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.
A Few Important Tips On Purchasing Land and Property
Although this list is by no means comprehensive, it addresses a few of the most common considerations when buying land or property, especially property that is rural or remote.
1. Make sure the property is surveyed, and that the results of the survey show access to the property, easements of record, and any existing encroachments. If you decide to purchase the property, make sure the survey has been legally recorded. In the United States, recording of legal documents is usually done by the county recorder's office.
2. Make sure the property has legal as well as physical access. Just because the road goes to the property you want to buy does not mean the road is in the correct place.
3. Make sure the title to the property is clear and marketable. There should be no encumbrances, liens, or unrecorded easements. Determine what rights (water, grazing, mineral, etc.) are appurtenant to the property and its title. Inquire if the property is eligible for title insurance.
4. Find out what the property taxes will be, and decide if this is an expense you are willing to assume.
5. Ask what stores, schools, churches, law enforcement, medical, and other services are available nearby.
6. Find out if property or home insurance is available for the parcel you are considering, and what it will cost. As an example, insurers 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. Determine also if the property is located in a floodplain and find out if it qualifies for federal or other flood insurance.
7. 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.
8. Determine the type of deed that will be issued by the grantor. A warranty deed offers the most protection to the buyer.
9. Have the property appraised by a local, licensed appraiser. This gives you a very close estimate of the market value of the property.
10. 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.
11. If you plan to build on the property, determine first if this is physically possible. 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.
12. Consider consulting a real estate attorney and/or a tax professional for advice on the purchase. The greater the amount of the investment, the greater the need for you to protect yourself by obtaining professional advice.