Real estate can be a highly lucrative and rewarding investment, but only if approached with caution, knowledge, and thorough due diligence.
Unfortunately, there are certain types of properties that come with legal, financial, or structural risks that could turn your investment into a bad nightmare.
Without adequate knowledge or experience, you could end up purchasing a property that brings unexpected financial liabilities or legal issues.
In this post, we will discuss five types of properties you should avoid. We’ll discuss each risk category, explain why it’s essential to avoid these pitfalls, and provide practical steps for safeguarding your investment.
Properties Without a Verifiable Owner
One of the biggest red flags in real estate is a property without a clear, verifiable owner.
Imagine buying a property and then discovering that the person who sold it to you was not the rightful owner.
Ownership disputes are one of the most common and complex issues in real estate, and they can lead to endless legal issues that drain time, money, and peace of mind. Here’s why properties without verifiable ownership are risky:
Why This Is Risky
● Ambiguous Ownership: If a property’s ownership is unclear or unverifiable, multiple individuals may lay claim to the property. This can lead to legal issues that often end unfavorably for the new buyer.
● Risk of Fraud: Unscrupulous individuals may attempt to sell properties that do not belong to them, often using forged documents. Such scams are prevalent, especially in high-demand markets, and can result in significant financial loss.
● No Legal Recourse: Without verifiable proof of ownership, you have little legal recourse if ownership disputes arise. This could mean losing your investment altogether.
How to Protect Yourself
To avoid falling into this trap, always insist on comprehensive verification of ownership. Here are some steps to take:
● Request Full Documentation: Ensure the property has a chain of ownership documents, such as a Certificate of Occupancy, Deed of Assignment, and any prior sales agreements. These documents should be validated by relevant authorities.
● Engage a Real Estate Lawyer: Working with a reputable lawyer who specializes in property law can save you from costly mistakes. A lawyer can conduct an independent ownership verification, helping you avoid properties with unclear ownership histories.
Properties Involved in Ongoing Court Disputes
Purchasing a property that is currently under legal dispute is a risky endeavor. Properties under dispute are often tied up in lengthy legal issues that can delay your investments for years. Even if the seller assures you that they will win the case, there is no guarantee, and any unfavorable verdict could nullify your purchase.
Why This Is Risky
● Frozen Assets: Properties involved in court cases are typically considered “frozen,” meaning you can neither use nor develop the property until the dispute is resolved.
● Risk of Eviction: In cases where the rightful ownership is contested, you may be evicted if the court rules in favor of another party.
● Legal Expenses: Legal disputes are not only time-consuming but also costly. As a buyer, you could find yourself embroiled in expensive legal issues that drain resources without a clear outcome.
Properties Without Proof of Ownership
Ownership is the foundation of any real estate transaction. Buying a property without legally recognized ownership backed up with proof is risky.
The ownership has to provide sufficient proof ( usually via documents) of ownership. It’s important to engage a property lawyer to verify whatever proof, whether oral or documents provided.
Why This Is Risky
● No Legal Standing: Without proof of ownership, the property is essentially not yours in the eyes of the law. This leaves you vulnerable to legal claims by others.
● Higher Risk of Fraud: Properties lacking ownership documentation are often involved in fraudulent sales. Scammers frequently exploit unsuspecting buyers by selling undocumented properties.
● Difficulty in Selling or Transferring Ownership: When it comes time to resell the property, the lack of official documentation could deter potential buyers or complicate the transaction.
How to Protect Yourself
To secure a legitimate purchase, ensure the property to engage a property lawyer to conduct comprehensive title due diligence on the property.
Properties Under Government Acquisition
Properties that fall within areas designated for government acquisition or public projects can pose serious risks to buyers.
The government reserves the right to acquire property for public purposes in accordance with the Land Use Act.
If you purchase a property in an acquisition zone, you may face eviction without compensation, even if you’ve completed the transaction.
Why This Is Risky
● Risk of Losing the Property: Governments have broad powers to reclaim land under acquisition. If your property falls within these zones, you could lose it with little to no recourse.
● Restrictions on Development: Properties under acquisition cannot be developed, which limits your ability to improve or profit from the property.
How to Protect Yourself
The following steps can help you avoid government-acquired properties:
● Conduct a comprehensive due diligence check on the property.
● Avoid “Too Good to Be True” Offers: Properties in acquisition zones are often sold at attractive prices to lure unsuspecting buyers. Be cautious of prices that seem too good to be true, as they may indicate underlying issues.
Properties You Have Not Personally Inspected
One of the simplest yet most crucial steps in real estate purchasing is to personally inspect the property.
While it may seem convenient to rely on photos, videos, or virtual tours, they often do not reveal critical details about the property’s condition, boundaries, or location. A personal inspection allows you to verify these aspects firsthand.
Why This Is Risky
● Hidden Structural Issues: Online images and virtual tours may not disclose defects like foundation cracks, mold, water damage, or other structural problems that can be costly to repair.
● Environmental Concerns: A personal visit allows you to observe factors like noise levels, safety, and the general environment factors that may affect your long-term satisfaction with the purchase.
Conclusion
Investing in real estate can be immensely rewarding, but it requires careful due diligence to avoid these common pitfalls.
By steering clear of the property types we’ve discussed, you can significantly reduce the risk of legal complications, financial losses, and potential scams.
If you’re planning to invest in properties in Lagos, Ogun, Oyo, or Osun states with a minimum budget of 20 million Naira, consider using our professional due diligence services to ensure a secure transaction.
Charis Legal Practice offers a Comprehensive Property Verification Package , covering essential checks, title verification, document review, and expert guidance.
Protect your investment and gain peace of mind with Charis Legal Practice’s comprehensive real estate due diligence services.
Click HERE to learn more about the comprehensive due diligence service today.
Don’t risk your investment, invest with confidence, knowing you’ve made a safe and well-informed choice.
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