Purchasing a home on the open market?
What you should look for
CARLTON EARL Samuels, chief development financing officer at the Jamaica National Group, says there are several things homebuyers need to be conversant with when purchasing a house on the open market.
He pointed out that chief among the considerations is location.
“The favourite mantra of real estate agents is, ‘location, location, location,’ and this still holds true as the most crucial consideration when buying a property. Everything else comes after,” advised Samuels.
He informed that it is the location that will determine the value of the property. For example, a house in Cherry Gardens or Beverly Hills could cost the same to build as a house in an inner-city community. However, the market value of the house in Cherry Gardens or Beverly Hills, which are preferred residential areas, would be several times the market value of the unit in the inner-city.
“Therefore, although the houses cost the same to build, possess the same architectural design and amenities, the market value would be significantly different,” he affirmed. “Why? Because the market value is determined by the location, and the location determines the desirability of the property.” Samuels explained that location is also important when one considers how a community will change over the next 10 to 20 years.
“Features tend to change, because we live in a dynamic environment. Therefore, you don’t simply purchase the property and go to sleep,” he advised. “You also need to be conscious about the changes taking place in the area, as what may be a prime residential area could become run-down if the amenities for that particular community are not maintained or observed.”
Samuels explained that astute homeowners, if possible, may want to exit a community early if they observe signs that the area is losing its prestige.
“You want to sell before the property price declines significantly,” he said.
Additionally, Samuels advised homebuyers who may be purchasing a property in a new development, to ensure that they conduct the necessary background checks on the developer.
“You will want to ensure the credibility of the developer, as this can have a significant impact on the construction quality of the unit you’re purchasing. The unit can appear to be attractive in its design externally; however, it may be poorly constructed internally and after purchasing the house, you may end up having all sorts of structural problems.”
Samuels noted that in the event that the developer is not a reputable, well-established builder, it is sometimes difficult to find them to repair the defects.
ENSURE TO GET APPROVALS
Homebuyers will also need to ensure that the development has received all the necessary approvals from the local authority.
“Where a scheme is being built by a reputable developer, they normally have the necessary notices on display in their offices. These will indicate when the approvals were received, and the names of the architect and contractors working on the project,” he informed.
Samuels said environmental considerations are also important, as homebuyers do not want to purchase a property in an area which is prone to flooding or other potential risks.
He further advised that persons purchasing property on the open market from private sellers must ensure that the unit is examined by a qualified engineer.
“This examination is important to rule out major defects or faults in the construction of the unit. However, if there are only minor flaws, it puts you in a better position to negotiate the price, and to reserve enough funds to remedy the problems prior to moving in,” he explained.
In regard to documentation, Samuels informed that lending institutions will want to see the valuation report and surveyor’s identification report for properties being purchased.
“The valuation report normally outlines the major features of the development, including the remaining estimated life of the property, its market value, and the force sale value,” he said. “The surveyor’s ID report tells you whether the unit has breached any boundary specifications and if there are any other breaches.”
The JN Group chief development financing officer said mortgage institutions require that major breaches are corrected before they lend funds to prospective homebuyers.
He said that in the event where the breach is minor, the lending institution will accept an undertaking from the vendor’s attorney to repair the defect, or a portion of the loan could be retained to correct the issue.