THE process of purchasing a house is often a steep learning curve for many prospective buyers who are unaware of the critical steps involved. As a result, they may fall prey to costly mistakes such as being duped into non-existent deals with no recourse, or watching their investments go awry due to negligence.

According to Richard Goulbourne, attorney-at-law and principal at Goulbourne Conveyancing, one of the most common pitfalls is failing to seek professional guidance.

“The first thing I would say — and it might sound a little cliché — is that failing to hire an attorney or perform the necessary due diligence is a common pitfall,” Goulbourne explained in a recent interview with the Jamaica Observer. He emphasised that property transactions are complex legal constructs that require careful attention to detail so as to protect the buyer’s interests. “A property transaction is not like buying a pound of flour,” he quipped.

The place to begin is with a legal representative who has a keen eye for the details. Many people hesitate to hire legal professionals when purchasing property, often citing concerns about the cost. However, considering the scale of the investment –which would be the largest some people make in their lifetime– engaging an attorney is a critical step to ensure the process is handled properly.

“I think what is even more expensive is the consequences if it goes wrong,” Goulbourne told the Sunday Finance.

A common mistake in Jamaica is assuming that paying cash for land and receiving a receipt constitutes ownership. However, without verifying ownership, paying transfer tax, and ensuring the transaction’s legality, buyers risk significant loss. A 2022 case in Clifton, St Catherine, illustrates this: A man’s unfinished house was demolished after he paid millions for land from individuals falsely claiming ownership, despite receiving a receipt. To avoid such pitfalls, verifying ownership before completing transactions is crucial.

“For registered land, the simplest proof of ownership is the title,” Goulbourne said. “If the seller doesn’t provide a physical copy of the title, you can ask for the title reference number — the volume and folio. With this, you can visit the National Land Agency, pay $500, and get a certified copy of the title to confirm that the seller’s name matches the title’s owner. If a person has their title in their name, you can be very confident that they are the owner of the property,” he added.

Although a title is often considered the ultimate proof of ownership for registered land, it’s not foolproof. Identity issues can arise if the individual claiming ownership is not genuine. To mitigate this, buyers must verify the title and confirm the seller’s identity through due diligence, which may involve checking identification documents. Additionally, buyers should understand the property’s boundaries, restrictive covenants, and valuation reports before proceeding with a purchase.

“It is very common for Jamaicans to say, ‘Okay, this is where my land stops; let me just build my wall,’ without considering the actual legal boundaries,” he said. “Sometimes the fence might be built too far over, leading to disputes when the encroachment is discovered later.”

A surveyor’s report is crucial for understanding a property’s physical and legal boundaries. Additionally, buyers must address restrictive covenants tied to the property, which outline what isn’t allowed on the premises. These restrictions may include limitations on construction or usage.

“You’re spending money buying this property, and what you want it to do you can’t do. And then worse, you buy the property, start doing it, and then you realise you’re in a legal problem because you breached your covenant,” Goulbourne explained.

He advises buyers to work with a lawyer to assess these restrictions and ensure they align with their intended use of the property. Furthermore, relying solely on a valuation report provided by the vendor is another common mistake. Goulbourne recommends commissioning an independent valuation.

“The vendor’s report reflects their interests, and real estate agents often base their information on what the vendor provides,” he notes. “Getting your own valuation ensures you have an unbiased assessment of the property’s true value, giving you a stronger position for negotiation.”

A valuation report is a critical document in the property-buying process, providing an independent assessment of the property’s market value and thereby protecting buyers from overpaying. When applying for a mortgage, lenders require a valuation report to confirm the property’s value, ensuring the loan amount aligns with the property’s true worth.

Goulbourne illustrated this point with an example, explaining to Sunday Finance that a property listed at $22 million could be negotiated down to $20 million, but a valuation report might reveal the property’s true market value to be $15 million.

“If this was a cash transaction you might have skipped the valuation and ended up overpaying by $5 million,” he warned.

Most banks offer 95 per cent financing for property purchases, based on the property’s market value as determined by a valuation report, not the asking price. “Banks are not concerned with what you think the property is worth to you — they are concerned with its market value. The bank will only grant you financing based on the property’s valuation, not the asking price,” Goulbourne emphasised.

The property acquisition process can be lengthy and costly due to various steps involved, such as valuation reports, surveying, mortgage approval, and legal checks. The biggest mistake prospective buyers make is failing to fully account for the total cost of completing a property transaction. The deposit, typically ranging from 5 to 10 per cent of the property’s purchase price, is just the starting point. Additional costs include registration fees, legal fees, mortgage processing fees, stamp duty, valuation and survey reports, and transfer tax.

Many buyers are caught off guard by these extra costs.

Goulbourne advises, “Don’t feel like the amount you’ve budgeted for the property is enough — you need to have additional sums on hand. Maybe not at the start, but find a way to secure them by the end because some of these costs are payable upfront and some come due during the process.”