What is the challenge for real estate purchasing?



By Clémence Simon

SKEMA Business School

Lille, France



Nowadays, buying real estate has become a real challenge. Indeed, the contracts become complex and the taxes important. This is why the percentage of profitability drops and young people are less and less attracted by the purchase. This article presents the different aspects concerning the contract and the payment for a property

Key words: Real estate, Purchasing, Investment, Leasing, Property, Warranties


What is better, leasing or purchasing property? It’s an eternal debate and for which there is no right or wrong answer, but we are sure about one point: the decision must be part of a life plan. Indeed, everybody requires a place to live; however the concept of owning propriety is becoming increasingly rare. It’s an essential and complex question that everyone has to think about, especially for generation Y (people born between 1980 and 2000), young people who are starting to save money.

Does becoming a real estate owner still make Generation Y dream? Generation Y also called, “rental generation” is outdated by the concept of ownership. Why own a car or an apartment at the time of Uber and Airbnb? Concepts more and more present in our life that induces us to have nothing more. More, a Nielsen survey found that 62% of Millennials “prefer to live in dense and diverse urban villages where social interaction is within reach.” To be able to afford this lifestyle, Generation Y has no choice but to rent. Other factors can deter the Generation Y from owning a home. They don’t want to maintain a home and take responsibility for selling.

Between 2000 and 2010, buying a house was quickly more interesting than renting it. What is the situation today? The answer is not so simple. And if real-estate prices remain globally high, they are trading!

The most important factor is the cost and profitability of the investment. In each case, there are advantages and disadvantages to both options, and the decision requires lots of analysis and planning. Both contracts are complicated and determine the up-front cost, monthly recurring cost, taxes, warranties and notices. So we are going to analyze them to see what can be profitable or not and what can be an inconvenient or not.

If you decide to purchase a real estate, you need to establish different contracts for the transaction. The contract determines different terms such as title to the property, earnest money deposit, improvements and fixtures included, purchase price and conditions of payment, real-estate taxes, assessments, and adjustments, special conditions and other statements. When you sign a purchase real-estate contract, you have to initial a lot of pages and sign different pages. What is important in these complex contracts? In this article, different terms will be described in order to explain what is relevant.

Objective statements

The objectives of this paper are to answer to the following questions regarding the payment:

  1. What if the transaction cannot be made?
  2. How secure is the payment?


Step 2 → feasible alternatives solution

  1. Identify retraction times and impacts on the cost of the transaction: time for retraction and condition precedent to obtaining a loan
  2. Protect your future real estate by making an inventory and indicate who has to pay the different costs (closing costs, house inventory)
  3. Build your own contract of purchase of your property with the necessary clauses to secure the payment of the transaction

Step 3 → developments of outcomes

  • Identify retraction times and impacts on the cost of the transaction: time for retraction and condition precedent to obtaining a loan

The purchase of real estate is done mainly through personal contributions but also with the contribution of a bank loan. However when a sales contract is signed there are several deadlines to respect. At the first signature, a period of 7 days is available to retract without any necessary reason. A loan is granted in a longer period of time to allow the bank to verify the ability to repay the loan if there is a problem and assess the risk of this problem occurring.


To read entire paper, click here


Editor’s note: Student papers are authored by graduate or undergraduate students based on coursework at accredited universities or training programs.  This paper was prepared as a deliverable for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director [email protected]

About the Author

Clémence Simon

SKEMA Business School
Lille, France



Clémence Simon was born in 1995 in Lille. She grew up with her 5 brothers and sisters in a familial house in Lambersart next to Lille and went to the high school nearby. She was a motivated and dynamic child. She practiced gymnastic during 13 years, tennis during 10 years, played the piano and was involved in the “Scout de France”. Clémence is a dynamic and spontaneous girl; her main values are respect, dynamism, family and trust.

She loves being part of projects that’s why in 2012, after high school she went to a school named “Iteem”. Iteem is an engineering school of Centrale Lille co-directed by Skema Business School which trains its students in engineering, but also management and entrepreneurship. During her studies Clémence undertook projects such as a humanitarian project in Cambodia, treasurer of an association that participates in sailing races, member of the student’s office…

Clémence likes to travel and discover new cultures. She has had the opportunity to experience many countries but also to live in independence. In 2015, she went on an 8-month internship in Singapore working with a Luxury Cosmetics SME.

Today, Clémence is in the 5th year of study during which she mixes her master’s degree in engineering at Centrale Lille with a Master of Project and Program Management and Business Development at Skema Business School. During school, she also had the opportunity to do in total 15 months of internship. That’s why she had a business culture and knows about the world of business. This last year is a real challenge because in addition to being a complete year, it will culminate in the launch of her professional career. If you want to know more about Clémence Simon, you can contact her at [email protected]