You found some land. The location is prime, the view even better, and the price surprisingly reasonable. But only if you pay right away. Should you?
Probably not. Sure, sometimes we stumble into deals because the other side needs to act fast. But usually urgency is a sign to slow down, not speed up.
In fact, you shouldn’t expect a real-estate deal to go fast. That’s because buying property is less like swiping your credit card during a Black Friday sale and more like preparing a Thanksgiving feast for the family. The process involves a variety of steps, each of which needs to be done right, if you want a happy result.
One of the most important steps in that process is known as due diligence. During it, you will want to investigate the property to make sure you are getting exactly what you expect before money changes hands.
First, figure out who actually owns the property. Obvious, right? But people occasionally buy property from people who don’t actually own the property.
In some cases, a seller mistakenly believes that they own the property. For example, a family might agree on how to distribute property after a loved one passed away without going through the probate process. And then later memories change, leaving ownership disputed.
In less-innocent cases, the seller is lying. They tell you that the property has been in their family for years; they may even cry over the idea of parting ways with it. But they assure you that if you pay right away, they will let it go.
The easiest and safest way to find out whether the seller actually owns the property is to obtain a preliminary title report. A PTR is not a government document; instead, it is a report issued by a title-insurance company describing the chain of ownership from the first owner to the current owner. It will also say if the property has been leased and whether there are any mortgages or other liens on the property.
You should get this document directly from the title-insurance company, especially if you have any doubts about the seller. On Saipan, two companies currently issue PTRs: Security Title and Pacific American Title. The first is located on Capital Hill; the second is in Susupe.
Second, double-check the property’s boundaries. Just because a seller claims that a property has certain boundaries doesn’t make it so.
Take a common example. Let’s say a father owns a big chunk of land and then passes away, leaving five children. Following probate, each child gets one-fifth of the land. Over 20 years, each uses the land with little thought about the formal boundaries of each property. Later, one of the children sells their piece to someone outside the family. What happens next? That’s right: Disagreements about where one property ends and the other begins.
And those disagreements can turn especially expensive if there’s a house built over the boundary line, a surprisingly common occurrence.
So, how does a careful buyer prevent boundary problems from transforming their investment into a nightmare? Get a boundary survey from a seasoned surveyor. Doing so will confirm access points and boundary lines as well as identifying any encroachments.
Third, make sure that you can use the property for the purpose you intend. You may not be able to. That is because Saipan has a zoning law establishing how different areas of the island can be used. For example, if a part of the island has been designated as a residential area, then it generally cannot be used for a nonresidential purpose like a hotel, a hospital, or a factory—although occasionally the Zoning Board or the Legislature may grant an exception.
Other zoning restrictions may also apply. The Zoning Law is long and detailed with many technical requirements stretching from how far to set back buildings from roads, boundaries, and high watermarks to how much parking is needed to how much of a storefront window can be used for advertisements.
Fourth, investigate whether the property has any environmental issues. For instance, is there a wetland on the property? If so, CNMI law strongly restricts and sometimes flatly prohibits development. Is the property in a floodplain? Again, development restrictions may apply (on top of all the other issues that apply to building in a flood-prone location). Are there any endangered animals on the property? If so, you will need to reach into your wallet to pay remediation costs. You may also need to halt your project until the issue has been addressed, a process that can take half a year or more.
Fifth, check whether the property is part of a planned community. Though more common in the U.S. mainland than here, the CNMI has some planned communities too. For example, if you buy a condo, an apartment, or a house that’s part of a subdivision, community rules often apply to everyone in the planned community. These rules can strictly control where you can park, how you decorate your property, and so on. So you’ll want to know what you are getting yourself into before you buy.
This column is for informational purposes only and is not intended to be taken as legal advice. For your specific case, consult a lawye