Whether you are buying a home, purchasing a commercial property for your business, or just getting started in real estate investing, it’s wise to become familiar with some of the most common real estate mistakes and how to avoid them.
Below are seven of these common mistakes.
#1 Failure to Ask the Right Questions
Consider asking the following questions before buying any property:
- Are you aware of any upcoming construction in the area?
- Has the area experienced any changes in recent years, and are any notable changes expected?
- Is the property located in a problematic area, such as a flood zone or area known for high levels of radon?
- Does the property have any permit or zoning issues that need to be addressed?
- Will any major appliances or systems on the property need replaced within a short period of time?
- What is the primary reason the property is being sold?
- What did the current owners pay for the property?
#2 Not Learning About the Local Market
Before buying a residential or commercial investment property, it is critical to understand the area’s real estate inventory, home and land values, and any issues around supply and demand.
#3 Closing Before You Get Zoning Approval
If you have a specific use in mind for the property you are purchasing, and that use requires approved zoning or permitting, the risks associated with closing before obtaining those approvals are immense. Although it can be difficult to get an owner to extend closing until zoning or specific use permits are approved, closing before being approved can cost you dearly. It is often in your best interest to pay the non-refundable extension fees. An experienced real estate attorney can help you determine how to proceed.
#4 Not Hiring an Experienced Real Estate Attorney
Many buyers and sellers expect their real estate broker or agent to do what only a real estate lawyer should be doing. In effect, they want to avoid paying legal fees and have their broker act as their lawyer. But expecting your broker to act in this capacity can be a recipe for disaster, especially when you’re dealing with complex real estate transactions or commercial transactions.
#5 Failing to Perform Proper Due Diligence
Again, unregulated enthusiasm, and the desire to avoid “excess” fees often factor into this common mistake. Not getting a property inspection report, for example, has become increasingly common in this crazy real estate market, but failure to do so almost guarantees unpleasant — and expensive — surprises down the road.
#6 Underestimating Costs
Your mortgage only represents a portion of the expenses associated with property ownership. From property taxes and insurance to lawn maintenance, appliance repairs, and installing a new roof, the costs of buying and maintaining a property can be extensive. Whether you plan to live in the property, work out of it, or rent it to tenants, it’s a good idea to make a list of the monthly costs (fixed and variable) to ensure that you can cover them.
#7 Not Using a Title Company That You Select and That Provides a Lawyer Who Represents Your Interests
Often, banks or realtors try to push their own title companies when it comes to representing you at closing and providing title insurance. The purchase of real estate is often the largest investment one ever makes. Therefore, it’s essential that you be represented throughout the negotiation process including closing by a lawyer and title company of your choice. That is your right. Don’t let a bank or realtor discourage you from exercising this basic right. Title insurance premiums are set by the Commonwealth of Pennsylvania. MidState Abstract Co., which is affiliated with Reager & Adler, will provide title insurance at the state-set rates and will provide an attorney to represent you at closing at no additional cost.
Contact Us Today
The legal team at Reager & Adler has more than 100 years of combined experience representing clients in all real estate matters. Our attorneys keep current with the constantly-evolving real estate market and laws, and we pride ourselves on developing tailored and innovative legal strategies to meet the needs and budget of our clients. Contact us today to learn more and schedule a consultation.
David W. Reager, Founder & Managing Partner
Reager & Adler, P.C.
2331 Market Street
Camp Hill Pa. 17011