Important Questions to Ask When Purchasing Property
We believe that wise property buyers look ahead to the day
they may want to sell that property. As a buyer, if you address at the time of purchase potential issues that may arise in the future, you will find that the
property is much easier to sell when you are ready to do so. Remember that in
real estate, "buyers are sellers and sellers are buyers". This list contains
some important issues to consider and questions to ask when purchasing real
estate of any type.
1. Is the title to this property clear and marketable?
The title is the interest one owns in real property, represented in most cases by some type of deed. Having clear and marketable title means that one legally owns an undivided, unencumbered interest in the property and therefore has the right to transfer ownership of the property. There should be no liens, encumbrances, or unrecorded easements on the property. The property should also be eligible for title insurance. The buyer should always make these inquiries of the seller, but the best way to obtain this information is from a title search performed by a reputable, licensed title company.
2. What rights are included with the property and its title?
These can include, but are not limited to, grazing, mineral, water, and development rights. Previous owners of the property may have reserved or transferred these rights or portions thereof, meaning that you will not own these rights even though you own the property itself.
3. What type of deed will be issued by the grantor (a person legally allowed to transfer title to a specific piece of real estate)?
Many types of deeds can legally be used to transfer title to real estate. These can include bargain and sale, quitclaim, trustee's, general warranty, special warranty, and reconveyeance deeds. A general warranty deed offers the most protection to the buyer, because the grantor is legally bound by covenants (promises) and warranties (guarantees). Next issue we will begin a new series that will contain a more thorough discussion of title issues, including the covenants and warranties contained in a general warranty deed.
4. Are there restrictions on uses of the property?
Restrictions on land use are often imposed by county or municipal governments in the form of zoning or subdivision regulations. In addition, homeowner's associations may enforce deed restrictions that usually are present in the form of covenants, conditions, and restrictions (CC&R's) that should be disclosed to prospective buyers by the seller or developer.
5. What is the dollar amount of the annual property taxes?
This expense can sometimes be overlooked when figuring the cost of property ownership. Find out how much these taxes are, and decide if this is an expense you are willing to assume. The most reliable tax information is usually available from the county and/or municipality where the property is located.
6. What services are available in the vicinity?
Rural or remote properties may not have services nearby that you consider important or necessary. These can include hospitals and other medical services, law enforcement, fire and ambulance services, churches, and schools.
Other considerations include the availability of road maintenance and snow-plowing as well as school busing and other transportation services. Finally, ask about restaurants and shopping. After all, there are still a few places left that are not within 10 minutes of a Wal-Mart or Starbucks.
7. What utilities are directly available at the property?
Water, electricity, and heating fuel may have to be hauled, delivered, or generated on-site if the property is remote.
8. Is there at least one adequate building site on the property? (If you plan to build a home or other structure)
Extremely poor access, soil that won't support a foundation, close proximity to floodplains, or inability to pass a septic system percolation (perc) test are all factors that could limit your ability to build.
9. Is property or home insurance available and what is the cost?
Although you may want to inquire of the current owner if the property is currently insured and what the coverage costs, you will probably need to consult with an insurance agent to definitively answer these questions. Be aware that the location of a property can be a factor in insurance eligibility. As an example, insurance underwriters may in some cases be reluctant to provide coverage for homes that are more than 10 miles from the nearest fire station unless an additional premium is paid, or they may simply refuse to insure the property at all.
This list is meant to aid real estate buyers in making wise and informed decisions about land and real estate purchases, but it is by no means comprehensive, nor does it constitute legal advice. We have only included questions that address the most common situations and issues. As always, it is prudent to seek competent professional advice when purchasing real estate.
FAQ's: Real Estate
Added: Thu May 15 2008
Last Modified: Sat Jul 05 2008