Make Sure This is in Your Contract | Pathfinder International

Saturday, October 10, 2009

Dear Reader,

In the past few weeks as Tip #1 and Tip#2 of her “Twelve Things you Need to Know to Do…and Then Do” series, Margaret strongly recommended you engage your own independent legal advice and told you how important it is to buy the right title insurance.

This week, Margaret tells you that you need to check your sales contract. She shows you things you need to look out for.

Seems obvious, right? You would think so. However, you wouldn’t believe the number of smart people that rely on verbal representations made by a realtor/developer, or paperwork that isn’t binding. Most likely, the only binding agreement you will have with the seller is your contract. Read it, understand it and make sure you are comfortable with it.

Over to Margaret…

“Tip #3: Check the Sale Contract You may get a sale contract or purchase agreement in English—but it’s the contract in the language of the country that you are buying in that is legally binding, whether that is Spanish or Portuguese or French. If you have a dispute with the seller, or if you need to go to court, then the version in the language of the country will be the version that you use. Have your attorney translate the sale contract for you, and read it yourself. Ask your attorney to explain any clauses or terms that you are not sure of.

Check that the property details, description and price are correct. Check that the seller’s name matches the name on the current title deed.

Your attorney can check that your sale contract/purchase agreement gives you title, free and clear, on closing. Surprisingly, sometimes the contracts don’t. I have seen a few that give you possession of a condo in a block, and the keys, but not the actual registered title…the developer simply stated that he would register it at some point (with an undefined time period).

I’ve also seen a few that gave title but did not include a mechanism for the developer paying off the portion of his mortgage related to your property. For that reason, if a developer has a mortgage, check how he proposes to pay it off, and how that affects your title.

Make sure that there are no outstanding taxes or liens on the property.

Unfair penalty clauses are an issue with contracts, too. If a seller has clauses stipulating exactly what will happen if you are in default…and applies financial penalties…you should have the same, if the seller is in default. Some standard developer contracts for pre-construction property state that if you (as a buyer) default for any reason (including making a late payment even if it’s only by a few days), you will lose whatever monies you have paid to date. I have even seen one where they not only kept your money, but imposed a fine on top. That’s all well and good…but you should have clauses that protect you equally if the seller is in default.”

Don’t think that your due diligence process is just boring paperwork. I always recommend that you visit before you buy. This is a central part of your due diligence. It’s also fun. This is where Pathfinder Chill Weekends come in.

A Chill Weekend is nothing more than an opportunity to enjoy a short vacation in exchange for allowing a developer the opportunity to showcase a property or development he is promoting.

No strings, no high-pressure sales tactics, no hard sell, just a chance to investigate some real estate opportunities (and check out the beach, of course!). Best of all: the developers pick up some of the tab.

Next month, our friends in Belize and Costa Rica’s Southern Zone will host Chill Weekends.

November 6th-8th: Orchid Bay, in Belize, will host a three-day escape to their tropical paradise. All you have to do is book a return flight to Belize City and the guys from Orchid Bay will pick you up from the airport and provide all of your tour-related transportation, meals, and accommodation for just $299. That price includes a tour of Mayan ruins, and a Hawaiian-style pig roast on the beach. A $10,000 discount will be available on casitas, bringing the price for these little homes down to $149,000. Lots start at $39,000. Get a full itinerary and information pack here.

November 6th-9th: Costa Rica, Southern Zone
Dramatic landscapes, lush, green mountains, dense jungles, and one of Costa Rica’s top beaches can be found in the Southern Zone. Prices here have stayed low for one reason. It’s been difficult to get to. That’s set to change. A new international airport is on its way and the coastal highway is nearly complete. Yet, you can still buy a lot here in a quality high-end community for $40,000. Get a full itinerary and information pack here.

Ronan McMahon