Due to the number of requests, we shall also be adding two more categories to our blog namely Estate Planning and Family Law. Stay tuned!

April 1, 2009

Things You Need To Do Before Buying A Property


Deciding to buy a property is easy. Paying the deposit is easy. These two decisions may often be the two easiest decisions you have ever made when buying a property. Then the problem starts. Which lawyer should I use? Can I move into the Property? What is an ‘assignment’?
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Often, a new purchaser will just pay the deposit, call up a friend (who is equally clueless), appoints a lawyer recommended by a friend’s friend’s uncle and hope that nothing goes wrong. This is a common scenario especially so for purchases from secondary market listings where the terms of the contract between the seller and the purchaser is king.

This often results in:
• The purchaser paying late interest to the seller.
• The purchaser having his deposit forfeited when his application for financing is rejected
• The purchaser getting a house with ‘extras’- tenants that do not pay rent.
• The purchaser not getting the property but having to service the loan
• .... and others .....

Scary? Forewarned is forearmed.

Here are five most important things to know & do when buying a property.

1) Read the Offer to Purchase Carefully….Better Yet, Get a Lawyer to Read It!
Before you hand over your hard earned money to the seller or to a property agent, usually you will be asked to sign a document called “Offer to Purchase”. Don’t. Read it first. If you can, get the seller to give you at least 48 hours to read it first (so that you can give a copy to your lawyer). This “Offer to Purchase” is usually an agreement by itself and would contain the important terms and conditions which are to be incorporated into the sale and purchase agreement. Make sure you can fulfill those terms and conditions.

Delaying the signing of the ‘Offer to Purchase may not always be possible especially so where the property is a ‘hot cake’. It may just be a sales spiel: “If you don’t sign now, there is another buyer waiting to grab it!” Don’t be fooled. ‘Hot cakes’ are usually rare in secondary market listings unless the owner is looking to sell quickly due to financial hardship. This in itself is a red flag which brings us to the next nugget.

2) Get A Proper Conveyancing Lawyer
When you want to learn to bake a cake do you go to a sandwich maker? The answer is of course a resounding “NO”. Surprisingly a lot of people instruct lawyers who are unfamiliar in conveyancing transactions to act on their behalf. Do not hesitate to question you lawyer. Ask him/her how long it will take to complete the transaction, what is the procedure like? Ask for a step by step account on how the entire process will take place. It is important for you to understand the process as this will not only cut down miscommunication and finger-pointing when things go wrong, it will also help you understand the various implications and assist you in your decision making process. If your lawyer cannot give you a reasonable account of the process….get another.

3) Don’t Deposit Money With The "Agent"
Before all the real estate agents shred me to pieces, what I mean is that the purchaser should only pay the earnest deposit with a licensed agent and in the name of the agency and NOT the agent’s personal name. This is to ensure that if the seller refuses to sign the agreement, the agency shall be required to return the earnest deposit. Many a times, when this happens, these rogue “agents” will abscond with your money.

4) Try to Get Your Loan Approved Before the Sale and Purchase Agreement is Signed.
Ordinarily people would apply for a loan after the sale and purchase agreement is signed but to do this is risky if you have a bad history of paying any loans you might have albeit credit cards, car loans or personal loans. If your loan application is rejected and you have already signed the sale and purchase agreement…Bye-Bye Deposit.

5) Find Out if There Are Any Tenants
If there is a tenant staying at the house you intend to buy, get a copy of the tenancy agreement and furnish it to your lawyer. If you want to let the tenant continue with the tenancy get your lawyer to prepare an assignment of the proceeds over to you when the sale is completed. If you do not want the tenant, make sure you give the seller a deadline to remove the tenant within a certain period of time or else….charge the seller Late Interest.

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5 comments:

Anonymous said...

Item 4 regarding getting a loan before signing of S&P, usually the bank will ask for a copy of S&P before they can evaluate the property and approved the loan amount. Can it be done without the S&P? Chicken and egg thingy I suppose.

Pet

Anonymous said...

banks will ask for the previous S&P, not the one you you are supposed to enter into...

Ho said...

Get the offer letter from few banks and compare after signing the offer letter.
Then, sign the offer letter before signing the SPA.

iqbal said...

Most commercial banks now provide free preapproval of loans (subject to further valuation of the property concerned). However get A CLEAR ANSWER written if possible that there will be no Cancellation or Processing Fees from the banks.

Having said this, if you don't proceed with a proper loan application (ie with all the required docs) after getting a preapproval, banks will note you for this and in future MAY have a bearing of loan applications to that bank.

On the matter of previous SNPs, a copy of title as an alternative is also acceptable by banks as they actually need the particulars of the property to value it. My humble experience.

Anonymous said...

Do i (buyer) need to appoint a lawyer for the S&P? And do i need to pay for the lawyer appointed by the seller?