WHAT EXACTLY THEN IS THIS VERY DEADLY MISTAKE NO. 6 I'M TALKING ABOUT?
Well, dear blog reader and real estate investor, this deadly mistake is simply this:
THE REAL ESTATE PURCHASE CONTRACT NOT PROPERLY REFLECTING PRORATION OF ALL THE NEGOTIATED ITEMS!
WHAT IS MEAN'T BY THIS?
Well, first things first. In order to understand what is mean't by the above mentioned preceding deadly mistake, let us start by looking at the word "PRORATION".
The word "PRORATION" comes from the word "PRORATE". What then does this very word "PRORATE" mean in real estate circles? Well, it simply means to divide income and expenses between the seller and buyer according to mutually agreed and accepted terms. This is normally done prior to signing the purchase agreement and then eventually reducing the same into writing and having both parties appending their signatures to the same. This is so in order to avoid any unnecessary surprises in the near future after the deal is sealed and concluded especially on the party of the buyer.
WHAT THEN ARE SOME OF THE ITEMS THAT NEED TO BE PROPERLY PRORATED AND THEN EVENTUALLY REFLECTED IN THE PURCHASE CONTRACT?
For instance, if the seller of the property in question hasn't been paying these statutory obligations of land rates and they happen to accumulate to certain uncontrollable and unmanageable levels, you - the buyer - could find yourself in serious problems. You may loose your investment via what is known as a Tax Sale. And your investment efforts would have been in vain.
So, always make it a point to verify if the property in question is up to date in terms of land taxes so as to enable you properly prorate such an item before you conclude the deal thereby avoiding the inconvinience that go with this. You could also use this to help you negotiate a lower price in direct proportion to the amount of unpaid taxes.
For instance, I personally know of a certain man in Ndola Town namely a Mr. Mukuka who bought a house from some seller whose house had an accumulated water bill of up to K1,400,000=00 / KR1,400=00. Mr. Mukuka, a retiree and someone who has not been educated in such real estate matters, got excited with the prospect of owning his own home and went ahead to consumate the deal. He paid the seller for the subject house in full. But later on when he was attempting to change the billing details with the water utility company to reflect his names, he discovered that there was a huge water bill to the tune of the amount stated above. However, when he tried to talk to the previous owner about this, the man simply told him that it was already too late. He had already used the money and besides the man told him that this wasn't part of the purchase agreement even though he had prior knowledge of the same before selling the house to Mr. Mukuka. And Mr. Mukuka couldn't do anything because he was the new owner of the house and had no choice but to foot the said water bill lest the water service be disconnected. If Mr. Mukuka on the other hand had taken his time to verify such issues, he would have discovered this and used that information to his advantage to negotiate a lower price in direct proportion to the amount of the water bill unpaid.
Therefore, in order to avoid finding yourself in such situations, always verify these things before you consumate and conclude your deals!
When dealing in income generating real estate such as rental property, whether commercial or residential, always make it a point to find out if their was any advance rental fees and security deposits paid by the sitting tenants. WHY? Because these monies paid in advance by the tenants may be required to be paid back to the tenants should they decide to vacate the said premises in question due to unforeseen circumstances beyond their control and yours. And if you did not properly prorate such items in your real estate purchase contract, you could find yourself in serious refund liquidity problems and therefore be held liable to pay back such monies for being the owner of the property in question.
So, to avoid falling prey to such hiccups or problems, always verify these things before you consumate and conclude your deals!
And besides, it gives you the advantage of reducing the selling price by the same amount involved thereby enabling you to purchase the said property in question at a favorable price. I talk about such techniques or strategies in details in a certain e-course called "How To Buy Real Estate Using Little or Non of Your Own Money at All" -> HERE! This e-course is worth $20 (K100,000 / KR100). So, check it out HERE! It's still very FREE at the moment. But in due course I plan to offer it on a cash subscription basis. So, take advantage of it NOW while it's still very free!!
There are other items not mentioned above that you as a buyer can determine and then decide to properly prorate them before hand. This is very important to you just as you've read above. It helps to protect your interests should their be any deliberate misrepresentation on the part of the seller. If you properly prorate them in advance and then reduce them into writing and include them in your real estate purchase contract, it will enable you to repudiate the contract should you discover otherwise later on.
Therefore, always take this into consideration whenever you make up your mind and decide to purchase a particular piece of real property! It will save you many years of living in regret.
Hope this has been of help to you.
NOTE: Read Deadly Mistake No. 7 ->HERE!
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