How to not overpay when buying property

Purchasing real property is one of life’s most important financial decisions, requiring thorough devotion, time and also knowledge. To find a home fitting both one’s budget and desires, people often search high and low, spend months and even years to find what they want. When they are finally in luck of finding a property they like, they become slightly euphoric and are even ready to overpay, just to start living in the new place sooner. The long search has been so exhausting that there is no energy or willingness left to pay attention to seemingly small details. Experience shows this can later result in unexpectedly high expenses.According to Inga Danče, real property specialist at the real property company “Immostate“, the visible part of the iceberg is shaped by various technical and legal aspects of a property. Since buying a home is not an everyday purchase, people simply lack knowledge, and taking advice from friends is not enough - had these matters been addressed more seriously before making the purchase, the choice would have likely been in favour of a different property. Thoroughly done “homework“ can pay off multiply - protecting not only from unplanned extra expenses but also from unpleasant surprises.

The main things to consider to not overpay for a property: 6 suggestions to consider before saying “yes” to a new home.

1.Checking documents

No matter how formal and tiresome it may seem, successful acquisition of property is impossible without thorough examination of documents. In the Land Register you can look into such details as the current owner of the property, encumbrances of the property object, etc. By doing so you will be able to avoid, for example, purchasing an entirely different property instead of the intended one from a dishonest seller. In turn in the cadastre system maintained by the State Land Service in the portal Kadastrs.lv you can see layout diagrams, actual land maps and other information, which certainly should be checked because what often happens is that non-existent constructions appear in the land boundary map, or buildings of another owner are situated on the plot that are not registered in the Land Register section but are in the cadastre system. Such buildings of a different owner can cause serious burden to the new owner.

2.Technical condition

Even though the chosen home may look flawless visually, it is very important to pay attention to its technical parameters, or to find the nitty-gritty details - when was the house built, what is its technical condition, wear and tear. Pay attention to materials and technical solutions used in construction and decoration, what energy efficiency solutions are there, if any. Do a visual assessment of repair work quality, any defects, condition and operation of utilities (water supply, sewage systems, ventilation, heating systems). If what you see instils doubt, involve a construction expert to perform an audit!

There are nuances that might not seem significant now or in a year, yet they can cause extra costs in the long term. 

3.References! 

A great way of getting more information about the chosen home is to speak to inhabitants of the house. No one else will be better at telling about the disadvantages and benefits, microclimate of the house, acoustic insulation and work of the house management, as well as how much is paid for heating in winter and for other public utilities. Besides, such “research“ - questioning future neighbours - requires only your own initiative and doesn’t cost anything, is rather effective and reflects the actual situation.

4.Value and price of property

To gain peace of mind that you are not overpaying a great deal for the chosen property, you can ascertain about adequacy of the price by carrying out appraisal of the real property. That will let you understand not only whether the price named by the seller is adequate but will also draw attention to the property’s pros and cons not always noticed by the buyer. Appraisal costs starting with 100 euros, depending on the property type, and really is not much, considering the purchase value.

Pay attention to whether the plot attached to the building is a private property or not. If it is a private land, flat owners must regularly pay rent for the land, which is why flats in buildings located on private land are usually cheaper than in buildings on privatised land (up to 10% cheaper than on average in the market).

Study extra costs - repairs, reconstructions, defect elimination costs, putting objects into service, coordination of unlawful reconstructions - these all also are factors affecting the property’s price and value. Many buildings are currently being renovated in Riga centre and sometimes flats are also traded in such buildings that are not formally put into operation yet. Banks that are ready to grant credit will possibly even let the transaction take place in such situation, yet complications might arise, for example, increasing credit rate if such matter is not resolved within the specified time-limit. 

5.Future value

When thinking about a property in the long-term, its future value is as important. There may come a time when the flat needs to be sold, for example, to purchase another property.

For that reason you should look at the chosen home also in perspective of the next decades. If the property is properly managed, repairs and improvements are done in good time, its future prospects are definitely better than if the manager of the house only acts upon emergency situations.

A significant factor in future value of the property can be its location in relation to the development plan of the respective municipal territory. As the regional infrastructure develops, the property value can increase. However, there is a risk of the value decreasing, for example, if a high-intensity transport overpass is built next to your property in the future. Such information serves as a reasonable argument for conversation about a lower price of the property or a reason to reject the purchase. 

6.How much will property maintenance cost?

It is worthwhile to calculate and evaluate also the expected daily payments or property maintenance costs - what are the costs for public utilities, management, heating, real property tax payments, land rent fee if the land under the building is not owned, etc. It is useful to find out if the house has any joint debts (for example, for heating) - that can also cause quite a few unpleasant moments, as well as extra expenses.

As you see, a very significant added value of the property and most importantly - predictable future expenses result from such nuances that might seem secondary in the moment when you have finally found the home you have searched for years. For this reason, if a decision needs to be made quickly, or if you are short of such knowledge and experience, this is definitely the time when you should not feel shy and ask an expert for advice. May the big life purchases be beneficial and successful!