News & Views on Indian Real Estate

Friday, February 22, 2008

Paperwork Homework…..

I recently invested in the real estate and discovered how important role formal agreements and legalities play in it. I never expected it to be such a tedious task. Contracts seemed to me pretty simple at the first glance but the whole procedure got a bit complicated later on. After getting done with groundwork of financing, settling down with an area of investment, sending the letter of intent to the owner, etc I was all ready to put everything in a contract. Initially I thought I will be able to manage the whole procedure all by myself. But later I decided to take the help of some real estate consultant or attorney for it as it gets very difficult for first time buyers like us to deal with all the paperwork. . It’s very important that everything is covered without missing out on anything. As contract plays an important role in protecting huge amount valuables.

The title company whom I consulted ensured that there were no title problems. I spoke to my attorney about insurance to cover the title. The standard contract included various things like time of closing, length of due diligence period, who pays for surveys, what type of financing, and such, and then there are special stipulations. Special stipulations are agreements between the parties not written into the body of the contract or language added to strengthen and clarify what’s in the contract or what’s been verbally agreed upon, such as what is excluded or included with the property. What I have learnt from my experience is -Don’t rely on verbal agreements, make sure it’s written down and part of the contract.

When deciding on the due diligence period to mention in the contract, I was prepared for some delays into account .Also I placed a special stipulation that extensions are allowed if one can’t schedule all inspections within the period or if one inspection uncovers something that calls for a special inspection, such as signs of structural damage that would require a structural engineer to inspect an write a structural report.

Also I learnt from my own experience one should read the contract properly as too many times people tend to assume that something is in the contract. If something important to you is not clearly stated in the contract, one should be very sure about it and should make it a point that it’s spelled out clearly in special stipulations. It’s also important to establish in the contract any representation. If you are being represented by an agent, make sure you have a representation agreement between you and the agent and that it’s clear in the contract.