Risks in Buying and Selling of Real Estate Property

by: Sara Martin
Total views: 19
Word Count: 616

Real estate investments are certainly profitable, making it a good idea to get started in the market sooner rather than waiting in order to make the maximum profit. Real estate prices are so favorable right now that many people are tempted to get into the market and start investing. But with this great profit potential comes risk, making it necessary for the property, its title and the real estate agent selling it to be checked thoroughly.

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 absconded with the down-payment cash he received from the buyer or the seller, whomever he is supposed to be serving. The best course of action for those who want to buy or sell real estate is to use a third party service or an escrow company. Escrow services are offered by Stewart Title, located in Houston, and by Fidelity Title, located in New York. These escrow companies will keep the money in an account in the U.S. until the terms and conditions of your agreement have been met and the money can be disbursed.

Secondly, you must check the title of the property before finalizing a deal. Many titles to various real estate properties have issues surrounding them. You may also hire an attorney to get you title clearance of a particular property. Also check whether the seller has a U.S. 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. Because of this, it’s the best idea to get title insurance before proceeding with any real estate deal. But then, even this is risky. You may end up applying for the insurance and paid a lump some to your agent for the same purpose, but it may happen that you never receive the insurance papers. By dealing through the escrow agents, you can however avoid this problem. These escrow agents are recommended by real estate agents and enjoy attractive incentives to ensure that your money is disbursed righteously and your deal hassle-free.

And third, real estate deals can be difficult, complex and pricey to close. 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). Each year you can expect to pay anywhere between $300 and $500 for the services of the trust. This amount is extremely well described in your trust documents, therefore, you should ask your agent to dig around to get a more favorable deal. There will also be a significant transfer tax that will have to be paid. Your closing fees may be as high as $7,000, and there is no way to recover the amount while the property is being sold. There is no point underreporting these transfer values because that is considered illegal and enormous 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. The simple fact is that the capital gains will have to be paid, and if the seller doesn’t do it, the buyer will have to. For this reason, the contract should have a clear stipulation about the seller paying the tax before any money will be paid to him.

About the Author

This article has been written by Sara Martin who is the director of Dubai Property & Dubai Real Estate & UAE Property Directory , Real Estate News , Pakistan Property & Real Estate Developments and UK Manufacturers & Manufacturing Directory .

---

Rating: Not yet rated

--Choose-- 0 1 2 3 4 5

Comments

No comments posted.

Add Comment

You do not have permission to comment. If you log in, you may be able to comment.