There are few occasions that will bring such an overwhelming sense of satisfaction and fulfilment as purchasing your own home. For most people, it is the realisation of a lifetime dream, and it often heralds their hope for a more prosperous financial future.
While the prospect of buying a home may trigger many emotional responses, it is important to remember that it is a major financial investment as well. If you're pursuing home ownership, you must also incorporate some rational and prudent decision-making steps in the process.
When investing money, most people will focus on the plus side of the equation; they concentrate on what they have to gain from making the transaction. However, when you commit your funds to a venture, there is always the possibility that you could receive an undesired or adverse outcome.
It can be easy to let your emotions control your thoughts when you are looking for that starter or dream home. However, you must keep a clear head and watch out for pitfalls that could jeopardise your financial investment. Your first priority is to protect your hard-earned money.
Let's say that after months of searching, you finally find a place that fits your budget and taste. Although there are some obvious warning signs, such as cracks in the walls and roof damage, you choose to ignore them because you have found the place of your dreams.
Sometimes it's better to walk away from a potential money pit than to risk your funds on what you believe is your last chance to attain home ownership. Don't feel pressured to commit to a 'deal'; it's wiser to do the necessary due diligence to ensure that your investment will be worthwhile.
LOOK OUT FOR LEGAL LOOPHOLES
Some of the expense items in your home procurement budget will be the attorneys' fees for preparing the sales agreement and transferring the property. You may be tempted to cut corners to save on your legal bill, in order to have more money for the actual purchase price.
To reduce these costs, sometimes the vendor and purchaser will agree to share lawyers, or will devise some informal arrangement that avoids them having to retain a legal advisor. If you are not a savvy real estate investor, this can be a very dangerous decision to make.
It is important to engage an advisor who is knowledgeable about property law. This person will be able to verify that there are no impediments to your purchasing the property, that the vendor has the right to sell the home, and that the terms of the agreement are favourable to you.
AVOID THE TIME TRAPS
Unfortunately, the process of finalising property transactions in Jamaica can be lengthy and often tedious. Both seller and buyer can wait for months before the loan applications, mortgage payouts and title transfers are completed, and this can tie up both parties' funds for a long time.
To reduce the opportunity cost of the delays on expected cash flow, the vendor's attorney may incorporate some time-bound clauses in the sales agreement. These could include deadlines on receipt of commitment letter from the mortgage institution, and payment of full purchase price.
If you fail to meet the time stipulations, you could possibly have to pay interest on the outstanding sum, make the contract void, or even forfeit a percentage of your deposit. It is very important to be aware of the time constraints and proceed with speed after signing the agreement.
CURB NEW-HOME CONSUMPTION
Once you have overcome all the hurdles and you have finally received the keys to your new property, you may feel justified in throwing a little caution to the wind. Now that you have a place of your own, you will naturally want to put your personal touches to make it feel like home.
If all your extra cash was used for the purchase, you may opt to use your credit card or take out hire purchase loans to furnish and decorate beyond what you can afford. You could put yourself in dire financial straits if you give in to the temptation to make your home into a showpiece right away.
There are many expenses associated with owning a home, so you must be cautious with spending at this time. It's better to outfit your place over time, than to risk losing your home because you are strapped for cash. You can find a detailed list of Jamaican home costs at www.financiallysmart.org.
While I have examined some of the possible financial risks that you could face when buying a home, don't be dissuaded from taking the plunge. Once you are prepared for the pitfalls, you should be even more eager to go after your home ownership dream.
Cherryl is a money coach, business mentor, and founder of Financially S.M.A.R.T. Services. Her upcoming book, "The 3 Ms of Money" will reveal all the secrets she learned about financial success. Get more advice on money and business matters at www.financiallysmartadvice.com and www.entrepreneursinjamaica.com.
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