Tuesday, July 26, 2011

"Buy It" Part Two - Presenting the Offer

Presumably you have arrived at a point that could be briefly outlined below:

1.  You know what you want to buy, what you will pay and when you will pay it.
2.  You have enough money to make the purchase and pay the associated closing and professional fees.
3.  You have outlined the conditions (contingencies) that must be met in order to proceed to finalize the transaction.
4. You have a broker who has local knowledge, and has advised you on other conditions and terms that should be in your offer.
5.  Your broker has taken the details of the transaction and has written them in an orderly, understandable and legal format.
6.  You have read, understood and signed the offer and have written a check for your Earnest Money Deposit.

What Happens Next?

The first thing you do is ask for and receive copies of everything you have signed and that includes a photo-copy of your check.   After that, retire to your favorite beach chair and wait to hear from your broker. 

Your broker will contact the Seller or the Seller's agent and will inform them of the offer.   Usually a phone call kicks off the dialogue, followed by delivery of the written offer itself.   If the Seller is nearby, a paper copy can be presented for consideration.  If (as is most common these days) the Seller would prefer to receive electronic copies of the offer, then the broker will either fax or scan and send a copy of the document you signed.  This offer will have given the Seller a time-frame in which to respond.  

The Seller will review the offer and respond:  

Occasionally it's really easy, and s/he says yes, signs and sends the document back.   If this happens you have an accepted offer, and that offer has now become a binding legal agreement.  

Other times there are small details that need to be corrected (somebody's name is spelled wrong, the parcel number has a typo, etc), or larger issues that need to be negotiated (price, date of closing, certain furnishings not being sold with the property, etc). 

Small changes can usually be corrected by hand right on the document, with the corrections initialed by the Seller - in this case the Seller will also sign the acceptance.  The Buyer will need to initial the changes too, but at that point for all practical purposes you know you have a deal and can celebrate.  

Larger changes mean you are back in negotiation with the Seller.   It is now the Seller who initiates a written proposal/response.   This response is known as a "Counter-Offer".   Typically there are two methods of documenting a counter-offer:

1.  Seller signs the original offer, with the caveat - "Subject to Terms and Conditions as noted on the attached Counter-Offer.  All other terms and conditions of the original offer are accepted."  Then the changes are outlined on a second form, signed by the Seller and sent off to the Buyer for consideration.
If the Buyer agrees to the changes, s/he signs the Counter Offer and the deal is done.

2.  The entire contract is re-written with the changes included.  The Seller will sign it, giving the Buyer a time-frame in which to respond.   (Whilst it is probably neater to do it this way, it's not always possible due to time constraints, computer programs, etc. )  If the Buyer signs this the transaction is a "done deal."

Counter-Offers are submitted to the Buyer in much the same way as the original offer was submitted to the Seller.  If the Buyer is not in agreement with the counter-offer s/he can make yet another offer.   Subsequent responses are handled more or less as noted above.  This process can continue back and forth for as long as you wish, but the fewer times it bounces around usually the better the outcome will be.   Try your best not to over-negotiate.    You may believe you deserve the refrigerator as part of the deal, but don't loose a fabulous house over a detail - forget the frig (and your ego) and concentrate on the real goal.   Make a deal you can live with and get on with the process of closing.  You'll be glad you did!

AFTER the agreement is signed ........ the period between signing a mutual agreement to a sale and closing the transaction is called the "Escrow" period. 
Next week -  Buy It, Part Three - What Happens in Escrow. 

Friday, July 15, 2011

"Buy It" - Part One - What's an Offer?

You found something you like, and can afford - YEA!  

Next step - Make an offer.  

What constitutes an offer and how do you make one?

An offer to purchase occurs when you state your terms and conditions for the purchase of something (in this case that something is real property).

You can make a verbal offer or a written offer.  Telepathic offers don't count.  Verbal offers usually don't count either, because they are not binding and rarely contain the level of detail that is needed to be clear about what everybody needs to do.  My first employer told me - "Verbal offers are worth the paper they're written on .....".   

Write it down.  When you do so you will begin to articulate not just what property you want to buy and how much you will pay, but also when you'll pay it, how you'll pay it, what other conditions apply.   All of these items are important.  Work with your broker to be sure the list includes everything it should. 

Buyer Name - Is it you personally, you and a partner or significant other, your company, a family trust ?  If you're not sure, then note that as well so that appropriate provisions can be made later to vest title as you may choose. 

Seller Name - The listing agent will have this information and your broker should be able to obtain it from him/her.

Property description - The legal and common description of the property - be sure everybody knows what property is the subject of the contract.

Price - What will you pay, in what currency.  In Belize it is common for property prices to be quoted in either Belize or US Dollars.  The quote usually tells you which kind of currency the seller wishes to receive.  An asking price of $100,000 US means the seller wants US currency, not Belize currency.  

Earnest Money - When you write an offer it is customary to present an "Earnest Money Deposit" with that offer.  Traditionally it is done by way of a personal check.  It should be 100% refundable if the offer to purchase is not signed by the seller.  Why bother?  Because the "Earnest Money" is to show you are doing this IN EARNEST.  You're serious.  If you want to be taken very seriously, make the check a substantial one.  Your broker will advise you on the amount that is appropriate for the property and offer you are making.  If the offer is accepted, the earnest money will be put into the purchase escrow account and will become part of the purchase price at closing.

Terms - When will you pay the balance of the purchase price and how?   In 30 days, 90 days, or an a particular date that coincides with the maturation of a CD, or will you put a % down and pay the Seller over time (1  year, 5 years, 1 years?).  If you are making payments over time, when will each one be due and how much will each one be.  Where and how will you make those payments?  By check, by wire?  To what account?   What are the consequences if you are late?  All these items should be made clear.  

Possession of property - When do you get to "control" it - when do you get to move in or move on the property?  Usually it is at the "closing" of the contract.  Ask your broker for details on what constitutes a closing.  

Closing - When does the down payment (or entire purchase price, depending on the contract) get paid to the Seller?   Contingencies must be satisfied prior to this date, papers must be signed, etc.   Typical closing dates are 30-60 days from the time the offer is made. 

Contingencies - the list below is a sampling of things you may wish to put in an offer.  A contingency means - IF this happens, we proceed to buy.  Each property is different, so you should work with your broker to establish the appropriate contingencies.

Typical provisions are:    Title search showing that the property has clear title and that the person selling it owns it.     Receiving, reviewing and approving a copy of the registered survey of the property.  Having property taxes paid up to date.  

For raw land there usually isn't much more to include as a contingency, but for a condo or a house there will be other items to include.  

For a condo, you will want to receive, read and approve the CC&R's and have the condo fees verified.  

For a house you may want to have provisions for a property inspection with a builder or contractor.  

If you are buying a furnished property you will want to include a general inventory (don't get too type-A on this by including every fork and spoon - focus on the big stuff) and note the condition the items should be in at closing (working order or "as-is" ?).  

Perhaps you wish to review the insurance currently in place on the property?   If you are not closing for a while, you'll want to stipulate that the seller has to keep the property insured until closing.

If you are buying a business there are a host of other contingencies that are too complex to go into here.  One day I'll take up that subject..... but  for now let's proceed with the assumption that you are buying a lot, house or condo.

Other costs - Who pays for what? 
Title search, Stamp Duty and fees of the Closing Agent are usually paid for by the buyer.  It's in the buyers best interest to have it this way - the individuals doing this work should work for you and represent you. 
Broker commission - Sellers usually pay all of this.
Annual Real Estate Tax - pro-rated for each party to pay a fair-share from closing until the end of the tax year in which the closing occurs.
Insurance - policies are not assignable, so there is no pro-ration for this.  Old policy will terminate at closing and a new one should be arranged to be in place when the property changes hands.  In the event of an installment sale/mortgage agreement, the buyer usually pays for the policy, and the insurance company will name both parties as loss-payees.  Discuss details with your broker an insurance agent.
Homeowner's fees - pro-rated, with seller paying up until closing and buyer paying thereafter.

Hopefully this list did not scare you - it's not meant to!  Your broker will take his/her boilerplate contract template and customize it to include the items that are appropriate to your offer.  

Read it before you sign it.  If something is not clear to you, ask for clarification.  In Belize it is the intent of the contract that prevails and contracts are typically very straightforward.   Simple agreements are usually easier on all parties - do cover the important parts but don't engage in so much hair-splitting that you give everybody a headache.   

When does an OFFER become a CONTRACT?   When all terms and conditions on the paper are agreed to - in writing - by both parties.   Be sure your "offer" has a time-limit on it, so that if it's not signed by the seller in a certain number of days it "expires" and cannot become a binding contract without your re-endorsement. 

Contracts are like road-maps - they say where you want to go, who's going, and what roads you wish to take to get there.  Sometimes (often) there is an unexpected adventure or detour along the way, but if you keep your attention on the destination (closing) you should arrive there just fine. 


Monday, July 11, 2011

Investing in Belize - Getting Started

It all sounds great - buy a piece of property in Paradise, enjoy it and make some money - but what do you DO to get started?

1.  Make a budget.   Sounds obvious, but most people start out asking how much things cost and then think about whether they can afford them.  Do yourself a favor and think about money before you stand on the beach or on a mountaintop and fall in love with a place.  Assume that you have already learned all the legal stuff and are comfortable with the idea of buying.  How much cash do you have today for investment?  Do you have a reliable cash-flow from work or other investments that would allow you to make ongoing payments on a property?   Answer each question before you go shopping.   You can always revise your budget down (or up if you win the lottery) later.  

2.  Define your goals.  Don't make yourself crazy with this, but do have some idea of what you'd like to do.  Do you want to invest in something you can use today for income and vacations?  If so, a condo or home are suitable.    Do you want to spend a little today hoping it will grow over time?  If so, perhaps a parcel of vacant land is the thing to look for.  Are you looking for a place to live longer term?  If so, make a list of things you "must have" in a daily life situation. 

3.  Book a trip to Belize.  Don't overdo the "research trip" idea.  Pick one or two places that appeal to you most and spend several days there.   If you feel at home someplace then realize you ARE home, and concentrate your property search there.  

4.  Locate a realtor who lives and works in the area you are interested in.  Develop a rapport with them.  Tell them about #1 & #2 above.  Without that information they can't help you.    The idea of finding something on your own in a place where you don't live is not practical, and in the end could cost you dearly.  Professionals do exist here, and the ones with good reputations have earned the trust and loyalty of their clients.  

5.  When you find something you like and can afford - buy it.  Use your head as much as your heart when making a choice.  In the end the property that has "emotional appeal" is going to be the most fun to own, and the easiest to re-sell if/when you choose to do so.  Don't buy ugly, and don't buy junky.  If your search parameters are realistic, your realtor should be able to find you a property meeting your needs without too much trouble.  If it's not there at the time, they will tell you.

Watch for the next installment dealing with step #5 above - "Buy It" -  How do you safely and sanely proceed?  We'll deal with several kinds of properties and what kind of questions you should ask, what contingencies you should demand, and what kind of legal services you may require. 

Belize Basics

This blog was created to help you learn about owning property in Belize.  Of course it helps to know a little bit about Belize and what is has to offer a property investor .........

So, why Belize?  Good Question!

It's a global economy.  It's long been advised that you don't keep all your money in one bank or one stock and these days it's advised that you don't invest in just one country.   Ok, good idea in theory, but how do you decide what "other" place to invest and how do you do it safely and intelligently? 

First, pick something you have a little experience with already.  For most of us, real estate is an area of investment where we have some experience and understanding.  Also - it's "real" which is not just a play on words.  Real estate is something you can touch, see, and use.  You can improve it, convey it, gain income from it and enjoy it.   As the old adage goes - "they're not making any more of it."  Until the dot-com rage, virtually all the great fortunes in the world were based on owning or controlling real estate.  And guess what, even a computer software mogul needs a house, and a place to park his/her money.  Under all is the earth ...... and Belize is a very special spot on planet earth. 

Assuming you already agree with the idea of real estate as an investment choice (after all you're reading this blog), and assuming that you might want to consider Belize (after all you're reading this blog) ..... here are a few thoughts on why Belize really is a good idea:

English Common Law
Strong Private Property Rights
Clear Title (Absolute, Fee-Simple, Freehold)
Non-litigious business climate
Contracts are easy to read and understand
Intent of contracts prevails (no getting caught in tricky fine print)
Abundant natural resources
Well educated population
Friendly, welcoming people
Multi-cultural society without racial strife
Offshore Banking
Leading edge company/trust/asset protection plans
Foreigners can own property without extra fees or permits
Great weather
Tourism opportunities
Good health care
Modern communications
Low Taxes
Democratic government
Environmentally responsible
Peaceful - Belize has never been at war
Secure, safe, healthy environment.
Belize dollar has a fixed exchange rate with the US Dollar
Belize real estate is a ground-floor investment opportunity
And ........ IT'S BEAUTIFUL HERE!!   AND FUN!!

Who am I and why should you listen to me?  
My name is Diane Campbell.   My husband and I live on the beach about 5 miles north of San Pedro, on Ambergris Caye in Belize.   I was a licensed Realtor in California from 1980-1992.  My husband was a builder of fine homes in Malibu, California.  We moved here in 1992 have lived here full-time ever since.   Together we have built a life and a business in Belize.  We buy and sell real estate, we build and sell developments.   We've made a nice life here and we intend to stay.   We loved Ambergris Caye as we found it many years ago and are mindful of honoring its integrity as we participate in its growth and inevitable development.   Investing in real estate is all we know and all we do.  It's worked for us and we firmly believe it can work for you, provided that you use common sense and do just a little homework.   I hope that by sharing some of what we've learned over the years that I can assist in shortening your learning curve and give you the information you need to make an intelligent choice when purchasing real estate in this amazing country.

Initially I'll be posting a series of basic real estate "lessons" pertinent to Belize.   When current events have an impact on Real Estate investments, I will post them here as well.   Check in weekly for the newest topic !