Visit the property to make sure it is genuine, then pay

The importance of conducting thorough due diligence before getting into any real estate deal can never be overstated. Part of the due diligence  includes conducting a personal visit to the property  one intends to purchase.

However, as a Nairobi-based realtor and the director at Prudential Valuers Ltd notes, people are getting increasingly caught up in phony real estate deals as a result of underestimating the significance of conducting an effective site visit. “With the advent of technology, some people who stumble upon property adverts on the Internet end up committing to real estate deals solely on the basis of the information provided by the property sellers on their websites,” says  valuer Paul Matumbi, a licensed real estate agent.

Other people meet real estate agents during property expos and similar promotional events, who offer them huge discounts if they commit to making an instant down payment. Kenyans living in the diaspora are especially prone to buying property on a whim as they have neither the time nor the resources to enable them to conduct effective site visits.

Mr Matumbi strongly cautions against such blind trust, saying that when it comes to buying real estate, “seeing is believing”.

“I have dealt with clients who insist that they don’t have the time to visit the land they want to buy, but their argument often falls flat on its face later on, when they lose precious time trying to straighten out issues that could have been addressed during the site visit,” Mr Matumbi says.

Enticing picture

Many firms often show you enticing pictures and brochures to lure you into signing a contract with them on the spot. Some have even gone a step further to conducting online virtual tours of their property. However, as a buyer, you should note that the images shown online or on the brochures are specially designed to portray the property in the best light, he cautions.

“Buying land or a home is probably one of the biggest commitments  an individual will ever make in their life,” he says “so, nothing can ever replace a site visit.”

The situation is even worse when you realise that, even among the people who conduct due diligence, including a site visit, some real estate deals still go awry. Mr Matumbi blames this on the naivety of most buyers.

TOTAL DISCLOSURE

“Many Kenyans do not go out of their way to sufficiently equip themselves with knowledge regarding property transactions. They do not engage relevant professionals in their real estate deas because they see them as an extra cost. Besides, they are not aware that even during a site visit, property sellers almost always never disclose the drawbacks of buying  a piece of land. Buyers need to be taught the right questions to ask during a site visit and how to identify red flags in order to avoid getting duped,” says Mr Matumbi, who has been in the business for 16 years.

Even to the sellers, conducting site visits gives them the benefit of developing a first-hand relationship with their clients. This gradually builds trust, translating to more sales in the end.

So, how do realtors and potential property buyers ensure that they get the most out of a site visit?

A model site visit with Manyatta Capital offers some valuable insights (see story on the left)

While commending the model used by Manyatta Capital, Mr Matumbi insists that firms looking to attract more clients should consider providing free transport and lunch. “Some companies charge exorbitantly for their site visits, and this scares away clients,” he says.

A real estate company should strive to disclose all the necessary information about a particular piece of land in good faith. “Whereas some firms give scanty information, at Manyatta Capital we prefer to reveal everything about the specific lot so that when the client decides to buy, they do so when they are fully informed.

This prevents future dissatisfaction and since our company thrives on referrals and repeat business, the policy of absolute honesty translates to more business for us,” the firm’s CEO, Mr Mr Kihanya, reveals. He says he adopted the policy because he once worked as a real estate agent in the US, where failure to disclose a seemingly minor aspect about a property can lead to  criminal charges being levelled against the seller.

However, Mr Matumbi says this is rarely the case in Kenya.  He says that people selling land are akin to marketers, who are determined to sell ice to Eskimos. Many realtors have a tendency to understate the negative aspects of the land while over-emphasising its positives. It is up to the buyer to catch  any potential problems before it is too late.

As a land buyer, when going for a site visit, it is advisable to bring along another individual to give you a second opinion, which could prove invaluable. If you can afford it, you can also bring along your real estate agent or valuer. However, in most cases, bringing along your spouse or relative is sufficient.

Mr Matumbi warns against being swayed by promises by sellers that  the value of the land will appreciate within a short time. “Most of these land sellers will tell you that the government has earmarked nearby roads for upgrading or inform you of a nearby upcoming project such as an airstrip or a bypass. Do not take the seller’s word for it. Rather, strive to verify their statements from an independent source before you commit.

While at the site, ensure that the seller shows you beacons that clearly indicate how far your land extends.

CRAFTY SELLERS

While his three-and-a-quarter acre lot was sub-divided into 24 one-eighth acre plots, Mr Kihanya acknowledges that unscrupulous sellers can subdivide a parcel of the same size to produce 30 plots, all of which they will pass off to the buyer as an one-eighth of an acre.

Mr Matumbi concurs, and toes on to explain that ignoring this can be costly: “In some areas, the planning regulations might stipulate that all constructions must be on plots of not less than, say, an eighth of an acre. If you unwittingly bought land that is smaller than that, you risk running into trouble with the county planning offices,” he says, adding that it is important to ascertain that the piece of land being sold to you is actually of the indicated size.

It pays to check out the neighbourhood and determine whether you’ll be comfortable owning land in that location. Speak to the local residents to get honest answers. Take note of any nuisances such as poor cell-phone reception, noise from overhead aircraft or a foul smell from a nearby industry.

Mr Matumbi says that some sellers are crafty, so they organise a site visit during the rainy season when the land is green, when in fact the area is dry and unproductive for most of the year. Conversely, in areas that experience floods, such sellers will only conduct site visits during the dry season.

Even though a large number of his clients live abroad, Mr Kihanya insists on his clients sending a representative to a site visit because phone calls and emails aren’t always adequate. Mr Kihanya says his company places  great emphasis on site visits because, while working in the United States he saw the real estate sector collapse right under his nose because people were buying property  they hadn’t seen.

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INVESTORS' TRIP 

Model site visit by Manyatta Capital 

 In April, Manyatta Capital, a Nairobi-based real estate firm, asked visitors to its stand at the 23rd Kenya Homes Expo at the Kenyatta International Convention Centre (KICC) to jot down their contacts in the visitors’ book.

 A month later, the firm contacted them, announcing a site visit to one of its plots in Juja on  Saturday, June 11. Since many of the potential clients were from  Nairobi and its environs, the company provided free transport from the city centre. By 10 am, all the potential buyers were in Juja.

 Mr Francis Kihanya, the firm’s CEO, first took them through an investor’s package that had been distributed earlier. He gave a history of the parcel of land the company intended to sell, mentioning at least three previous occupiers of the lot and explaining why they had decided to sell it.

 The CEO then gave a background of the area in which the land was located: “This area is ideal for investors and home builders because of the efficient fiscal planning that ensures a high level of order. The roads, for instance, are 15 metres wide. The government has allocated 54 acres of land nearby for building primary and secondary schools, a polytechnic and police post. It is also planning to build a bypass nearby, thus reducing the commute time from here to Nairobi city.”

 Mr Kihanya proved that the land for sale actually belonged to his company by showing the potential customers the original title deed. He went a step further to assure them that the lot had been legally subdivided by showing them a survey map of the land, indicating not only the one-eighth acre subdivisions, but also a provision for a 9-metre wide access road.

 After having refreshments, the group proceeded to inspect the lot. Mr Kihanya showed them the beacons demarcating  individual plots, as well as a tap within the land proving  that there was water.

 After going through the land, the team of about 20 gathered once more, this time round for a question-and-answer session. One person wanted to know whether the stated price of Sh380,000 was all-inclusive, to which Mr Kihanya replied: “We usually provide a lawyer to process the title deed at an additional fee of Sh30,000. However, if one wants to use their own lawyer, that is fine. Other than that, there are no other hidden charges.”

 The question-and-answer session lasted about half an hour, with Mr Kihanya tackling different queries ranging from the passability of the roads during the rainy season to the affordability of building materials in the area.

 Finally, the potential buyers were requested to fill questionnaires on the effectiveness of the site visit. It included an assessment of different aspects of the company’s effectiveness in organising the site visit such as punctuality, professionalism and addressing the customers’ queries. The group was then transported back to the city centre.

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Questions to ask during the site visit

1.            Who was/were the original owners of this land and why did they sell it?

2.            Does this land have ready title deeds?

3.            Apart from the stated price, are there any other charges?

4.            After paying, how long will I have to wait for the title deed to be processed?

5.            If I pay  a deposit for this piece of land but change my mind it later on, will you refund me all my money?

6.            You say the government is planning to build a school and a highway nearby, can I see the supporting documents?

7.            Can I speak to some of the clients who have bought land from you i?

8.            I want to build high-rise apartments on this land; do zoning regulations in this area allow that?

9.            Do planning regulations in this area allow me to subdivide the land further?

10. Is your spouse aware that you’re selling this land? If so, can I see his/her letter of consent?

11.          Are any portions of this land designated as wetlands?

12. Does the site have access to electrical power and piped water?

13. Are there any roads or sewerage systems that will need to be managed by the people who build here? If so, how will that be handled?

14. Are there any restrictions in this area regarding  house size, height of buildings?

15. How do I go about building on this type of soil?

16. Is this area secure? Where is the nearest police station?

17.          If this region is as prime as you say, how come no one else is building around here?