The Covid-19 pandemic has put a lot of things in perspective and aligned many of our priorities. We had to quarantine the place we were staying for fear of getting the virus.
When restrictions relaxed, we saw many going to alternative beach houses or mountain homes to spend a few weeks away from the city.
This is one of the many reasons that Filipinos explored the idea of having two homes instead of one house.
Some opted to buy a house near the beach to soak up the sun and engage in water sports.
Others wanted a cooler alternative where they could just sit by the balcony and relax with a good book. Thus started the active inquiries to buy a property outside of Metro Manila.
Buying real estate is not something you take lightly or just dive into without knowing the basics of acquiring a good property. There are many rules around it that you must be aware of, or at the very least have someone you trust to look into. Here’s a guide to buying real estate property in the Philippines.
01 of 08Reasons For Buying Real Estate
There are reasons why you buy real estate, but knowing why you are doing it now will help you stay focused on the choice of property, the location, and the budget. While you can do your research alone, there are many real estate agents that you can approach to help you with your transaction and ensure your documents are in order.
Keep in mind that you can get a housing loan through the bank, finance lenders, or Pag-Ibig Fund. Depending on your financial budget, you can choose to buy an empty lot to build in, a pre-owned house, a pre-selling condominium or townhouse, or a pre-owned condo or townhouse.
First Owned Property
It is a person’s dream to call the house they go home their very own. This is usually the first thing that comes to mind when you start working.
Since you can avail of being a Pag-Ibig member once employed, you need 24 monthly contributions to apply for a PHP 6M housing loan.
The approval amount is based on your capacity to pay or the loan-to-appraised value ratio
Usually located in a distant location from the city, a vacation property is a place you go for the weekend or long holidays. It is your place to de-stress from the toxic demands of city life and drive towards nature.
Some prefer swimming with the waves of the beach while getting a tan, while others like the peaceful serenity of hiking through a mountain area.
For the middle-aged group whose children have graduated from college and are working on their careers, a retirement property is a place for personal pursuits.
Some purchased farmland, so they can plant vegetables and fruit trees to keep them busy. Others want a panoramic view where they can paint or pursue their creative talents.
Those who have accumulated extra funds or whose business is thriving will want to diversify and put their money into property that will earn revenue.
This could be a commercial lot that is leased into rental spaces, residential condominiums, townhouses, or raw land that will attract a joint venture with a land developer. It is a property that has the potential to earn income on its own.
02 of 08Guide to Buying Real Estate Properties
Now that you’re ready to jump into property hunting, here are some things to remember. It is not only a guide to buying real estate property in the Philippines, but it serves to rid you of future problems that you want to avoid at any given time.
It is helpful to engage the services of a real estate broker, agent, or legal advisor that would assist you in buying the property.
Research on Landowner or Land Developer of the Property
Once you have chosen the real estate property that you want to buy, find out who owns the land. Conduct your research by checking on the photocopy of the title presented to you. You will see the owner’s name and vital details in the photocopy of the title. You can further verify the information with the Registry of Deeds.
Check the Possible Issues of the Real Estate Property
Like any other transaction, many issues can be attached to the sale of a real estate property. Below is a quick look at the list that needs to be cleared before moving forward in the transaction:
- Verify the legitimacy of the owner or seller’s representative
- Land Description must be in order
- Get a Copy of the Tax Declaration
- Check on the property’s right of way.
Secure the Notarized and Signed Deed of Sale
You must secure a notarized and signed Deed of Sale before you finalize buying the real estate property. This document identifies who will pay the taxes upon the sale of the property.
Land Title Transfer
The transfer of Land Title requires you to prepare documents that are submitted to the property location where the Revenue District Office (RDO) of the Bureau of Internal Revenue (BIR) is.
- Notarized Deed of Absolute Sale – original copy and two photocopies
- All signatories on the deed of sale-photocopy
- Official Receipt of the Notary Public for the Deed of Sale.
- Latest Tax Declaration/ Sworn Declaration of No Improvement/ Certificate of No Improvement – Certified True Copy and two photocopies
- Tax Clearance
- Clearance from the Homeowners Association
- Birth Certificate/ Marriage Certificate/ CENOMAR
- Tax Identification Numbers of Seller and Buyer
- Certificate of No Improvement for lots only
- Special Power of Attorney for the processing of transfer of ownership to the buyer.
- Certification of the Philippine Consulate of Special Power of Attorney if the owner is abroad.
- Location Plan or Vicinity Map
Once the documents are submitted, you can get an assessment and pay Capital Gains Tax, Value Added Tax, and Documentary Stamp Tax on BIR’s RDO Authorized Agent Bank. Once that is paid, you will get the Certificate Authorizing Registration (CAR).
- BIR Official Signed Computation Sheet
- Deed of Conveyance
- BIR Form 1706 Capital Gains Tax signed by the seller – three copies
- BIR Form 2000-OT Documentary Stamp signed by the seller – three copies
- Cash or Bank Manager’s Check
As you complete all the documentation, you will wait for an estimated two to three weeks period to pick up two copies of the Certificate Authorizing Registration.
A blue copy is for the transfer process and a brown copy is for safekeeping. The original deed of conveyance will be stamped received by the BIR and signed by the RDO officer.
You proceed to the Treasurer’s Office of the Local Government where the property is located to submit the Deed of Conveyance, Tax Clearance, Certificate of No Improvements for lots, BIR Certificate Authorizing Registration, and Special Power of Attorney for the representative doing the transfer.
Transfer of Title Ownership
The City Treasurer’s Office will compute the Transfer Tax and transfer fee that you have to pay by Bank Manager’s Check. You will be given an Official Receipt for the transfer fee and a Treasurer’s Office rubber-stamped mark on the back of the Deed of Conveyance or Tax Certificate. You need the following completed documents for submission:
- Deed of Conveyance
- Tax Clearance
- Certificate of No Improvement for lots
- BIR’s Certificate Authorizing Registration
- Special Power of Attorney (representative of the owner who will process the transfer)
This is submitted to the Registry of Deeds for computation of registry fees. Once paid, you will wait two to three weeks before a new title is presented. Again, another set of documents needed to be presented:
- Deed of Conveyance
- Photocopies of IDs of all signatories
- Official Receipt of the Notary Public for notarization
- Certified True Copy of the Title
- Latest Tax Declaration Certified True Copy of the Tax Clearance
- Clearance from Homeowners Association
- Certificates of the Seller and Buyer – Birth, Marriage, Certificate of None Marriage
- Original and Duplicate Copy of the Title
- BIR’s Certificate Authorizing Registration
- Official Receipt for the Transfer Tax Payment
The final step in processing the land transfer of the title is to submit the documents to the city or municipality of the Assessor’s Office where the property is located. The Assessor’s Office will issue a new tax declaration, with the new owner paying the assessment fee. You compile the important documents for submission:
- Certified True Copy of the New Land Title
- Old Land Title – Photocopy
- Deed of Conveyance
- Certified True Copy of the latest Tax Declaration
- Business Tax Receipt/ Business Permit (if a corporation)- Original Copy and Two Photocopies
- BIR Certificate Authorizing Registration- Duplicate Copy and Photocopy
- Tax Clearance – Original Copy and Photocopy
- Photos of the Property
Cost of Transferring Title
Both seller and buyer have to pay different items to transfer a land title to another name. The seller should update the real estate tax payments and be ready to shoulder the capital gains tax once the payment for the property is made. The buyer has to pay for the registration fee, documentary stamp, and miscellaneous fees.
03 of 08Thinking About Buying Real Estate Property
You are at the point in your life where you want to buy a real estate property, but there are important things to think about. You may think you saved enough and are ready to take the plunge to buy a new property, but there are many things to consider until you can narrow down to a few choices for consideration.
Your budget determines the choices of property that you can buy. Aside from the amount of the property, you have other costs to cover. The budget plays a major role in deciding what kind of property, size, and location you will look into. You also have to consider the following extra costs when setting your budget:
- Reservation fees – The buyer makes a payment to the landowner or developer to hold off the property for 30 days from other buyers. This can be deducted from the selling price or the down payment.
- Down Payment – The upfront payment of 10-30% of the property’s price that can be negotiated with the developer
- Monthly Mortgage Fees – monthly installment payment based on the interest rate that is based on the term that you choose
- Value Added Tax- 12% tax on the property value
- Real Property Tax – yearly payment based on the assessed property value of 2% for Metro Manila and 1% if it is located in the province.
- Association Fees – Monthly fees are paid to the condominium or homeowner’s association for standard area maintenance and security.
- Property Insurance – Payment made to an Insurance company to protect your property and belongings in case of fire, theft, or accident.
You’ve heard it mentioned every time that location is everything. In buying real estate, this is a fact to suit your needs. If you are buying a family home, you want to choose a neighborhood accessible to schools, the mall, and a nearby hospital.
Narrowing it further, you have to decide if you want to live in a gated subdivision or by the main street. Here are some factors to consider:
- Security – Check if the security guards or barangay marshals are watching the streets. Security cameras or CCTV assure you that the area is under digital surveillance.
- Flood-Prone- Ask or observe if the area gets flooded during the rainy season or if there is regular unclogging of the street sewers.
- Accessibility- Determine the property’s distance to the nearest grocery, the hospital, schools, laundromat, etc.
- New Developments- Inquire if the area has future developments or building structures that can affect the zoning classification.
3. Credit History
It is best to have a healthy credit history before you take out a loan. Your credit history is reflected in the Credit Information Corporation (CIC) as a source to evaluate how sound you are as a borrower. Through the evaluation, the lender can gauge the total amount they will lend you, the interest rate, and the term of the loan given.
4. Household Size
The number of people in your household is a reliable factor in deciding the property you will buy. A newly married couple will be comfortable with a one-bedroom condominium, but that would be too crowded for a family of four persons. You must also count the number of helpers that live with you and work out their lodgings.
The Filipino household can extend to having siblings or aging parents that live with you, so that is another factor to consider. A bigger family will require space and privacy to avoid tensions in the home and allow a harmonious flow of living together.
5. Kind of Property
You now have a budget set as well as an idea of how many rooms are needed for your household to determine the kind of property you will buy.
You can choose to build on an empty lot or buy a pre-owned house, then renovate it to fit your needs. Likewise, you can also buy a condominium or townhouse that is closer to the places you frequent.
Consider your family’s lifestyle and see what will give maximum comfort and convenience. If you prefer a bigger space for your family and don’t mind driving to school or the nearest mall, then a house would be ideal for the family.
But if you prefer to skip the traffic and long commute, a centrally located condominium with amenities might be the place for you.
6. Complete Income Documentation
Just like applying for a job, you need to complete your income documents as a first step in applying for a housing loan and bringing you closer to buying your real estate property. It is best to have the following completed documents to speed up the approval process and avoid delays of questionable financial standing:
- Latest annual income tax return
- Social Security Number
- Government IDs
- Bank Statements
- Court-Ordered Payments for Child Support (if applicable)
04 of 08Buying Real Estate Through Pag-IBIG or Local Bank
Borrowing money to buy your real estate property entails a long relationship with a relationship of your Pag-Ibig or Bank representative. You have to do a bit of research on how credible the bank is and its interest rates.
It would be wise to ask people with existing loans about their experience.
You can apply for a Pag-Ibig Loan, take a housing loan from the bank, or you can use both financial sources to buy your real estate property.
But you have to know the property price, the fees needed to comply with, and payments made to the government institutions to determine how much you need to loan.
Remember that the maximum loanable amount that you can get from Pag-Ibig is PHP 6 million at a lower interest rate compared to banking institutions. You have the option to get a second banking loan to help you pay for the real estate property.
The joint funding will help you when you start construction on your house or do some renovations on a previously owned property.
|PAG-IBIG FUND||BANK LOAN|
|Maximum Loan Amount||PHP 6 million||Value of Property to be used as Loan Collateral|
|90% of property value more||60-90% of property value|
|Starting Interest Rate||5.37% per year||5.25-6% per year|
|Repayment Maximum Terms||30 years||5 years for vacant lot|
|10 years for condominium|
|20 years for house and lot|
|Eligibility Requirements||Pag-Ibig Member with 24 monthly contributions||Depositor with a minimum gross income of PHP 50,000|
05 of 08Check For Authentic Real Estate Property Title
The first thing you look at when buying a real estate property is to check if the title is clean of any mortgages or loans.
You should also check if there are other claimants attached to the property, as you do not want to be involved in a family dispute or squabble. Find out if it is a privately owned property or a corporate asset.
There are many instances of fake property titles in a real estate transaction, but knowing the initial signs of a genuine real estate title will spare you the headache of dealing with a bogus contract.
The Quality of Contract Paper
The Banko Sentral ng Pilipinas prints the paper used for the property titles. It has a similar texture to a bank check. If you hold the title behind a light, there is a visible watermark of the Land Registration Association.
Identity of Seller or Dealer
You do your initial background check by calling the real estate agent to check if the agent or dealer is connected to the company.
If you deal directly with the seller, you need a Special Power of Attorney (SPA) from the family members or landowner assigning the person authorized to negotiate on their behalf.
Description of Real Estate on the Title
The property that you are looking at must match the land description of the property title. This includes the actual land survey, the exact location, the land measurement, etc.
Status of Real Property Tax
You can check if the real property tax is paid and updated by going to the municipality of the Assessor’s Office.
You can likewise ask the seller for a notarized agreement once they update any back payments.
06 of 08Important Documents When Buying Real Estate Property
In any material investment, you need to secure the right documents to protect your transaction. It may be a tedious process to wait and complete, but you might as well go through the process to avoid any problems that may arise a few years after.
Here is a list of documents you need to obtain to successfully close the deal when you buy the real estate property.
Contract To Sell
A Contract To Sell is a written agreement between the seller or property owner and the potential buyer. It is a binding reservation agreement stating the real estate property is removed from the market for other buyers.
But if a down payment is given with an agreed installment term, the Contract to Sell is given. Until the amount is fully paid and under debt, the seller or landowner retains possession of the said property.
Deed of Absolute Sale
A Deed of Absolute Sale is given once the full payment has been completed. It is filed and notarized in the Registry of Deeds before your original copy is delivered to you.
It states that you are now the legal owner of the property and the purchase of land is finalized.
Deed of Adjudication with Sale
Another legal document states that all surviving heirs have voluntarily agreed and consented to sell the land.
The Deed of Adjudication with Sale protects the buyer from future claims or disputes on the sale transaction.
Certificate of Title
The legitimacy of land ownership is determined by the Certificate of Title from the Registry of Deeds.
A Transfer of Certificate of Title is issued to the new owner after the original first title.
As soon as you get a Certificate of Transfer Title, you should verify the current status of property tax payments.
You can request this from the municipality’s Assessor’s office by submitting the property’s new title and a photograph. You are free of tax responsibilities once you get a tax declaration.
07 of 08Breakdown Of Costs When Buying Real Estate Property
The payments may be confusing, but to make it simpler, here is a breakdown of what the seller and the buyer have to pay. Take note that the percentage is based on the highest value, whether it be the selling price, the zonal value, or fair market value.
|1.5% Documentary Stamp|
|6% Capital Gains Tax|
|3% – 5% Real Estate Agent’s Fee|
|3% – 12.5% Costs Paid|
|1% – 2% Notary Fee|
|0.50% – 0.75% Local Transfer Tax|
|1% Registration Fee|
|1.5% – 3.75% Costs Paid|
08 of 08Final Notes
Buying real estate property is a big step for any person to make. It is not an impulsive decision you make, not only because you have to take out a big chunk of money, but also the responsibility of being the new owner of the property.
This fact is something every buyer has to remember before engaging in a property transaction.
The guide to buying real estate in the Philippines will give you a broader idea of what to prepare for and what to expect. It is best to study each step carefully to save time and resources when completing the requirements.
There are legal documents and pay fees that have to be submitted before you can finalize a transaction.
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