The Buying and Selling Process
The buying and selling process of property in the Philippines can be daunting given mountains of forms that need to be completed and the many trips to government offices required.
HotProperty.ph will guide you through - step by step - the buying and selling process of property, which will help endure a successful and smooth transferring ownership of real estate in the Philippines.
Step 1: A Contract of Agreement will be signed between the Owner and the nominated Broker
The property seller will discuss and agree on terms of sale and the amount of fees / commission on the sale with a nominated real estate agent. The broker will also scrutinize the existing documents of the owner in order to check the status of the property (such as condition of the land title if it is free from loans, liens and encumbrances).
Step 2: The property owner will issue an Authority to Sell
This agreement will legally bind the broker as an agent of the property owner, and include terms detailing the amount of commission and detailed information of the property to be sold, as well as indicate whether the property owner will bestow upon the broker exclusive rights to sell or a non-exclusive authorization to sell their. This agreement will also serve as proof that the broker is legally authorized to represent the property owner in selling their property.
The broker will gets hold of the relevant documents before marketing your property to make sure that it is free from encumbrances (encumbrance means that someone else has a right to, interest in, or legal liability on real property that either prohibits the passing of title to the property or which would diminish its value). The property owner must also provide for an authority letter to transact to the selling broker so the latter could get certified true copies of the Title, Tax Declaration and Tax Clearance.
Step 3: Review of Property by Real Estate Broker
The real estate broker must be able to check the property in order to make an assessment of its condition and ultimately its market value. Many factors are considered in determining the value of the property including location, condition, proximity of amenities and services and general area.
A licensed real estate professional is trained to ascertain the value of a property.
Step 4: Broker start to market the property
The property owner and the broker will agree on how to market the property and consider things such as privacy when it comes to publishing photos and revealing the location of the property online (on HotProperty.ph for example) must be considered.
Step 5: Property Viewing
Potential and prospective buyers will get in touch with your nominated broker who will organize viewings of the property. Make sure you make the property presentable to add value to your property.
Step 6: Letter of Intent / Offer to Buy
The buyer will submit a Letter of Intent which is a legal document offering to the owner of the property to buy the property and thus to declare their intention to purchase. This is the first step in documenting a sale of property. Note, the letter of intent is a non-binding document which provides specific details which note the price, amount of deposit, length of due diligence period, treatment of financing and other terms which are relevant to the purchase of your property.
Step 7: Acceptance by Property Owner
If the property Owner signs the Letter of Intent, this will signify the acceptance of the terms given by the buyer. At this point the seller is bound to promise not to offer the property to other potential buyers (unless the purchaser does not breach any of the conditions provided in the letter).
Step 8: Deposit / Earnest Money
This is the money given by the home buyer while seeking or applying for financing in order to pay the remaining balance owing on the property. This money is provided to hold the property subject to the due diligence of the buyer and can be forfeited once there is default on their part. The money may also be refundable subject to deductions depending on the agreement between the parties.
Part 9: Legal Documents
The seller and the broker must be able to secure the necessary documents in preparation of the transfer of ownership to the buyer as the latter prepares to fulfill the payment of the property.
Below is a general list of documents that the property owners and/or brokers must obtain from the Register of Deeds to finalize the transfer of ownership to the new owner:
1. Certified True Copy of Transfer Certificate of Title (Land)
2. Certified True Copy of Condominium Certificate of Title (Unit)
3. Certified True Copy of Condominium (Parking)
Further documents to be procured by property owners or brokers from the Assessor’s Office:
1. Certified True Copy of Tax Declaration (Land)
2. Certified True Copy of Tax Declaration (Improvement / Building)
3. Certified True Copy of Tax Declaration (Condominium)
4. Certified True Copy of Tax Declaration (Condominium parking)
5. Real Estate Tax Clearance for Current Year
6. Certificate of Non-Improvement if property is bare and without structures such as a house or a building
The property Owner must also secure the following:
1. Certificate Authorizing Registration from the Bureau of Internal Revenue (BIR)
2. Original Real Estate Tax Receipts – Current Year
3. Lot Plan / Subdivision Plan
Part 10: The Deed of Sale
Once the price is fully paid, a Deed of Absolute Sale will be signed where the seller relinquishes / transfers ownership of the property to the buyer.
Part 11: Payment of expenses applicable to the sale of property
o Capital Gains Tax / Creditable Withholding Tax (whichever may apply);
o Documentary Stamps Tax;
o Transfer Tax; and
o Registration Fees.
Part 12: Mutually agreed and signed Deed of Absolute Sale
Upon full and final payment of the purchase price and other expenses such as tax, fees for various transactions, the contract is signed and ownership is legally transferred to the buyer.
Part 13: Have the Deed of Absolute Sale Notarized
Once the deed of sale is signed by both parties, the document must be notarized to protect the document from potential fraud. Once a document has been notarized, it will become a public document and would be binding to third persons. Notarization will protect the buyer from fraud and possible unfounded claims by third persons in the future.
Part 14: Seller must turn over the ORIGINAL copies of the following:
o Transfer of Certificate of Title – (land) – Owner Copy
o Condominium Certificate of Title (condominium)
o Tax Declaration (Declaration of Real Property)
o Tax Clearance – (both land and improvement)
o Tax Clearance – (condominium unit and parking if applicable)
Part 15: The buyer must obtain a new tax declaration
After releasing the Transfer Certificate of Title / Condominium Certificate of Title under the Buyer’s name, a certified true copy of the new Title and a photo of the property are needed to process the new Tax Declaration in name of new Owner.
Part 16: Issuance of New Tax Declaration
Considered to be the last step since transfer of ownership rights includes the transfer of the obligation to pay property taxes. Once a new tax declaration has been released under the name of the new owner, the full obligation of the former owner is terminated.
The process can be confusing most specially to first-time property buyers or sellers but it is necessary to be familiar and vigilant even to the smallest detail. Handling and transferring the ownership of a real property requires extraordinary diligence because it could be extremely costly.
SHOULD YOU NEED ASSISTANCE IN UNDERSTANDING THE PROCESS, PLEASE FEEL FREE TO CONTACT HOTPROPERTY.PH’S IN HOUSE LAWYER FOR FURTHER CLARIFICATION AND GUIDANCE AT email@example.com.