Being well informed about the basics of real estate is a positive start to owning your dream home.
Buying real estate is one of the biggest investments you will make. And being well informed about the basics of real estate is a positive start to owning your dream home.
There has been understanding in some of the basics of real estate and we thought we’d outline some of these misunderstandings because it could cost you, the buyer, significantly. Here are our 10 myths about buying real estate in Papua New Guinea.
There is a misunderstanding that when a potential buyer approaches a real estate agent for available sales, the real estate agent is acting in the interest of you, the buyer. This is incorrect. A real estate agent acts in the best interest of the seller and therefore he or she will do anything to convince you to buy. It is best to seek independent advice and not rely on everything the real estate agent says. Ask as many questions as you want, but remember to keep in mind that the answers from the real estate agent tends to push for a sale and may be biased. You may wish to get a buyer’s agent although there are not many buyer’s agents around in Port Moresby. In any event, always seek independent professional advice from someone who has your interest at heart.
The purchase price is often seen as the final price the buyer will pay. This is not correct. In fact, the purchase price is the minimum you will pay. Other additional costs that you may pay will include your lawyers legal fees, stamp duty, Ministerial approval fees (if applicable) and other associated charges like land rent and NCDC land and garbage rates. You may also pay GST if the purchaser is GST registered. Your lawyer should advise you what possible costs you will likely pay on settlement of your purchase.
It is important to always check prior to handing over any funds for the purchase on whether the property is insured. Run down properties are likely to be uninsured but so too are quality properties. As the real estate agent or better get them to show you evidence that the property is insured. The last thing you want to find yourself in is to hand over funds for the purchase of a property and to find out that the house on the property has been damaged and it is uninsured.
The real estate agent does not set the sale price of the property you want to buy, the owner does. While agents can influence the sale price, it is the owner that has the final say.
The asking price may not be the market value of the property. As mentioned above, it is the seller that sets the price of the property and that price can be independent of any market valuation done by a registered valuer. When finding out the market value of the property, the safest way to find out is to arrange a valuation to be conducted by a registered valuer. Alternatively, you may look at prices of other similar properties in the same area and make your own guess. Finding the valuation of the property you want to buy is important because after all you do not want to buy something which is higher than its actual value.
When an owner says he or she has clear title, do not take his or her word. Conduct your own investigation at the Department of Lands or better get advice from a lawyer. There could be an existing mortgage registered against the title to the property which will require the approval of the mortgagee (normally the bank) for any transfer of the property.
The standard practice is to pay 10% deposit to the seller or the seller’s agent to secure the property. This is true under current practice but it is not a concrete rule. Parties can agree to increase or decrease the percentage.
while sellers prefer to hold the deposit, it is not a safe thing to do and it is best that you pay the deposit to a reputable real estate agent or a lawyer’s trust account so that it is held in trust pending completion of the sale and purchase transaction. You should be concerned if the seller insists on paying the deposit direct to them because it is not their money until full completion has occurred. Your lawyer should advise you on the best approach to take but paying the seller directly is a big risk.
Buying a property is not as simple as it sounds. Other than the price being one of the biggest you will pay in your life time, the process can take between three to 12 months. The bank is normally involved, lawyers are involved, the tax office is involved and Department of Lands too is involved and as you can see dealing with one office in Papua New Guinea is no easy task.
If you’re buying a property outright from you own funds, this may be true. The reality though is that most homebuyers purchase with the assistance of a bank or financial institution. In this case, the bank or financial institution will normally take the title and keep it until you as the borrower have satisfied all requirements or obligations with the bank. If your loan with the bank or financial institution is for a 30 year term, then unless you settle your loan quickly, the bank will hold the title for that 30 year term.
Buying a property is a big step and a big commitment you will have to make. If done properly and within your budget, it is one of the most rewarding investments you can make. Experienced investors buy more than one property repeating the same process or adjusting to new rules and regulations.
As we mentioned above, this is just a guide and you are recommended to seek professional advice suitable to your circumstances.
In the meantime, check out some current properties on sale from our Real Estate partner Hausples.com.pg