Because investments made in real estate is so profitable, the sooner the investment can be made, the more profitable it is likely to become. Because real estate prices are currently so favorable, it is tempting to get into either the residential or commercial real estate markets. But with this great profit potential comes risk, making it necessary for the property, its title and the real estate agent selling it to be checked thoroughly.
Firstly, there are real estate agents out there who may do more harm than good, having no knowledge of the properties they sell, the market they sell in, and may well have no license at all. There are also plenty of fake real estate agents who are only there to take down payments from a seller or buyer and are never heard from again. Property buyers or sellers should use an escrow or third party services of similar nature. Escrow services are offered by Stewart Title, located in Houston, and by Fidelity Title, located in New York. These escrow companies will keep the money in an account in the U.S. until the terms and conditions of your agreement have been met and the money can be disbursed.
Second, the property’s title will have to be checked before the deal is made final. Currently many properties have some type of problem surrounding their titles. You may also hire an attorney to get you title clearance of a particular property. Also check whether the seller has a U.S. title clearance and a Fideicomiso. If the property has neither of these, it is possible that there are issues with the property title. Even if there is a Fideicomiso in place, that still doesn’t give any guarantee that the property title is completely clear. You can get an added measure of safety by buying title insurance on the property’s title. But then, even this is risky. You may have applied for the insurance and paid a lump some to your agent for the same purpose, but it may happen that you never receive those insurance papers. A way to avoid this risk is to use an escrow agent. To avoid the problem, it is necessary to use an escrow agent for the transaction. These escrow agents are recommended by the genuine real estate agents and enjoy healthy incentives to ensure that your cash is disbursed righteously and your deal hassle-free.
And third, anytime a real estate deal is closed there is the potential for a large expense and a great deal of complexity. Foreigners buying properties near coastal regions or borders are required to obtain a permit for foreign investment and hold the land/property title through a bank trust (the earlier discussed Fideicomiso). These trusts for doing the necessary services will cost about $300-500 annually. This amount is very well documented in your trust papers, therefore, you should ask your agent to dig around to get a more favorable deal. There will also be a significant transfer tax that will have to be paid. Your closing fees may be as high as $7,000, and there will be no way to get back the amount while the property is being sold. The fines that would be levied for underreporting the amount of the transfer value are high, making this illegal activity not worth the risk. For those buyers who underreport, or who let their seller do it, they will be responsible for the capital gains that must be paid on the transaction. The capital gains taxes will be due no matter who pays them, so if the seller somehow escapes paying them, the buyer will have to do so. This can be resolved by adding a stipulation in the contract that keeps the money from the seller until such time as he pays the capital gains tax.
This article has been written by Sara Martin who is the director of
Dubai Property & Dubai Real Estate & UAE Property Directory ,
Commercial Real Estate and
Pakistan Property Agents & Real Estate Agents .
