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THE IMPORTANCE OF DOCUMENTATION IN REAL ESTATE

The importance of documentation in real estate cannot be over emphasised. It is important to note that 75 – 80 % of real estate business is legal and these legal transactions cannot be void of documentations. Before any real estate transaction can be said to be successfully concluded, all documents have to be up-to-date and duly signed by relevant parties.

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In Nigeria, all land within a state (except those vested in the Federal Government or its agent) is owned by the Governor of the state, who holds land in trust for the people and has power to allocate as far as urban areas are concerned; while the rural areas is allocated by the control of local government authorities. The current land ownership system became operative after the promulgation of the Land Use Act, Cap 202, Volume 11, Laws of the Federation (1990). Prior to this law, land ownership was primarily based on settlement, conquest, sale, gifts or larches and acquiescence.

It is important that as an investor in real estate or as a real estate firm you should know what governs land ownership and the legal documents used in conveying title for land ownership in the state, where your business is located or where you intend to invest in.

What types of documents are required in a real estate transaction?
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Some of the documents required in real estate are as below;
• Certificate of Occupancy (CofO)
• Letter of Allocation
• Registered Title – Deed of Assignment/Sub-lease/Indenture
• Land Certificate
• Governor’s Consent
• Deed of Assent (Registration By Administrators/Executors of an Estate)
• Power of Attorney

All these documents should be duly registered at the appropriate registry.
Before the advent of a Certificate of Occupancy, other documents such as a deed of conveyance, deed of gifts etc, also existed as proof of land ownership. Holders of such documents have statutory right of occupancy and remain valid provided they have been converted to lease hold which is subject to the Governor’s approval.
In land ownership for example, a registered document is usually obtained by customary occupants of a land registering such land at the Land Registry. This is usually done before ownership of the customary land can be transferred to another owner. After that, a deed of assignment is prepared and issued to the new owner who is expected to get a Governor’s consent for the Deed. Upon the grant of a Governor’s consent, a landowner can proceed to request for a Certificate of Occupancy (CofO). It is important to note that a C of O in its self is not sufficient to claim ownership of a property without a Governor’s consent.
The importance of knowing what title documents cover for land ownership in your state, guides a buyer when carrying out due diligence on a property. All verifications of title documents are done at the State’s Land Registry.

Other documents that are needed in a real estate transaction include but are not limited to;
Sale/Purchase Agreement – This is another important document which contains the terms and conditions governing the sale and purchase of a property. This document serves as a guideline for the transaction between a buyer and seller. It covers purchase price, type of title, the date the agreement would become unconditional, any deposit the buyer must pay or cost that must be paid if the seller defaults. This document protects both the buyer and seller from any breach of contract as referrals can be made to this document, which serves as a binding and a legal contract once it is executed.
Reservation form: This is usually presented to a prospective client in order to confirm the prospects commitment in a property and to reserve a property within a given a period of time, which the prospect is expected to make further commitments to buying or leasing the property. This document helps protect the interest of the prospective client and helps save the company’s productive time from non-committed prospects. It evaluates the level of interest a client has in a property.
Receipt of payment: This serves as evidence that monies or other forms of consideration have been exchanged between the buyer and seller.

Why it is important to have accurate documentation in real estate?
1. Title documents when verified give the buyer confidence to use the land without fear.
2. Title documents that have been verified are legal documents that are admissible in a court of law in the event of any dispute that may arise in future.
3. Title documents also serve as a form of collateral which an individual can use to access loans from financial institutions.
4. For the real estate marketing firm, having all necessary title documents gives the firm the edge over their competitors as prospective buyers have confidence in your property listings. It creates a trust level between you and your client.
5. Documentation plays a pivotal role in ensuring that the real estate firm keeps track of its progress and list of clients, take note of flaws if any, in previous transactions and enable the firm measure its sales progress by the years.

It is important that both parties read all documents carefully and fully understand the full content of the documents before signing. It is strongly recommended that professional legal advice is sought prior to entering into any contractual agreement.

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Tips to successful negotiation in real estate market.

The Nigerian real estate market is very dynamic with constant changes and evolving trends and has experienced significant growth in recent times with the availability of various financing structures. It is fast becoming the frontier of investment in Africa leading to an improvement in housing supply and increase in effective demand and transactions hence the importance of negotiations. Having interest in real estate is great but being able to elevate the interest to actual sales can be done through negotiations. The “art of negotiation” is not just a simple isolated exchange, but rather a continuing effort. Negotiations can make or break real estate deals so being a skilled negotiator is very important to buyers, sellers and especially real estate consultants.
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Negotiating is an art, one that requires both experience and knowledge. All real estate transactions are unique as both buyer and seller want the best outcomes that favour them or at very least represents a fair balance of interests as nobody wants to feel cheated or slighted. Success in real estate, whether it is buying or selling a house, comes down to negotiations and getting the best deal possible. The strategy for negotiating the purchase of a home is always based on facts – the current price in the real estate market, the seller’s requirements, amenities in the property, and its comparative value to similar properties in the location. In getting the best negotiations, you have to develop a strong bargaining position which can be gotten from having in-depth knowledge of the property. A strong bargaining position can also be derived from the ability to answer the following;

1. Do you understand the market?

At various times we’re in a “buyers” market, a “sellers” market, or a balanced market where housing supply and demand are roughly equal. In a buyers’ market, supply outstrips demand so the buyer has more control of the negotiations. The reverse is the case in a “sellers market” where demand outstrips supply and sellers get the price that is being offered or even more. However, in a balanced market, this is where the real negotiations take place as there is an equal supply of homes and buyers. Counteroffers are rampant on this phase and transaction closure takes longer than the other markets as both sides feel no urgency and personal priorities reign

2. Do you know what to leverage on?
Leverage means everything when it comes to negotiations and both the home seller and home buyer should be aware of where they stand before stepping in to the bargaining process. For example, if the home buyer knows that the home owner is desperate to sell for whatever reason, the home buyer has a lot of leeway in the negotiation process. On the other hand, if the home buyer is one of many vying for the home, the home seller then gains the upper hand.

3. Is there available finance?
The available finance for the real estate purchase is very important as a pre-qualified buyer with known financial capacity increases the chances of the transaction taking place and represents less risk to owners than a buyer with unknown financial capacity. Also, the lower the current interest rates at a particular period of time, the larger the pool of potential buyers. More buyers equal more potential demand, and more closed transactions.

4. What is the Comparative Value of similar properties?
This plays a lot in the transaction as cost of similar properties can be used for negotiation purposes and this could be to the benefit of the developer and buyer. Similar properties could cost significantly less than the property for sale, but with the addition of value enhancers like recreational facilities, amenities could be used during negotiation to get the premium prices demanded by the seller and vice versa.

5. Do you have the right expertise and knowledge?
Employing the services of an experienced real estate professional (for both the buyer and seller) ensures that each side is sufficiently represented and gets the best deal possible from the transaction. The best real estate agents have tremendous expertise when it comes to market value in particular areas and are very knowledgeable. Experienced brokers see opportunities where laymen might not and can extract the absolute best value from any transaction.

During negotiations, never take an adversarial or even aggressive posture in your interactions with real estate agents, buyers or sellers. Doing the opposite actually works better bearing in mind the main reason you are having the negotiations which is to solve your real estate needs as a buyer or seller. All information released during negotiations must be delivered at the right time, place, and manner and designed to improve your position in the transaction.

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