The perils of buying a property

The perils of buying a propertyHelen Tatham

Have you bought property in Dubai? The same process applies to anywhere else in the world and it still could be the single most expensive asset that you will ever buy, so it is important to take great care throughout. Due diligence can prevent a bad mistake, whether it be to do with the purchase process or the property itself.

I should start by saying that you should work with a reputable real estate agent who can do all this for you, but some people prefer to do the leg work themselves.

Due diligence

Research the areas that appeal to you — not only the pricing but the schools, amenities and transport links. The better the infrastructure, the greater the value your property will hold. If looking at off-plan projects, do what you can to find out from the master developer what the plans are and when they will materialise. When you have identified the area(s) of interest, you can start to work out what you can afford within these. It is worth noting the age of some developments and the reputation of the developer.

A natural starting point is online, where you will find the property portals and company websites to peruse. Once you have worked out that there aren't as many properties for sale as are being advertised — after a few calls — mainly on account of duplicate and sometimes ghost listings, you will start to narrow down what properties are suitable for you.

If you need finance to make your purchase, this is the time to engage with a bank or mortgage broker to understand your limitations. You will find that most real estate agents will ask if you have pre-approval for a mortgage before showing you a property. This is called qualifying your buyer. This is also reflected by sellers who don't want to show their properties, particularly if they are rented out, to anyone who has not yet started that process.

Your next piece of due diligence should be finding a reputable real estate agent. Identifying a company or two should be relatively easy but you must make 100 per cent sure that the particular agent that you are dealing with is experienced, knowledgeable and Rera-registered.

Not only will they be more efficient with their search, but they will also ensure that all the necessary documentation is in place with the sellers of suitable properties. If your agent does not have an in-depth knowledge of the market, you could be running around for days or weeks trying to find something that you like and you could miss out on your ideal property in the meantime. Test their knowledge and ask about background, if they are new to Dubai and what training have they received. How much do they know about the development, and are they aware of any developer disputes? Remember — it's an expensive trip you are taking with them and their advice must be trustworthy.

Unravelling the red tape

You've found your ideal property and it's time to make an offer. Ask your agent for guidance and what the Dubai Land Department (DLD) transaction records indicate as the market price. Make sure that you know all of the costs involved in addition to the purchase price, such as DLD transfer fees, trustee fees, agency fees, mortgage registration fees, or service charges to be paid in advance. Your agent should ensure that a title deed is in place or, if applicable, the Oqood Certificate (which is the registration of a non-completed property between the developer and Government of Dubai to protect the interests of the purchaser). Otherwise serious delays can occur. The property should also be clear of all encumbrances such as outstanding alteration approvals and make sure that if any major work or erections have taken place, the owners have been given the correct permissions to do so. Are the owners on the title deed in country and if not, are they allowed to re-enter? Are they alive or could the property remain intestate? A good real estate agent should be thorough enough to avoid scenarios such as these.

A Sale and Purchase Agreement, otherwise commonly referred to as a Memorandum of Understanding (MOU) is drafted and signed by both buyer and seller. At the same time the buyer will pay a 10 per cent deposit and the agreement will become legally binding. If either party is financed, it is becoming increasingly popular to employ the services of a conveyancer who is approved by the DLD and has good relationships with the banks as this speeds up the process, but most importantly they will hold the deposit, and other necessary funds, in escrow to safeguard the buyer's interests until the property is transferred into their name with the DLD.

Invariably it comes as a shock to buyers — whether they are financed or not — to be told that they must pay off the seller's mortgage before they take possession of the property.

Once mortgages are redeemed or in place, a No Objection Certificate is applied for by the developer. Once received, it gives the all clear to transfer the property from seller to buyer and Title Deed is issued by the Trustee Office the same day.

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Source: Helen Tatham, Special to Property Weekly

Helen Tatham is Managing Partner at Prime Places Real Estate, a boutique agency based in Dubai. She was previously Director of Residential at Knight Frank and has been an observer of real estate trends in the UAE for more than ten years


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