If you’re considering buying a property second-hand, you need to be aware of the possible pitfalls and how to avoid them. Here are 11 ways to protect your money and your rights.
- Do a title search â€“ Your attorney should do a title search to ascertain that the seller is indeed the owner of the property. This search will reveal whether the property is encumbered by mortgages, liens or debts of any kind.
- Get an engineer’s report â€“ An engineer should check the apartment to see if it is structurally safe. The engineer’s report will give you a list of items in the apartment that need to be repaired and an estimate of how much those repairs should cost. In a few cases, the apartment may be structurally unsafe, or the repairs too costly for your budget. If you are interested in building an addition to the apartment, an engineer can tell you if your ideas are structurally viable.
- Check the zoning â€“ You should get advice concerning the zoning laws of the neighborhood or street on which the property is built. Do they allow the kind of addition you would like to build? Do they allow your neighbor to build another floor, thereby obstructing your view? What do the zoning laws allow to be built on the empty lot across the street? Is the plot slated for public use e.g. a school, youth center or synagogue? Are there any plans to change the zoning?
- Budget for additions â€“ If you would like to add an addition, find out what the costs are. What are the building costs? What are the costs involved in getting a permit? What are the fees of the person preparing the permit request? What are the municipal fees involved? Will there be betterment tax and if so how much?
- Figure out the financing â€“ How are you financing the deal? Do you have savings that you want to use and if so, when do they become available? If you need a mortgage, you should apply for approval of the loan before you sign the contract. This way you know exactly how much you are getting from the bank and can include this figure in your financial planning. At this point you should ascertain the conditions of the loan and the monthly payments.
- Negotiate â€“ When you have all the information you need, your lawyer can negotiate the conditions of the contract. Make sure your attorney has strong negotiation skills. Many important issues need to be negotiated such as the payment schedule, the date of closing, the amounts of money held in escrow, the rate of exchange etc.
- Understand the deal â€“ Before you sign the contract get your attorney to explain all the details to you. In addition to this, your attorney should explain to you how the process works and what expenses you might incur above and beyond the price of the property.
- Register a pledge (‘mishkun’) or ‘he’arat azhara’ â€“ After the contract is signed and the first payment has been made, your real estate attorney should register a pledge (‘mishkun’) with the Registrar of Pledges (‘Rasham Hamashkanot) or a ‘he’arat azhara’ in the Land Registry. Which of the two registrations is selected is determined by the place where the property is registered.
These registrations prevent the seller from selling the apartment to someone else and protect your rights against other encumbrances that might get registered on the property after the contract is signed and before the property is registered in your name.
- Keep an eye on the escrow â€“ Very often the transaction finishes before all the documents necessary for the transfer of rights are in place. If this happens, your real estate attorney should make sure that some of the money owed to the seller is held in escrow with one of the attorneys until all the required documents are received.
- Sign on the dotted line â€“ At the signing of the contract your real estate attorney should make sure that all the forms necessary to register the property in your name are signed by the seller, including an irrevocable power of attorney from the seller to your attorney.
If something happens to the seller and he is unable to sign forms later on, then at the very least your attorney will have a power of attorney and will be able to sign the forms in his place.
- Finish the registration â€“ At the close of the transaction your real estate attorney should proceed immediately to register the property in your name. When this process is finished you should get a deed to your property which proves your ownership and protects your rights to the property.