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Risks In Buying And Selling Of Property And Real Estate

Mar 20, 2008
Investment in Real Estate is indeed very profitable and the sooner you get to buy a property the better it is for in terms of investment point of view. Moreover, the price of Real Estate is quite favorable these days, which make Real Estate investment, be it residential or commercial, very tempting. One must however realize that there are significant risks involved in a Real Estate transaction and all the details pertaining to the property as well as the agent need to be thoroughly verified.

First of all, in this market there are agents who are neither licensed nor bonded, and there could be many who do not know the market well and do not even care to check if the property they are trying to sell is problem-free. A number of them are fakes; there have been many instances where the agent has fled with the down-payment cash he received from the buyer or the seller, whomever he is serving. Property buyers or sellers are therefore advised to use an escrow or third party services of similar nature. Stewart Title in Houston and Fidelity Title in New York offer escrow services. These agencies hold your money in one of the US accounts until funds are disbursed based on your offer terms and conditions.

Secondly, you must check the title of the property before finalizing a deal. Nowadays a large number of properties have title problems. You may also hire an attorney to get you title clearance of a particular property. Also check whether the seller has a US title clearance and a Fideicomiso. If he doesn't, there are possibilities that the land or property has title issues. However, even if the seller has a Fideicomiso, it doesn't guarantee clear title of the property. You need to therefore play safe and get title insurance. But then, even this is risky. You may have applied for the insurance and paid a lump some to your agent for the same purpose, but it may happen that you never receive those insurance papers. By dealing through the escrow agents, you can however avoid this problem. These escrow agents are recommended by the genuine Real Estate agents and enjoy attractive incentives to ensure that your cash is disbursed righteously and you deal hassle-free.

Third, the deal closure is both complicated and expensive. Foreigners buying properties near coastal regions or borders are required to obtain a permit for foreign investment and hold the land/property title through a bank trust (the earlier discussed Fideicomiso). These trusts for doing the necessary services charge about $300-500 annually. This amount is very well mentioned in your trust documents, therefore, ask your agent to shop around to get the best possible deal. Moreover, there is a huge transfer tax. You may be expected to pay nearly $7,000 as closing fees, which cannot be recovered while selling that property. There is no point underreporting the transfer values because that would be considered illegal and huge fines can be imposed if caught. If you do this or allow the seller to do this, then you will be yourself accountable for the seller's capital gains. It is simple, if the seller doesn't pay the stipulated capital gains, then you are liable to pay the same. You need to therefore mention in your contract that the seller doesn't receive any money from your end until he has paid all his capital gains.
About the Author
William King is the director of Wholesale Products & Dropshipping Trade Supplies & Distributors Directory, Pakistan Property & Pakistan Real Estate Portal and Dubai Property & UAE Property & Dubai Real Estate Portal. He has 18 years of experience in the marketing and trading industries and has been helping retailers and startups with their product sourcing, promotion, marketing and supply chain requirements.
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