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When planning and eyeing for a potential investment such as real
estate, first thing to consider is the monthly income you are currently
receiving and the amount will be left after all the expenses deducted plus the
amount needed to put into your savings account. These are important basis to
know if you are capable of handling financial operations in the long run. Just
keep in mind that unforeseen expenditure can be minimized by building enough
cushions through planned funds.
Hope you’ll find these notes useful to your future investment and
will provide some guidance in choosing and buying property in the Philippines.
A. General Information (cited in Real Estate Laws in the Philippines)
As a rule, if married to a Filipino citizen, is to have the ownership of the land
under the Filipino’s name. However, in the event of death or separation, the
land cannot be transferred to the foreigner. Another
option is to acquire land through a corporation or partnership. Corporation or partnership can only be, at
the maximum, 40% foreign-owned and at least
60% of the shares owned by Filipinos are entitled to acquire land in the
Philippines.
Aliens can acquire land in the Philippines only on a few exceptions:
Aliens can acquire land in the Philippines only on a few exceptions:
1) Acquisition thru hereditary succession -if the foreigner is a
legal heir.
2) Purchase of not more than 40% interest as a whole in a
condominium project.
4) Purchase by a former natural born Filipino citizen who acquired
foreign citizenship & has not applied and granted dual citizenship.
5.)
Maximum area that may be allowed is as follows:
a. For residential purpose - 1,000 square meters of urban land or one (1) hectare of rural land (BP 185)
b. For business or other purpose - 5,000 square meters of urban land or three hectares of rural land.
5.)
Maximum area that may be allowed is as follows:
a. For residential purpose - 1,000 square meters of urban land or one (1) hectare of rural land (BP 185)
b. For business or other purpose - 5,000 square meters of urban land or three hectares of rural land.
B. Modes of Acquiring Land:
- Private Grant – voluntary
transfer or conveyance of private property by a private owner, such as
sale or donation
- Public Grant – acquisition of
alienable lands of the public domain by homestead patent, free patent,
sales patent or other government awards
- Involuntary Grant – acquisition
of private party against the consent of the former owner, such as
foreclosure sale, execution sale, or tax sale
- Inheritance – acquisition of
private property through hereditary succession
- Reclamation – filling of
submerged land, subject to existing laws and government regulations
- Accretion – acquisition of more
lands adjoining the banks of rivers due to the gradual deposit of soil as
a result of the river current
- Prescription – acquisition of title by actual, open, continuous, and uninterrupted possession in the concept of owner for the period required by law
There are various classifications of properties. There are
residential, recreational, commercial, agricultural, industrial, or memorial
properties. From these sub-categories, and depending on your capital, you may
start buying and selling real estate properties as a business.
C. In buying properties there are so many factors that must be considered
C. In buying properties there are so many factors that must be considered
1. Set the criteria for your desired property
- Determine your purpose of
buying
Is it for your family? Or your business? Is it for your retirement? Or are you into buy and sell investments? - Determine the property category
Is it house and lot? A residential lot only? Or a condominium unit? - Determine your desired location
Is it somewhere in the province? Should it be near your office? Or somewhere far from the city? - Determine your budget
Set the price minimum and price maximum that you can afford. Say 2 million to 6 million pesos - Determine other specifications.
Do you need at least 3 bedrooms? Do you want a 3-car garage? Is it two-story?
Your new dream house and lot will be the biggest
investment that you’ll make in your lifetime. Before embarking on your journey
of house and/or lot hunting, know what you really want and need. List all the
features you care most about.
Know where to look for properties to buy. You may find them in
newspapers or in the internet for properties under foreclosure. It is
advisable, too, to concentrate mostly on people who want to sell in a hurry.
You may also ask your friends if they know someone who sells property/ies.
2. Cost and Financing
Know your monthly income or resources; identify your monthly
expenses and savings (it will help you to identify your budget for monthly down
payment and amortization). Do not force yourself to buy a big/huge house if you
can’t pay it in the long run. Choose the right financing scheme that fits your
budget. Find out how much you can afford and what loan financing are
available (Pag-Ibig, Bank, In-house financing). Understand the pros and cons of
each type of financing. Give your payment only to the owner of the property, or
to someone with a certified authority to collect. Always ask for receipts and
receiving copies.
Get sample computation and study. Ideally, mortgage payments
should be not be higher than 36% of our total monthly income. This way, you can
comfortably pay your mortgage and care for other household expenses.
There are many cases of overseas workers who bought
preselling properties but could no longer maintain the monthly amortization
even before the house and lot or condominium was turned over because their
contracts abroad were not renewed.
3.
Location and Neighborhood
Location
is a very important consideration when buying a property. It’s an important
indicator of value. It should be accessible by public transportation in going
to your place of work, near schools, banks, mall or shopping center,
supermarket, hospitals, church and airport. Look for ongoing/future road
development near the housing project as this will shorten travel time to your
place of work and will also add to resale value of your property.
Know
the Developers’ Reputation (Do your homework! Scout/Research about the place or
the property and its developer; find the most trusted developer for you’re
investing your hard earned money! Choose your agent well!)
4.
Investment Potential
Most home buyers, especially first-timers, will eventually decide
to sell and relocate to another home at some point. That is why it’s important
to consider how well the home will hold its value over time. If an area is
gaining popularity, it only implies that the road network is due for
improvement and the property value is expected to increase in the future.
5. House Type
Do you want a two-story townhouse, or single detached house, or a
house with private park? Are you looking for ready for occupancy (RFO) houses?
Or pre-selling houses?
* Lot Area – refers to the size of the lot.
* Floor Area – refers to the size of the house (first floor +
second floor and so forth)
* The bigger the lot you acquire the higher the price.
6. Contact the broker on the property.
Usually the owner has already appointed someone to sell the
property on his behalf and that person is called the broker. Though some think
that buying directly to the owner or developer will save them time and money, a
broker will still be advantageous to the buyer for the following reasons:
- Broker facilitates the whole
transaction process
From setting appointments/meeting, negotiations to furnishing of legal documents and other requirements from the pre-sale to post-sale stage, the buyer and seller is relieved from the hassle and stress of the menial work. Sometimes the seller/owner may not have enough technical knowledge on the legal requirements for the sale of his property, so it is safe and practical to involve a broker in a transaction to have someone in charge of the documents and the processing work. - Broker trips the buyer to the
property sites
The buyer has the privilege of being tripped by the broker to the sites of the properties for free. The buyer no longer has to worry searching a local city map where the property might be located. It is the responsibility of the broker to lead the buyer and set appointments for the site visit - Broker acts as negotiator.
During negotiations, the broker is an indispensable party as witness and negotiator for both seller and buyer. A third party may be necessary to ensure that all agreements is recorded and is put on paper. If the buyer may find it hard to ask for a lower price to the owner, the broker may negotiate in behalf of the buyer. - Broker can give recommendations
of other alternative properties
An owner may try to convince the buyer that his/her property is a good choice, but the broker is a good source of recommendations of other alternative properties to the buyer. Usually a broker keeps an "inventory" of properties that he/she is allowed to sell. Through this, the broker gives the buyer a wider range of choices and saves his time and effort. Instead of looking for 20 owners of properties, the buyer has to find only one broker that has a listing of 20 properties. - Broker can search for more
properties in behalf of the buyer
If still the buyer can't find the property that fits his specification, and it isn't found on the broker's inventory, the broker will exert further effort to search other properties. The broker may use his network of friends in real estate to quickly get more property listings that might fit the buyer's specification.
The same is true with development projects (e.g. subdivisions,
villages, condominium units, etc.) A developer will appoint brokers as
marketing arms to sell the units in the project. But take note that whether you
go direct to the developer or course the transaction through a broker, most of
the time you still get the same contract price. So why not go with the benefits
of dealing with a broker. Check if the broker /agent are a license registered
and especially ensure that the property being eyed has not been sold to other
buyers.
Here are some important tips on how to buy real estate properties.
These land buying tips will certainly aid buyers to seek great locations
for their potential investment.
1.) If you buy a property from individual owners
- Verify the ownership of the property. Do not just rely on the certificate of land title. Ask the seller of the property for a photocopy of the title -you will need the title number and the name of the owner. You can check this by securing a certified true copy of the title from the Register of Deeds. This office is usually located at the city or municipal hall where the property is located.
- Inspect the property that you will purchase. A clean title is free from any encumbrances such as mortgage from a bank or lending companies. Whatever transactions or legal matters that transpire on the land, as a rule, these should be annotated in the title. Check for these annotations. If the page is empty, it is clean. It is advised also that you are going to repeatedly inspect every corners of the place or hire home inspectors so that you are very much assured on the things that need to improve or repair in the place. That way while you are not yet moving in or paying the place, the seller still have the time to improve or repair things in the property.
- Make sure that the land described on the title is really the land that you are buying. You can validate this at the Register of Deeds or by hiring a professional land surveyor or a geodetic engineer to ensure that the actual property you are buying will match the technical description in the title. Land titles don't have any street name and number to pin point a property, it is a must to confirm that the actual property you are buying matches the technical description on the Transfer Certificate of Title.
- Make sure that the sellers are the real owners. If you are buying from an individual property owner, ask for identification papers like passport or driver's license. Valid IDs should match the name in the title. Always inspect the original title, not a photocopy. Check with some authority figures within the locality like the Barangay captain as they also have valuable information about the property and can attest their true owners
- Make sure that yearly real estate taxes are paid and updated. The government imposes at least quarterly payment of taxes and when a property is sold, the government requires payment of the entire year, so negotiation as to what period buyers pay and what period sellers pay their tax dues should come into play in the sales transaction. It is very important that real estate taxes are paid because of stiff penalties imposed by government on delayed payments and eventually the government can impose a lien on the property which can extinguish the owners right of the property until taxes are paid including penalties.
- If the property you are buying is not a residential subdivision such as raw land, or beach lot, check with the DENR (Department of Energy and Natural Resources) with regards to the regulated use of the land. Lands have classifications such as farm land, industrial, commercial, residential and therefore, these should be used according to their classification, though diversion may be applied but requires government approval and usually undergoes a tedious process.
- Check if there are claims against the property. Examine the title if there are liens or encumbrances that may affect the value of the property.
- Know if the price is right. Every property investors need to have an assurance that they are going to have an investment that has a right price. You need to know the value of the property that you will buy and compare the price to other properties available in the place. That way you can make sure that the price available on the property that you will have is valuable.
- Drive a hard bargain. Negotiate for more discounts or incentives. Never accept the first asking price for it is almost certain that you can haggle for less. Remember that the key to selling at a profit is buying low in the first place.
- Beware of smokes and mirrors. Do not just believe what the seller is claiming. Visit and inspect the property you are buying. Interview neighbors to counter-check claims. Also ask opinions from property experts in the area. It is advisable also to fence the entire property immediately after purchase to counter any dispute and also to avoid squatters living within the area.
- Have an experienced licensed appraiser assess the value of the property. You may think you have hit the jackpot but there may be factors that you have not taken into account. It is best to get the services of a professional in the field to make sure of your estimate.
- Never forget to have your deed of sale, contract of sale or other document over the land annotated on the copy on file with the register of deeds.
- Read everything before signing contracts and papers. Consult a lawyer that is experienced in real property transactions. It is false savings to save on legal fees and then suffer from legal problems later on.
- Before buying the particular land, check first the whole city or community utilities whether they have good water and sewer connections available on the lot or land.
- Ensure and check also that the electricity and phone services are readily available at the property. It must be a priority.
- If for instance the land the buyer wishes to purchase is not accessible by a public road, a road maintenance agreement must be confirmed to be undertaking in place. This is an agreement stating that everyone on the road agrees to help in the repairs.
- If the lot or land is under construction and further development, ask for a copy of the restrictive covenants—here is where the buyer can realize the restrictions for minimum house size, whether other structures are allowed and other limitations.
- It is advisable to ask the city head if zoning changes are planned for the area because there are some cases that there is a project to build new roads or widen existing rails.
- It is fully recommended for home buyers to purchase a certain land in a community with institutions like hospitals, banks, schools, church, etc. If not within the community, it is also good to be near those social bodies.
- Buyers should not be ashamed of seeking aid from professionals about buying techniques and bidding strategies.
- If the buyer can afford, he/she can hire a home inspector, preferably an engineer with experience in doing home surveys in the area where he/she is buying. The job will point out potential problems that will arise in the near future that need to be settled down as soon as possible.
- In terms of bidding techniques, the opening bid should be based on sales trend of similar homes among the neighborhood. If homes have recently sold at 5 percent less than the asking price, then the buyer should make a bid that’s about eight to ten percent lower than the actual price.
- Never buy in an urgent rush. Buying a house definitely demands time of careful planning and serious decision-making. It can take two months or more to get an expert’s help, to shop for the house, to get approved for the mortgage and to close escrow.
- Safety and security should also be in the utmost importance form the buyer’s perspective. Not only should the entirety of the house be inspected but also the environment where it is situated. The surroundings must be clean and green enough to ensure the safety and security of the family members.
2.) If you buy from a developer:
- Check for the availability of the mother title. Usually developers offer pre-selling of properties. This means that the houses or condominiums will have to be constructed based on contract over a period of time. The individual title may not be available as this takes time like three years to have the title individualized
- Trust a reputable developer who has a track record of completed developments. It's ideal if you can personally check these completed developments to have an idea what it would look like in their pre-selling projects that you might be interested to invest
- Check every provision of the Contract to sell that you are going to sign including the annexes. A licensed real estate broker should be able to explain to you in common language all the legal terms expressed in all documents that you are going to sign. You may hire at your option a lawyer for this purpose but this is not customary in large project developments as the documents are standardized. All the signed documents will be notarized and you should have a copy of one original notarized document.
- Choose or negotiate for the least cash out, least monthly installments, and if possible no interest for properties that are yet to be built or on-going in construction. Retention can be negotiated to be paid upon delivery of the unit
- If you plan to make some modifications on the inside of the unit whether a house and lot or a condo, make sure that this is allowed by the developer and up to what extent if allowed. There are developers who would not allow any changes in their plans but there are those who entertain changes and can be negotiated or discussed before the construction begins
- Whether you buy from individual owners or from a developer, it's best to choose a Licensed Real Estate Broker or Agent you can trust with proven records of good and honest service and has extensive knowledge of the local area. Check for loyalty on previous work experiences. Only choose licensed professionals as the colorum or unlicensed are now strictly monitored by government authorities and prohibited to practice real estate profession in the Philippines. Even if licensed, have preference over in depended brokers/agents compared to in-house agents. The in-house agents of developers are strictly not allowed to sell the projects of their competitors and therefore can be expected to be biased on their own projects
- Before buying the particular land, check first the whole city or community utilities whether they have good water and sewer connections available on the lot or land.
- Ensure and check also that the electricity and phone services are readily available at the property. It must be a priority.
- If the lot or land is under construction and further development, ask for a copy of the restrictive covenants—here is where the buyer can realize the restrictions for minimum house size, whether other structures are allowed and other limitations.
- It is advisable to ask the city head if zoning changes are planned for the area because there are some cases that there is a project to build new roads or widen existing rails.
- It is fully recommended for home buyers to purchase a certain land in a community with institutions like hospitals, banks, schools, church, etc. If not within the community, it is also good to be near those social bodies.
- Buyers should not be ashamed of seeking aid from professionals about buying techniques and bidding strategies.
- In terms of bidding techniques, the opening bid should be based on sales trend of similar homes among the neighborhood. If homes have recently sold at 5 percent less than the asking price, then the buyer should make a bid that’s about eight to ten percent lower than the actual price.
- Never buy in an urgent rush. Buying a house definitely demands time of careful planning and serious decision-making. It can take two months or more to get an expert’s help, to shop for the house, to get approved for the mortgage and to close escrow.
- Safety and security should also be in the utmost importance form the buyer’s perspective. Not only should the entirety of the house be inspected but also the environment where it is situated. The surroundings must be clean and green enough to ensure the safety and security of the family members.
Questions on Land Title
Title is a generic term that refers to the legal evidence of
ownership one has over a property. It includes such documents as Tax
Declarations, Real Property Tax Receipts, Deeds of Sale, and the Torrens Title.
What we normally think of as title is actually a Certificate of Title also
known as the Torrens Title, which results from the Torrens System of Land
Registration. The Certificate of Title is the best form of evidence of land
ownership.
The following are some of the most commonly encountered questions
on Land Title and/or Land ownership in the Philippines.
1. How can one acquire Land Title?
The easiest is through sale and by executing a document called
Deed of Sale, which shows the legal transfer of title from the name of the
seller to the buyer. The Deed of Sale is then taken to the Registry of Deed to
be officially recorded. This type of title is also called Transfer Certificate
of Title.
When no title has yet been issued over a parcel of land, Title it
can be acquired either through:
- Judicial proceedings – by
filing a petition for registration in Court
- Administrative proceedings – by a filing an appropriate application for patent (e.g. homestead) in the Administrative body (DENR) and registration of this patent becomes the basis for issuance of the Original Certificate of Title by the Register of Deeds.
2. Are there lands with no Land Certificate of Title yet?
Yes and they are called public lands and include the following:
- Alienable or disposable (A
& D Lands) – those that can be acquired or issued title. The
Philippines Constitution provides that only agricultural lands can be
disposed of to private citizens.
- Non-alienable lands – includes timber or forest lands, mineral lands, national parks. No title can be issued over any portion within this area.
3. Can a foreigner have the Land Title in his/her name?
Unfortunately, the answer is – Land Title can only be put in the name of a Filipino or a Corporation with at least 60% Filipino ownership. As a foreigner, it would be helpful to be aware of this limitation on your right of owning Land in the Philippines. Please refer to the article that discusses land ownership in the Philippines made especially to the foreigners.
Typical Transaction Estimated Costs – Purchases from Individuals
1. Capital gains tax – 6% of actual sale price. This is paid by the seller but in some cases it might be expected that the buyer pays. This percentage could differ if the property assessed is being used by a business or is a title- owned by a corporation; in this case the percentage is 7.5%
Unfortunately, the answer is – Land Title can only be put in the name of a Filipino or a Corporation with at least 60% Filipino ownership. As a foreigner, it would be helpful to be aware of this limitation on your right of owning Land in the Philippines. Please refer to the article that discusses land ownership in the Philippines made especially to the foreigners.
Typical Transaction Estimated Costs – Purchases from Individuals
1. Capital gains tax – 6% of actual sale price. This is paid by the seller but in some cases it might be expected that the buyer pays. This percentage could differ if the property assessed is being used by a business or is a title- owned by a corporation; in this case the percentage is 7.5%
2. Document stamp tax – 1.5% of the actual sale price. This is
paid by the seller but in some cases it might be expected that the buyer pays
3. Transfer tax – 0.5%- .75% of the actual sale price.
4. Registration fee – 0.25% (more or less) of the actual sale
price.
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