When life gives lemon, turn it into lemonade! Just how applicable is that ideology when the "lemon" is a seemingly unprofitable property. Years of preparation, saving, and sacrifice. Months of meetings with property advisors, lawyers, insurance companies, and financial gurus. Then finally, everything is in order, and you're ready for the purchase. You rush off to buy the house, and heck! The cracks begin to show. Hundreds of thousands of dollars wasted on a property lemon. But no matter how angry you are at the seller, the truth is, in many cases, there is absolutely nothing you can do after buying a property. All legal requirements have been met, you had the opportunity to inspect the house before purchase, and you could've walked away at any time. But you missed something. The warning signs! So, we've decided to put this piece together to protect you from making the same grave mistakes other homebuyers made.
Watch out for the following red flags when buying a property.
Nobody wants to buy it. Is it jinxed, cursed, or haunted? No, maybe just hideous, from a sales point of view. The longer a property has been on the market, the less people fancy it, even if it's only a perceived disadvantage. Once this happens, it's wise to question why. Price, appearance, and location are three reasons a house would stay longer than expected on the market. But the worst reason of all – you guessed it – it's a lemon! While homeowners set their prices high to maximize profit, they tend to bring it down if they don't get any real prospects. If, despite the price reductions, the house is still hanging, you know there might be a problem. And is the property listed with other agents? For how long now? Certainly, this isn't 100 percent conclusive, as it could just be a hidden gem waiting for the right investor, but don't bank on it.
Broken roof? That can be fixed. Bricks falling off? That can also be fixed. But water damage in the basement or broken sewer pipes beneath the house…. goodbye! There are many things to look out for before buying a property, which is why you should hire a licensed home inspector. You need a professional to inspect the house, not just for damages, but also for pests. If you are buying a house built in the pre- 80s, it likely has a suspended floor with timber frames. These frames can be affected by moisture, termites, and heavy equipment. As a consequence, you may end up with a sloping floor some years down the line.
Many homeowners are in a rush that they don't bother with a thorough inspection or ride on trust. In some cases, they would do the inspection themselves, because after all, who hasn't watched enough property makeover shows to know exactly what to look out for? Well, the home sellers are as knowledgeable and masters at covering their tracks. One way around it is to keep you from walking through the door often and restricting you from viewing unpleasant areas. If every time you try to book an inspection, the family or occupier is "unavailable," don't think it's a mere coincidence. Most likely, they are trying to hide something. The beauty of using a licensed home inspector can't be stressed enough. It is worth those few pennies. Also, request free access to all parts of the house for a thorough inspection. Clean the house first, as trash is a smart way to keep you from looking closely. Brave the stench if you have to. Do whatever it takes to get a thorough inspection before buying a property.
Finding the Right Balance There are numerous other things to look out for, and quite frankly, one buyer's lemon is another investor's goldmine. For example, you might not want to purchase a house on a vacant lot, which may soon turn into a shopping complex. But for another investor, that could be an advantage. The flaws you find could end up getting you a fair market value; that's why you must understand what you are paying for. After all, it's only a lemon if you pay too much and get nothing from it. Consult an expert if in doubt. But even if you go solo, be sure you get the best deal.
Call it the five deadly sins if you like, but plunging into any of these blunders can cause nightmares in your hunt for a property. Buying a property is one of life's areas where it's pretty tricky to turn a lemon into lemonade; that's why you must tread with caution. More often than not, investors looking to make quick bucks are disappointed as they soon realize they took the shot too early. To avoid falling for property lemons, here are the five don'ts property investors must consider.
This can also be termed as an emotional purchase. As an investor, you must dig deeper into the facts and figures. Don't use intuition. You may have heard a tale or two about a guy who knew a building was a 'sure thing' and then bought it, flipped it, and retired on an island. It is possible, but lightning rarely strikes twice. First-time investors can also get duped by developers or homeowners with silver tongues. A single house visit can't tell enough about a property. Take time to ponder over and visit time and again to confirm every detail.
What are you buying a property for? Do you want to rent or sell it out? If you plan to sell, do you want to develop it, or buy low and sell high? How long would you like to keep it before a resale? Consider such personal thoughts and study current market conditions. If you list a house today, how many months would it take (on average) to find a buyer, and at what price? Does the developer hold the title deed? Can they surrender the apartment at the said time, and if that fails, do you have a contingency plan? When it comes to research, you need to keep in mind several things. Think from the market as a whole to tax incentives, type of home, planned developments in the area, the location, and even financing. You also need to inspect the house. For these and other considerations, you need the services of a property expert.
The global recession taught us a sweet lesson in mortgage financing – never bite more than you can chew. It is tempting to take a massive loan because you like significant risks, but that's how many businesses have failed. Real estate tycoon and outgoing US president, Donald Trump, learned lessons about buying a property the hard way. Huge debts led to bankruptcy, and though he recovered, not many of us are as lucky. Thanks to new banking regulations, it is a lot tougher to get a loan you can't repay. But you can get poor financing in terms of how you are to pay back and what. For example, you may get slaughtered by rising inflation rates. First-time owners who are confident that they will sell their property within a few months bank on big. But big often go bust. To get it right, you need the help of a professional mortgage broker.
After a few videos and some research, you might feel as though you are thoroughly equipped to take on a project like this solo. It's okay to save on costs when buying a property, but the issue of hiring professionals is a no brainer. You need a property advisor, a licensed home inspector, and a professional mortgage advisor. Anything short of these can cause much chaos. A property advisor will better explain the market conditions and how to go about your search. The inspector will make sure your house is up to code, and the mortgage advisor will get you the right financing, as mentioned above. Finally, it would help if you had a good lawyer, especially when contracts and large sums of money are involved. Even if you've worked in the real estate industry before, you're buying a new property and funding it yourself; you still can't do without a lawyer.
Buying a property is not a journey you want to take alone. Hire a team of experts to guide you, but don't break the bank. And when you finally settle on a preferred property, be sure to double-check the deal before signing.