Purchasing and owning a property is always a high risk. Real estate professionals will say to make sure to “do your due diligence” when buying property, but what does that actually mean? What is due diligence?
The truth is, there isn’t an easy way of doing your due diligence. It’s really a time-consuming process, and few Kenyans have any idea on what to do.
Basically, due diligence means taking caution, performing calculations, reviewing documents, procuring insurance and walking the property. Simply put doing your research before actually buying the property. Moreover, if there are too many issues with the property this means too much potential risk and cost. Thus you can cancel your purchase agreement and look for a better property.
Here are just a few of the steps that apply to both personal residences and investment properties, although some may only apply to one.
1. Shop the marketplace
The Kenyan real estate is vast and has a lot of options hence make sure you know what the market has to offer. Unfortunately, too many Kenyans look at just a few properties-put in an offer and purchase. Importantly partner up with a real estate agent like Kenya Homes. This will save on time and expense.
2. Mortgage financing
Make sure the mortgage options you have are fair and in line with competitors. Have your real estate agent advise you on the best lenders so you know to get the best deal.
See Also: Mortgage Loan: What you need to know
3. Calculate your investment
If you’re buying an investment property, it’s vital to calculate your deal. How do you know whether it’s a good deal if you haven’t done the math and compared it to other opportunities?
See Also: How to avoid Real Estate Investment Scams
4. Property inspection
You probably had an inspection, but did you go to it? Did you review the inspector’s remarks on all the work that needs to be done? Then did you call a contractor or go to a home repair store to see how much it will cost to put the property in the shape you desire? Renovating properties is hugely expensive and high risk, so make sure you get estimates for the work before you decide to move forward with a purchase.
Insurance
Did you check to see whether an insurance policy can be written for the property? How much will it cost? Some areas, such as fire-prone or hurricane-prone areas, might not even be able to get a policy. And even if they do, it might be prohibitively expensive. Get some bids before you’re too far along in your purchasing process.
See Also: Home Insurance: Why You Need It
What is the Importance of due diligence
- It helps you identify the cons of owning the property
- You get to understand more about so-called “hidden charges” which add on your fees.
- You avoid buying properties with ownership issues.
- You’ll avoid real estate companies that don’t give full ownership so that they can keep collecting money from Certificate transfer fees.
- To avoid commitment to a property that cannot be mortgaged.
- It provides relief and satisfaction with what you are buying.
- With the complete information about the property, you are securing yourself. in case false claims come your way.
Those are just a few of the many items that make up due diligence when buying real estate. Remember, you have to do these before you close escrow on the property. If you fail to do the proper tasks, problems might arise that were preventable and might make your real estate experience less than palatable, or downright life changing! Or they might cause you to lose all the money you’ve put into the property.