Identifying serious offers - what to pay attention to when purchasing land

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Hi,

sorry in advance if this question has already been asked in this generalized way. I searched this forum, but regarding this topic the threads that I found usually focussed on a too specific situation instead of generalizing. So, I would like to discuss what one should pay attention to if he/she wants to buy property and wants to make sure that the seller and his offer are trustworthy. In order to avoid that we get off the point, let´s leave legal aspects (having prenup, etc.) aside and focus on how to separate trustworthy from dishonest offers.

I often read very superficial statements and warnings like "when it seems too good to be true, just let it be" or "watch out when you want to buy property". But since these are empty phrases, I would like to know what exactly one should pay attention to. How can you separate serious offers from fraud?

Some thoughts from my side: I guess if the seller tries to put you under time pressure, this should be a warning. Also one should be careful when there is no certificate yet or if it is still in process. And you probably should hire an own notary who checks the certificate plus land - and this should better be possible before having to pay a down payment.

But what else? If the seller seems trustworthy to you while meeting him and while showing the land, and he already has the SHM certificate, and he also agrees that you can hire a notary to check the certificate and land beforehand (even before down payment), and your notary does not find anything that should worry you (no overlapping, no other owners, no falsification of the certificate, and I do not know what else he will check :) ), what else is there that could go wrong? Or what kind of signals are there that should be a warning to the potential buyer?

And is it safer to try to buy land via a real estate agency since they have to maintain their reputation?
 

jstar

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We've seen it quite often that:
  • an owner did not want to sell at all, but just puts something on the market because of curiosity / check the temperature of the water / to consider selling if they get a crazy offer / .... . That can hardly be called serious, it happens more -but not only- if there are no agents involved;
  • there are multiple listings for one property by agents, which do not even have the same asking price;
  • there are multiple agents working for one owner, while the owner only has an agreement with one of them. So (s)he is not aware of the others. Then it might become an issue for the fees;
  • once you start bidding, the price goes up. Esp. if you belong to a certain race;
  • to lower the taxes, the NJOP instead of the agreed price is used (quite common in Europe as well, pay partly in cash to lower the notary costs);
  • it is unclear who exactly the owners are, very often there are multiple family members, sometimes not even on speaking terms.
Just out of the top of my head...
.
 

Pak Tani

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I would have a chat first with the kepala desa or pak RT/RW before seriously considering buying the property. Or with some of the neighbours. See if they have some information about the property and the owner they want to share with you. You definately want to avoid messy things like tanah sengketa or the things mentioned above by Jstar.
 
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Thank you for the input. I will try to classify the threats (feel free to correct me if I am wrong):

  • an owner did not want to sell at all, but just puts something on the market because of curiosity / check the temperature of the water / to consider selling if they get a crazy offer / .... . That can hardly be called serious, it happens more -but not only- if there are no agents involved
  • once you start bidding, the price goes up. Esp. if you belong to a certain race;
.
Annoying, but at least, since you do not have to bid higher price or crazy offer, you will only lose time, not money, by that (except if you already introduced a lawyer/notary).

  • there are multiple listings for one property by agents, which do not even have the same asking price;
  • there are multiple agents working for one owner, while the owner only has an agreement with one of them. So (s)he is not aware of the others. Then it might become an issue for the fees
First case: But if the price they offer you when communicating and meeting, the price should be clear then so that you can ignore the other listings that might exist since you know the price that you have to pay and you can accept or not accept.
Second case: Maybe I am too naive...but I would claim that you only have to pay the agent that arranged the deal. Why would one have to pay an agent he never met and who had nothing to do with the agreement?

  • to lower the taxes, the NJOP instead of the agreed price is used (quite common in Europe as well, pay partly in cash to lower the notary costs);
.
As a "newbie" I do not understand this point completely for now; but I will inform myself about NJOP, NJKP and so on.

  • it is unclear who exactly the owners are, very often there are multiple family members, sometimes not even on speaking terms.
.
Of the mentioned cases, this is probably the worst one. But if the seller has an SHM certificate which contains only his name, then the property belongs to him so that you can sleep tight? If not, is there a way to protect yourself (except never buy any land :D ).
Edit: I noticed Pak Tani´s comment now. Talking to kepala desa or pak RT/RW or neighbors probably is a good idea. The SHM certificate only consisting the name of the seller would not be sufficient (from a legal point of view)?
 
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jstar

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there are multiple agents working for one owner, while the owner only has an agreement with one of them. So (s)he is not aware of the others. Then it might become an issue for the fees;
I would claim that you only have to pay the agent that arranged the deal. Why would one have to pay an agent he never met and who had nothing to do with the agreement?
Unlike in many other countries, here you don't have an agent working for the seller and an agent which gets the assignment from the buyer. Of course it's possible, but not common.

So being a potential buyer you contact an agent for a listing in his portfolio, often they will also provide you with other options. Normally, it is the problem of the original agent and the one that introduced you to the property, to work out a deal. In fact the commission (minimal 2%) etc. is from the side of the seller, which forces your broker to get his money that way.

But but but; both agents often don't want to share, obviously the one from the seller had him sign -without the seller being really aware- and exclusivity contract. And the one that introduced you, will want to be paid; by the seller if they can't or don't want to deal with the other agent.

Of course there are serious and knowledgeable real estate agents working for registered companies. But the absence of a formalized code of conduct and control by a trade organization, and everybody* calling him- or herself a real estate agent, wanting to sell the house of their family members, doesn't really help.

Having said all that, there is a rather good legal framework. Look here for instance:

*The second hobby ...eh job is often insurance agent btw (look at the patrons meeting at any Starbucks or CB&TL close by.)
 
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jstar

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Talking about land only; it is possible that it is not registered with the land office yet. Look in that case for something called SKT (not SKN)*. And it can be that the ownership and land types are not determined (so no Hak Milik etc. is applied). That doesn't necessarily mean it's bad but it will have to be converted from so-called eigendom (Dutch word for property).

Now with the lousy build quality here (looks good from afar but far from good) it is very tempting to buy land and do your own construction, right? But if you're not used to doing projects here that might not be a good idea. Also, having experience with an existing house will prove to be rather benificial; you know what the mistakes are, what to avoid, what to change, ...

* edited
 
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Unlike in many other countries, here you don't have an agent working for the seller and an agent which gets the assignment from the buyer. Of course it's possible, but not common.

So being a potential buyer you contact an agent for a listing in his portfolio, often they will also provide you with other options. Normally, it is the problem of the original agent and the one that introduced you to the property, to work out a deal. In fact the commission (minimal 2%) etc. is from the side of the seller, which forces your broker to get his money that way.

But but but; both agents often don't want to share, obviously the one from the seller had him sign -without the seller being really aware- and exclusivity contract. And the one that introduced you, will want to be paid; by the seller if they can't or don't want to deal with the other agent.

Of course there are serious and knowledgeable real estate agents working for registered companies. But the absence of a formalized code of conduct and control by a trade organization, and everybody* calling him- or herself a real estate agent, wanting to sell the house of their family members, doesn't really help.

Having said all that, there is a rather good legal framework. Look here for instance:

*The second hobby ...eh job is often insurance agent btw (look at the patrons meeting at any Starbucks or CB&TL close by.)
Good to know, thank you for the detailed explanation.

This is probably rather a problem for the seller than for the buyer since the seller has to deal with the agents and their commission. But I guess, the buyer could be influenced by this if the seller struggles to find a solution with the agents. Then this could delay (or even cancel) the whole process of buying the land.
 
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Talking about land only; it is possible that it is not registered with the land office yet. Look in that case for something called SKN. And it can be that the ownership and land types are not determined (so no Hak Milik etc. is applied). That doesn't necessarily mean it's bad but it will have to be converted from so-called eigendom (Dutch word for property).

Now with the lousy build quality here (looks good from afar but far from good) it is very tempting to buy land and do your own construction, right? But if you're not used to doing projects here that might not be a good idea. Also, having experience with an existing house will prove to be rather benificial; you know what the mistakes are, what to avoid, what to change, ...
Yes, building a house on the land would be a big challenge, I heard about that, and also read about it in other threads in this forum.
Regarding SKN: I never read of SKN in this context and also my google search led only to other topics when searching for SKN in Indonesia. What does this abbreviation stand for? Did you, by any chance, mean the property title SHM?
 

jstar

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I made a typo, sorry. It is SKT (Surat Keterangan Tanah). Which is a certificate that identifies and serves as proof someone owns that land.
 

dafluff

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There are already some very good pointers here. I would like to add:

1. Check your easement rights. If it is a public road it should be noted in the "Gambar Situasi", otherwise it may not be, despite what the seller tells you. If there are agreements regarding the easement with another party, you will need to have your own agreement with that party. Also make sure it is transferable.

2. Check zoning. Yes, in rural areas this may not matter, but in the city it could be a pain in the ass to buy property for a certain purpose but finding out too late that it is zoned for something else. In fact, double check that you can in fact build anything at all.

3. It is customary (and a good idea) for the buyer to choose notaris/ppat. Chose one that you trust.
 
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There are already some very good pointers here. I would like to add:

1. Check your easement rights. If it is a public road it should be noted in the "Gambar Situatsi", otherwise it may not be, despite what the seller tells you. If there are agreements regarding the easement with another party, you will need to have your own agreement with that party. Also make sure it is transferable.

2. Check zoning. Yes, in rural areas this may not matter, but in the city it could be a pain in the ass to buy property for a certain purpose but finding out too late that it is zoned for something else. In fact, double check that you can in fact build anything at all.

3. It is customary (and a good idea) for the buyer to choose notaris/ppat. Chose one that you trust.
Thank you for these important hints.

I just read on another website about your second point. The article stated that it is possible that the zoning status of the land gets changed in the ITR without the owner of the property being informed about it - and therefore, it can happen that the status from the SKT is not up to date anymore and therefore does not match with the status in the ITR. The article says that some notaries do not check the ITR if the potential buyer does not explicitely ask for it. So, I think this can really be a big threat when trying to purchase land.

About the first point, easement rights: In which way should the road be noted as public road in the gambar situasi? Is it sufficient if the road is just drawn into the gambar situasi and there is no remark like "private street" or so? Or must there be a term like "jalan umum" marking the street in the gambar situasi?
 
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dafluff

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About the first point, easement rights: In which way should the road be noted as public road in the gambar situasi? Is it sufficient if the road is just drawn into the gambar situasi and there is no remark like "private street" or so? Or must there be a term like "jalan umum" marking the street in the gambar situasi?
The gambar situasi should mention everything around the boundary of the property. If it is a road, it will have "Jalan" which indicates public road, if it is someone else's property it will say the property number or "tanah milik".
 

Jamu

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dafluff makes excellent points in post #10. Easements can be a thorny issue if the land is not next to a public road, and you ought to deal with this upfront, not after you buy. Definitely choose your own 'reputable' notary, independently from any 'recommendation' that the seller may make. You will be paying anyway and by choosing the notary he/she may feel a moral obligation to look after you - though technically they are supposed be neutral. Also, regarding zoning - if necessary, make it a condition of deal closing (your notary can help with this) that the status of the property you are buying is 'perumahan', meaning you are allowed to build a house there. Put the burden on the seller to change the land use if necessary.

Other things to look out for are availability of power and water to the site, and what else is going on in the neighborhood (is there a local karaoke place or a pig farm currently existing or planned? - either one could make your life miserable). Like Pak Tani advised in post #3 above, go see the village head and ask about development plans in the area, especially near to the property you are looking at.

And, be prepared to walk away if anything makes you uncomfortable. It seems like Indonesia property is very much a buyer's market these days so it's just a matter of time until the next interesting deal comes along.
 

jstar

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If the land is locked in you really can't take any action upfront on obtaining access to the public road since you're not the owner yet. If there is no access, you will have to sue the owner of the land between you and the road. Then you will get it, but you will need to compensate the neighbor. If they closed an existing common access -what happens quite a lot here- there are laws in place that make this illegal.

You will see that a lot of public footpaths and small roads between parcels are closed off (or even confisquated). Often because they are afraid of burglars and want to limit access so you can get there via the big road only.

Besides doing your home work on possible sources of noise (get up early and visit between 4 and 6 AM once!), you'd better also check if it's a flooding area.
.
 
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Jamu

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I have to disagree with the advice in post #14 above. In the case of a landlocked parcel, the best action to take is to tell the seller that you won't buy without legal access and ask his help to negotiate an easement over the neighboring property. You can (should) make it a condition of sale. The signing of the easement can take place simultaneously with the land closing, or it can be obtained by the seller beforehand and legally assigned to you. This is actually a relatively common situation and the notary will know how to handle it.

Do not wait until you own the property to ask for an easement! You will likely be held to a king's ransom price-wise and good luck to you if you think that suing your neighbor for access is going to ensure a good outcome and a peaceful co-existence in the future. Engaging lawyers is expensive, and you are totally at the mercy of the court in terms of the 'reasonable price' you would have to pay. Plus, the bad will you will create with your neighbor and even the village itself will make you wish you never saw the property in the first place. Moreover, there is no guarantee a court will award you a proper 'driveway' so that you can drive a car onto your property. The best you may end up with is a narrow footpath with room for a motorbike only, and the location may not be the one you would prefer. Personally, if I couldn't get a negotiated easement at a reasonable price, I would walk away from the whole deal.
 

jstar

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^ As usual, all theoretical nonsense. We have done that and it worked out fine*. A seller will say "screw you" and if you really want it you don't have much choice.

*because at the end of the day the owner also realizes he doesn't have anything to gain, so they agree with compensation. (It was not something we bought but obtained another way)
 
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Jamu

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^ As usual, all theoretical nonsense. We have done that and it worked out fine*. A seller will say "screw you" and if you really want it you don't have much choice.

*because at the end of the day the owner also realizes he doesn't have anything to gain, so they agree with compensation. (It was not something we bought but obtained another way)
It's not theoretical advice if it's been done successfully in real life. In our land purchase (a real life example), we had road access but not correct land use to build a house, so we had the owner get it changed at his cost and risk as a condition to deal closing. Another real life example was our neighbor up the street who did not have car access to the parcel he wanted to lease for building a house, so he took the negotiated approach with the lessor's help and got a three meter driveway easement over another farmer's land as part of the lease deal.

Anyway, if the seller says 'screw you' to any term discussed in a property purchase/lease, then why on earth would you deal with them??? Most owners are motivated to sell and get the cash, so they will do what's necessary to help close the deal. Antagonistic or uncooperative sellers should be avoided like the plague. There is never 'no choice' when it comes to buying a property. There are many great properties for sale in Indonesia, it's a buyer's market.
 
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The gambar situasi should mention everything around the boundary of the property. If it is a road, it will have "Jalan" which indicates public road, if it is someone else's property it will say the property number or "tanah milik".
One further question regarding zoning plan (I hope this is an acceptable translation of gambar situasi? :) ): I have already seen a few plans shown by the broker or seller, but the quality (or let´s say the attention to detail) of these plans seems to vary. I guess, the gambar situasi is not an official document which is drawn and maintained by the government. Instead, the creation of a gambar situasi is managed by the broker/seller. Is that correct? But is a gambar situasi legally binding then? I assume, it is one of the notary´s tasks to create, hold and also give a copy of the gambar situasi to the buyer so that the buyer has proof in case that there are discrepancies regarding the gambar situasi later?

For example, if the land has no access to a road yet. But the seller/broker says that a public road is going to be built in the near future. And if you ask him to document this in the gambar situasi also. Is the gambar situasi a legally binding document then? So, in case that there will be inconsistencies (intentionally or by mistake), you could ask for compensation of the costs that you had to obtain an access to the public road later?
 

dafluff

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One further question regarding zoning plan (I hope this is an acceptable translation of gambar situasi? :)): I have already seen a few plans shown by the broker or seller, but the quality (or let´s say the attention to detail) of these plans seems to vary. I guess, the gambar situasi is not an official document which is drawn and maintained by the government. Instead, the creation of a gambar situasi is managed by the broker/seller. Is that correct? But is a gambar situasi legally binding then? I assume, it is one of the notary´s tasks to create, hold and also give a copy of the gambar situasi to the buyer so that the buyer has proof in case that there are discrepancies regarding the gambar situasi later?

For example, if the land has no access to a road yet. But the seller/broker says that a public road is going to be built in the near future. And if you ask him to document this in the gambar situasi also. Is the gambar situasi a legally binding document then? So, in case that there will be inconsistencies (intentionally or by mistake), you could ask for compensation of the costs that you had to obtain an access to the public road later?
Gambar situasi is attached to the certificate, and should not be altered by anyone other than a government official in charge of doing so. It should document the current situation of the property, not any plans for the future.

A zoning plan (Denah Tata Ruang/Denah Peruntukan Lahan) is usually available from the local government office. Some of them are more organized than others, so your ability to get them and make sense of them may vary.
 
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Other things to look out for are availability of power and water to the site, and what else is going on in the neighborhood (is there a local karaoke place or a pig farm currently existing or planned? - either one could make your life miserable). Like Pak Tani advised in post #3 above, go see the village head and ask about development plans in the area, especially near to the property you are looking at.
Regarding power, I assume it is the same principle like when discussing road access? So, you should ask the seller for help to find a solution with the neighbors in case your land is locked in and has no access to electricity yet?

In case of public road access, but no access to electricity yet: Probably, it is the easiest way to lay the power line along the road then, so that you do not have to ask neighbors for permission? But are village officers usually cooperative and allow that? Probably, the potential buyer has to carry the costs for installation of the power line along the road then. But is it also common that the government/village officers reject a request for a power line along the street if someone wants to obtain access to electricity by that?

Access to water is also to consider but, regarding negotiation with neighbors, probably a less problematic topic since in most cases you can drill for water - and in most areas it is also possible to have water delivered in case of road access.
 

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