How to do your homework before buying property
For many people, buying land or a home will be one of the biggest deals of their lives. For others, it might be a garden-variety Tuesday. But whichever camp you fall into, you’ll want to do your homework before buying a property. Otherwise, you could be in for some unpleasant surprises in the future.
The first step is to check out several properties, not just one. By looking at several properties, you’ll begin to get a sense of the market. And that will give you a better idea of prices, options, and the like. Knowing those things will help you make a quick, confident decision when the right property falls into your lap.
If you’ll need a loan, you may also want to speak with lenders ahead of time. Getting pre-approved for a loan or, at least figuring out around how much money you might get will help you focus on property in your price range and allow you to move quickly when the time is right.
Once you’ve identified a property, the real work begins. Start by confirming that the seller actually has the right to sell the property. This sounds obvious but all sorts of ownership issues can arise. A common one in the CNMI are people who treat property as their own even though it really belongs to a dead family member. In these cases, the dead person’s “estate” must go through probate before a living family member can officially own the property and, by extension, have the right to sell or lease it.
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. 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.
While verifying ownership, the next safeguard is to 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? You guessed it: Disagreements about where one property ends and the other begins.
Or consider another surprisingly frequent event. A person buys a building. Then they start renovating only to discover that one of the walls is actually built on a neighboring lot. Now they need to make a deal with the neighbor or knock down the encroaching wall. Much better to find that out before buying the building.
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.
If you are buying a building, you’ll also want to get the property inspected. Have a qualified person check out the roof, plumbing, electrical, appliances and so on. And then have them give you a report. If all is clear, great. If not, walk away or request a lower price.
If you are planning to develop the property, make sure that you can use the property for your intended purpose. You may not be able to. That’s 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 non-residential purpose like a hotel, a hospital, or a factory—although occasionally the Zoning Board or the Legislature may grant an exception.
Another often overlooked area is 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’ll 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.
Bottom line: Buying real estate can be a great investment. But many traps are lurking. So, it’s important to do your homework before handing over your hard-earned money.
This column is for informational purposes only and is not intended to be taken as legal advice. For your specific case, consult a lawyer.