Buying and selling property in Kenya involves several steps and legal requirements that ensure the transaction is legitimate and secure for both parties. As PZ Developers Limited, we will explore the entire process, from initial considerations to finalizing the deal, providing a comprehensive guide for prospective buyers and sellers. We know sometimes this process can be hectic and tiresome to both property owners, investors or even clients; that’s why many opt to have real estate agencies or brokers work on their behalf. Even in the option of opting to have real estate agencies; you will need to be extremely careful to do your research and get a genuine and registered Real estate agency/Brokers or Real estate Developers. We recommend you to work with PZ Developers Limited for better partnership.
Initial Considerations
For Buyers
1. Determine Your Budget: Before starting the property search, it’s crucial to know how much you can afford. This includes considering the cost of the property, legal fees, taxes, and other related expenses.
2. Research: Look into different areas and types of properties. Consider factors like location, amenities, security, and future development plans.
3. Financing: Decide how you will finance the purchase. Options include savings, bank loans, or mortgages. If opting for a mortgage, get pre-approval from a bank to understand how much you can borrow.
For Sellers
1. Property Valuation: Get your property valued by a professional to determine its
market price. This helps in setting a realistic selling price.
2. Legal Documents: Ensure all legal documents related to the property are in order. This includes the title deed, land rates clearance certificate, and any other relevant documents.
3. Marketing: Decide how you will market your property. Options include real estate agents, online listings, and word of mouth.
The Buying Process
Step 1: Property Search
Buyers can search for properties through various channels such as real estate agents, online property portals, and classified ads. Visiting open houses and property expos can also provide
valuable insights. At this stage it is also important one needs to consider a consultant or a property professional to get more insights about properties. This is where one will have to have either real time or futuristic consideration depending on what he/she wants to use the
house or property for; can be for economical use, residential (retirement home/holiday home, rental) or investment.
Step 2: Viewing and Inspection
Once you find a property of interest, schedule a viewing. During the visit, inspect the property thoroughly. Look for any signs of damage or required repairs. It’s advisable to hire a professional inspector to assess the property’s condition. If its a land, try to get the history of the area and the ownership background, this will help you navigate if its the right location for the purpose intended. Also, this is the right stage where you will request for the property documents for your reference and inspection; you can hire a professional to carry out the inspection and verification of the document such as title deed etc. Once you have the search results of the property then you are ready to make another step.
Step 3: Making an Offer
If you decide to proceed, make a formal offer to the seller. This offer should be in writing and include the proposed purchase price and any conditions you want to be met before closing the deal. The offer can either be done through your personal lawyer or you do it yourself direct to the seller or to his/her lawyer. It is also possible to make the offer via a letter of intention or viable communication depending on the relationship the two sides have.
Step 4: Negotiation
The seller may accept, reject, or counter your offer. Be prepared to negotiate the terms and price. Once both parties agree, a sale agreement is drafted.
Step 5: Sale Agreement
The sale agreement outlines the terms and conditions of the sale. It includes details such as the purchase price, payment terms, and closing date. Both parties sign the agreement, and the buyer pays a deposit, usually 10%-50% of the purchase price. This is determined by the mode of payment whether cash or installment. Approval
Step 6: Due Diligence
The buyer’s lawyer conducts due diligence to verify the property’s ownership and ensure there are no legal issues. This involves checking the title deed, land rates, and any encumbrances on the property. At this stage, if its a land, one can hire a surveyor to give a report on the land number and measurements for the purpose of getting a map to be used at the land registry.
Step 7: Transfer of Ownership
Once due diligence is complete, the buyer’s lawyer prepares the transfer documents. Both parties sign these documents, and the buyer pays the balance of the purchase price. The seller then hands over the title deed and other relevant documents. This is estimated to take 30 to 90 day for the transfer to be complete.
Step 8: Registration
The transfer documents are lodged with the Lands Registry for registration. The buyer pays the stamp duty, which is a percentage of 2%-4% of the property’s value (This varies depending on the location and the type of property). Once registered, the buyer receives the title deed in their name.
Step 9: Final Handover
The seller hands over the keys and possession of the property to the buyer. The buyer should inspect the property to ensure it is in the agreed condition.
The Selling Process
Step 1: Preparing the Property
Prepare your property for sale by making necessary repairs and improvements. A well-maintained property attracts more buyers and can fetch a better price. This also entails getting all documents of the property ready and in the right and good condition.
Step 2: Listing the Property
List your property for sale through real estate agents, online property portals, or classified ads. Provide accurate and detailed information about the property, including high-quality photos. This level determines mostly on how fast to sale the property. The choice of marketing channel or real estate agent really matters the most. Also getting good and quality pictures will boost on the marketing strategy.
Step 3: Receiving Offers
Review offers from potential buyers. Consider not only the offered price but also the buyer’s financial capability and proposed terms. At this level one needs to be very patient as to receiving more offers and consider the best offer above all.
Step 4: Negotiation
Negotiate with potential buyers to reach an agreement on the price and terms of the sale. Once an agreement is reached, a sale agreement is drafted.
Step 5: Sale Agreement
Sign the sale agreement with the buyer. This agreement outlines the terms and conditions of the sale, including the purchase price, payment terms, and closing date.
Step 6: Due Diligence
The buyer’s lawyer conducts due diligence to verify the property’s ownership and ensure there are no legal issues. Cooperate with the buyer’s lawyer by providing all necessary documents.
Step 7: Transfer of Ownership
Sign the transfer documents prepared by the buyer’s lawyer. Once the buyer pays the balance of the purchase price, hand over the title deed and other relevant documents.
Step 8: Registration
The transfer documents are lodged with the Lands Registry for registration. The buyer pays the stamp duty, and once registered, the buyer receives the title deed in their name.
Step 9: Final Handover
Hand over the any relevant item and possession of the property to the buyer. Ensure the property is in the agreed condition at the time of handover.
Legal and Regulatory Considerations
Title Deed
The title deed is a crucial document that proves ownership of the property. Ensure the title deed is genuine and free from any encumbrances.
Land Rates and Rent
Ensure all land rates and rent are paid up to date. Obtain a clearance certificate from the local county government to confirm this.
Stamp Duty
Stamp duty is a tax paid on the transfer of property. It is usually a percentage of the property’s value and is paid by the buyer.
Consent to Transfer
For leasehold properties, obtain consent to transfer from the relevant authorities. This is usually required before the transfer can be registered.
Capital Gains Tax
Sellers are required to pay capital gains tax on the profit made from the sale of the property.
This tax is calculated as a percentage of the gain and is payable to the Kenya Revenue Authority.
Financing Options
Mortgages
Mortgages are a common way to finance property purchases in Kenya. Banks and financial institutions offer various mortgage products with different terms and interest rates. It’s important to compare different options and choose one that suits your financial situation.
Savings
Using personal savings to buy property is another option. This avoids the cost of interest payments but requires substantial savings.
Loans
Personal or business loans can also be used to finance property purchases. However, these loans often come with higher interest rates compared to mortgages.
Challenges and Solutions
Fraud
Property fraud is a significant risk in Kenya. To mitigate this risk, conduct thorough due diligence and work with reputable lawyers and real estate agents.
Financing
Securing financing can be challenging, especially for first-time buyers. Improve your chances
by maintaining a good credit score and getting pre-approval from a bank.
Market Fluctuations
Property prices can fluctuate due to various factors. Stay informed about market trends and
seek advice from real estate experts to make informed decisions.
Conclusion
Buying and selling property in Kenya involves several steps and legal requirements. Both buyers and sellers need to conduct thorough due diligence and work with professionals ensure a smooth and secure transaction. By understanding the process and being prepared, you can navigate the property market with confidence and achieve your real estate goals.
