Real estate investors should know about local customs

As a commercial real estate investor, there is a good chance you can invest in a property that is very different from the one you live in. Knowing some of these habits can help prevent mistakes that can make money. When people say you're in Rome, do what the Romans do. However, there is often disagreement as to whether the seller or buyer is in Rome. This article discusses some of the habits you should know. One can explain why these habits are and can be a very long story.

Independent consideration

You see this independent monetary consideration often in contracts in Texas (TX), Georgia (GA) and North Carolina (NC), but not in California (CA) that love and affection are acceptable endorsements. The list of brokers in these states often emphasizes the right of the vendor to cancel the contract within 30 days of the contract's cancellation. As an out-of-state investor, you have to pay air fares, hotels, groceries and car rentals to visit the property at your own risk. So if you decide that the location is not as good as it appears on a satellite map or for whatever reason, it doesn't make sense to pay another $ 1000-5000 to cancel the contract. While the law of these states requires independent monetary consideration, it states that this amount should be. So you have to choose between $ 1 and $ 10 for the contract to be legal!

Non-Profit Deposit

In CA, there is no deposit trust under a CA court ruling. Most real estate contracts in all states do not have a paragraph because of the damage done by both parties. That's often enough. However, some brokers and sellers outside the list often insist that the entire deposit be "hard", ie non-refundable, and release to the seller after a due diligence period. Even if you make sure you think twice about violating the target, it may be difficult to get no deposit

  • For an unexpected charge, for example. if a truck hits or has a heart attack and goes to heaven or wherever, it cannot close the transaction.
  • The property is partially damaged, or burned down by fire.

  • The seller spends it all and because of the soil contamination found later, your loan was not accepted!

You are in a bad position to offer nothing when the seller owns the money. Therefore, it is advisable to leave the deposit until it is closed. However, sometimes you have to make a tough choice, especially when there are so many offers to buy the home you want.

Property Taxes

In CA, the property is automatically appraised at the purchase price. The property tax rate is about 1.25% of the purchase price. Under Proposition 13, property taxes can only be increased by a small percentage each year unless there is a change in ownership.

In TX, the property tax rate is about 3% of the appraised value or tax. However, the tax value is usually the price you buy or not. If the highest purchase price is reported to the county, you will pay property taxes based on the purchase price. So it is a good idea not to report this high purchase price. Lately in TX, local government has been trying to raise revenue by aggressively evaluating property values. It could be greater than the new evaluated value, for example 100% old evaluated value. If this happens to your property, you may want to hire a professional company to claim the NNN leasing property tax increase. The success rate seems to be quite high. As an investor, it is prudent and prudent to keep NNN expenses to a minimum for tenants. You definitely want your gold to continue to lay eggs.

In Florida, there is a monthly sales tax for commercial property, so make sure you know who to pay. In Illinois, the property tax rate is quite variable, about 5 percent. The property tax rate is approximately 1.45% of the non-taxable value after the NC sale.

Lawyer States

In CA, an Escrow company can manage to close a real estate transaction. In GA, FL or NC, trusted companies can only hold a deposit and in that state you need to hire a licensed attorney to close it. These states are called "state attorneys". Defendants claim that the real estate transaction is very complex, so he must have a lawyer to help. For the opposites, this is about job security for lawyers. If you are investing in a law firm, you want to hire a lawyer who charges a flat fee, which is a very predictable amount of work. You will receive an estimate based on what you need to do. He or she will not begin writing until he / she has been authorized to do so. The lawyer will review all the documents and give them a blessing before signing. It is advisable to avoid a lawyer who charges by the hour. Most are looking for a great salary day lawyer.

In CA, the buyer automatically receives the Preliminary Title Report, which shows the owner and various information, for example. credit and loan amount property. If you cancel the transaction, you usually do not pay a fee. In the states of lawyers, attorneys will search for and review the title. The licensed company will then issue a title commitment in the face of title defects. If you cancel the transaction, the lawyer and Escrow Company may charge a fee for the work done.

Closing Costs

When you make an offer, you often say that the buyer and seller split the costs of closing the property in the region where the property is located. In CA or TX, sellers typically pay the owner's title insurance premium based on the purchase price, which ensures a clear title to the buyer (technically you didn't have to buy the owner's title insurance when you refinanced the property when the title was already insured). pays the loan policy premium based on the amount. The lender policy requires you to protect yourself against losses arising from claims made by other homeowners. Of course, if you pay money for the property, there is no loan policy. However, in GA it is common for the buyer to pay the owner and the lender. So make sure you have enough funds to close the transaction.

Tooling tool

In CA, sellers often target buyers with interest. In other states, the seller will transfer his interest to the buyer through a general or special buyer.

  • The general guarantee deed is used to convey the seller's interest in real estate to the buyer. The seller has ensured that the title of the goods being transmitted is free of defects, debts and charges. The buyer may sue the seller for any damage caused by the name mistake.

  • Special deed of collateral is also used to convey interest in real estate. However, the lender does not own any property against defects arising from the conditions that existed before. So a special guarantee deed is not as good as a general guarantee deed. However, most vendors will use this deed for obvious reasons.