HOG BUYING A REAL ESTATE

Buying a property is a major milestone in life that a lot of people want to check off their list of goals. Even though this is a dream, there is a long process involved in buying a property. Along with this process is a long-term commitment. From searching for a property to paying a loan, this massive purchase should be properly planned out. Those who are looking to purchase a property need to follow a few steps before finalizing everything.

List Priorities

Every person has different preferences for their home. They want a certain location, number of rooms, sizes, etc. Before purchasing your new home, you should know what you want. This is important because every preference has a corresponding financial consequence.

For example, a property that is near a bustling commercial area is more expensive than a space in a little more secluded location. Wanting more bedrooms could mean you’d need a bigger house, which is inevitably more expensive. 

Once you’ve sorted your priorities and preferences, you’ll have a better idea of which real estate investment is the better option for you. After this, it’s time to evaluate the costs and prepare yourself financially.

Evaluate Costs

The cost of real estate investment does not only involve the house and lot. Aside from these, homebuyers have to pay taxes and processing fees as well. After you’ve purchased the house, you might need to spend on renovations and, later on, property maintenance. 

The price of the property determines the amount that you will pay in taxes. Transfer taxes depend on predetermined percentages of the property’s selling price. It could also be determined by the location or zonal price of the property. The buyer should also pay the registration fee of the property, which depends on the selling price. Additionally, the buyer should pay real estate taxes.

While searching for your new home, tour the place. This will help you visualize the changes you want to make as well as the renovations that you need. If possible, get a rough estimate from a contractor so that all the possible expenses will be laid out.

Even though interest hasn’t been in place yet, it’s good to add it to the equation beforehand. If you’re borrowing money to purchase the house, the interest will play a significant role in your future expenses.

Create a Financial Plan

Homebuyers will need to research to find the right financial plan. Several options are available to finance your real estate investment. Loans from banks, financing companies, or even the government can help you. However, they have different benefits and interest rates. The good thing about having a wide array of options is that you can select the one that works best for you.

The purpose of the property determines the kind of loan that you can qualify for. A commercial loan offers a bigger amount of money than a residential loan. Loans for residential property might also differ from investment properties. The following are types of loans that homebuyers can consider:

  • Conventional mortgage loans: This is the most common type of loan. They are given by banks or mortgage brokers.
  • Hard money loans: These are loans provided by private professionals who focus on real estate investments. It’s easier to get a hard money loan than a conventional mortgage loan. Private entities don’t require credit scores but look at the value of the property.
  • Private money loans: These are given by people who have extra money to invest in property. Unlike hard money loans, these investors are not professionals. They are merely investors who could be anyone.

Seek Expert Advice from a Realtor

It’s always a good idea to seek the advice of a professional, certified real estate agent. A non-professional in the field of real estate is capable of making mistakes that are apparent to a real estate agent. There are also things that a regular person won’t spot or won’t know about a property. 

An expert opinion is a level-headed and non-biased opinion. When a real estate agent gives you their two cents, it’s best to put it into consideration. After all, they are people who deal with properties, sellers, and buyers every day. They know the ins and outs of the industry, and their experiences have made them capable of giving trustworthy advice.

Check Your Ability to Purchase

Investing in real estate is not easy. Lenders and investors in real estate have to make sure that you are eligible to purchase a home. Among the factors they consider are credit score and down payment.

Your credit score depends on your bank transactions, timely payment of bills, and credit card usage. A bad credit score or no score at all hinders you from purchasing a property. Having enough money to pay for the down payment will save you a few headaches. Mortgagers may require a minimum amount for the down payment to ensure your commitment to the purchase. 

Consider the Long-Term Implications of the Property You're Going to Purchase

A real estate property is a long-term investment. Because of this, they undergo changes—not just in themselves but in their surroundings as well. The way you use the property also plays a big role in its evolution.

An example would be a piece of land that a person has held on to for a decade. When they purchased the property, the area was not developed at all. Ten years later, the area turned into a bustling metropolitan area. As a result, the value of the land significantly increased.

Another example would be the family home. Because this property is constantly maintained and is in use, the structure remains to be intact—as compared to an abandoned property. Therefore, the property that is constantly used retains or appreciates while the abandoned property could depreciate.

Legal Checklist for Purchasing a Property

Several legalities are involved in purchasing a property. Before people can enjoy their new estate, they need to undergo a rigorous process with their lawyer. Making sure that everything is in place prevents future problems with the ownership of the property. The following is a legal checklist before buying a property:

1. Property Documents. Land ownership entails securing documents. A lot of the home buying process will be hindered if the documents are not present. Here is a list of documents that you should look for:
  • Title. This could come in a lot of forms, especially when the property has been transferred through donation, sale, succession, etc.
    • Nature of the title. This could be a leasehold, a freehold, or a development right. There could be additional requirements or attachments depending on the nature of the title.
      • Appropriate stamps and registrations. All title documents should bear stamps and seals of registration from relevant jurisdiction offices.
      • Khata. The khata contains the property assessment, including the specifications of the property. This should be registered under the seller’s name.
        • Original copies of the title. This document proves ownership of the property and serves as protection against potential legal disputes.

        2.The Identity of the Seller. Before purchasing the property, a buyer should verify if the seller is who he says he is. This is especially important for special circumstances. 

        For example, a guardian can sell the property of a minor or someone who is not in the capacity to sell a property. Therefore, the seller should secure a court order, stating that he is the guardian and that he has the authority to sell the property.

        If the property is owned by multiple people, the buyer should verify the identity of all the owners. If the owner of the property is a company, the buyer should ensure that the company is valid and legal and can own and sell the property.

        3. Permissions. The property should have verification from zoning departments. These documents will guarantee that the property is built in compliance with safety measures.

        4. Construction Approvals.
        This is another measure that the property is built safely and follows city rules and regulations. These documents involve different departments such as fire, environment, pollution, sewage, etc.


        5. Occupancy Certificate. Securing an occupancy certificate prevents possible penalties and demolitions.

        6. Tax Payment Receipts. Taxes are a heavy burden, and they are the most crucial element in owning property. To avoid future problems and unexpected costs, make sure that the taxes due to the seller have been paid.

        7. Encumbrance. This document fully guarantees that the property does not have legal or financial liabilities attached to it. If this were a luxury item, the encumbrance is the code that proves the item as authentic.

        The Key Takeaways

        A buyer should take the necessary steps before buying a property. Financial preparations are crucial in purchasing a property, and this includes having a good credit score, securing the down payment, and choosing the right loan. A buyer should also think about future expenses such as renovations, maintenance, and future changes in property value. Most importantly, both the buyer and the seller should follow legalities to prevent disputes in the future. 

        Author Bio: Rose Flores

        Rose is a licensed real estate broker and the co-founder of RE/MAX Gold Philippines, a real estate company in the Philippines. Acting and real estate have always been her passions since childhood. She confidently helps close record breaking deals for residential and commercial buyers while leading her team to success. Check out their website at remaxgold.ph.

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