Pitfalls in Property Investments
June 12th, 2009 by ALVIN SOONG
I read the newspaper on some pitfalls in property investments. Knowing most people have no time to read much,Ii summarised the following
Case 1. In one condo. pruchase, the condo’s management could not transfer the unit to new buyer because of the seller’s debt arrears. In this case, ‘the buyer should have made the cheque out to the MCST (management corporation) instead of the seller, knowing that the seller has debts
a. The agent should have done was to get a lawyer to add a clause in the standard option to purchase document, saying the downpayment is for the MCST debts.
b. As an added precaution, the clause could have also said that the downpayment was conditional to the sale.
c. Buyers should avoid paying more than 1 per cent option money in a resale dealIn this way, their exposure will be limited if the deal gets terminated for various reasons, such as the death of the seller or if the seller becomes bankrupt, experts said.
Case 2. A couple was outbid on a $1 million offer property which they liked very much, but the seller sold it to someone who offered higher. The keen buyers should do is to make an immediate offer that is close to the seller’s expectations, on the spot. If another buyer later offers a cheque at a higher price that the seller agrees to, it will be a done deal. The agent is not obligated to inform the previous home-hunter of the higher offer.
The key is whether buyers are serious about their offers, experts said. ‘When the buyer makes an offer to the seller through our agent, we do it officially through a document called the offer to purchase. It is never verbal.
Case 3. When the buyer pays 1 per cent, and a further 4 or 9 per cent within four weeks, to the seller’s lawyer. The money will be transferred to the seller when the deal is completed 3 months later. So if the buyer agrees to give him 10 per cent cash, it means that only 90 per cent, or $855,000 is going towards the property purchase.
a. Problems will arise if the seller’s housing loan is more than that amount. ‘If the seller cannot redeem the loan, the property will not be transferred to the buyer. To avoid this problem, a buyer should get his lawyer to check on the seller’s outstanding loan on the property.
b.Another risk is that the seller becomes a bankrupt within the three months it takes to complete the deal. A buyer should therefore also check to see if there are any pending legal suits against the seller to ensure he won’t be made a bankrupt before the deal is sealed
Summarised from Sunday straits times 7th June 2009
