Why due diligence in property acquisition can save you from losing out: Part 1
What would make an individual or organisation take the option of not proceeding with a property transaction or investment on a site? Property Access (PA) will present a series of experiences that presents different learnings on what to look out for when acquiring property whether for a family investment or for an organisation.
A recent site acquisition project outcome left the team shell shocked. During the enquiry process, the selling agent had introduced an element of high demand for the property and the need for the interested buyer to act quickly to beat the competition (Red flag: allure of the offer of a very good deal). They said that the sale price would go up and we were lucky to get the vendor to agree to the same price that they were asking in 2020 (Red flag: the offer of a huge saving therefore need to act quickly) The agent indicated that the vendor was too busy and difficult to get on their calendar (Red flag: vendor doing the buyer a favour to sell ) and that they were only available the following day and would be busy the rest of the foreseeable future (Red flag, great sense of urgency). We stood our ground on behalf of our client ( the buyer) taking a safe counter position on all these fronts and avoiding the traps.
Our due diligence checklist ticked all the boxes. The site met the technical requirements, the location was optimal for capital appreciation of the land and the asking price was within market range, these attributes made the buyer (Our client) get emotionally attached to the property, making it imperative to close the deal. The surveyor confirmed the size of the land and the boundaries, the neighbours ascertained that they did not know of disputes, a visit to the area chief gave a clean bill as well. The official search from the land registry confirmed the vendor was the registered owner, no known court cases regarding the vendor or the title came up. This should have been good to go. Yet our collective gut sense indicated there was a problem. What was the reason behind the red flags? PA requested the client to allow for a further look into the history of the property.
We had lodged a search of the green card (this is a property search that provides information on the transactions on a certain title under the Land Registration Act of 2012, previously under the Registered Lands Act) and three weeks later, we were still awaiting the results from the land registry
The property title was issued in late 2020, we had previously asked the agent why it was already in the market and they explained that the vendor had inherited the property. As a result, they were keen to dispose of it to utilise the funds on other projects. That made perfect sense.
The vendor finally made time to meet PA and discuss the history. According to them, they bought the property in 2018 but only managed to process the title documents in 2020 because there was a government embargo on transactions on land in that area at the land registry at the time.
No, it was not an inheritance as previously explained. Why would someone pay for a high value property when the government has warned against transacting in the same? The narrative here was inconsistent and gut sense knocked again; after working on property acquisitions for 18 years, you know you know.
Despite the fact that the paperwork allowed us to proceed we needed to find paperwork to support our gut sense. We obtained the green card search the following day and to our consternation, we had been interacting with the previous owner all along. The current selling agent was the first owner of the property with the title deed issued in 2016. The agent sold to the current vendor.
The vendor and selling agent had withheld the information and even initially misled us to think that the vendor had inherited the land. All along, the agent has wanted us to close the deal very quickly. We lost confidence to deal and let the prime property go to escape the trouble in store.
We would also like to hear your learnings on important steps or red flags. We will combine with ours and if you would like to check out our final checklist and inventory, follow us on Linked In, Instagram, Twitter and Facebook.
