Real Estate Guide: Processes to Consider in Selling Properties in the Philippines

The selling process of real estate property in the Philippines could be a nightmare, taxing and time-consuming. Considering the voluminous paper work required from owners and the numerous trips to government offices you would have endure, it could be exhausting.

However, you can bring order to the seemingly-unfashionable processes of selling properties in the Philippines to help you familiarize the procedures and the legal documents. It could be a breeze next time you do the next closed sales. Or the process may prove to be less simple than what you hope for but at least, you already know what to do.

This guide will help you in knowing a step by step process of successfully selling and transferring ownership of real estate properties in the Philippines.

1. Owner and Broker signing a contract of agreement

The seller and real estate agent will amend on the terms of the sale, the professional fee or the commission through a thorough discussion.  At this stage, the broker must also scrutinize the existing documents of the owner in order to check the status of the property. The scrutiny of the documents is relevant to assess to property title for any “hang-ups” that may cause headaches to the broker at the end.  Property must be free from loans, liens and encumbrances. If there, that should be resolved first before taking the property in the market. Honesty is very important in selling to attract good karma.

2. Owner should issue an Authority to Sell

This contract would stipulate whether the owner would bestow upon the broker exclusive rights to sell or a non-exclusive authorization to sell his or her property. This agreement would legally bind the broker as an agent of the owner providing for the amount of commission and the pertinent information of the property to be sold. This document would also serve as proof for the broker to be legally authorized to represent the owner in selling the property.

The broker usually keeps the necessary documents prior to marketing the property to make sure that it is free from encumbrances. An 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 owner must also provide for an authority letter to transact as addressed to the selling broker so the latter could get certified true copies of the Title, Tax Declaration and Tax Clearance.

3. Ocular by Real Estate Broker

The broker must make an assessment of its current market value by appraising the property. The appraisal of the market value of the property is necessary in determining the actual current price of the property. Many factors must be taken into account in determining the value of the asset such as the location and area.

4. Broker will promote, render the marketing service and offer the property in the market.

The owner and the broker must agree on how to market the property. Limitations such as privacy when it comes to releasing photos and disclosing the location of the property online must be considered. Moreover, both parties must decide on how to split the marketing costs such as the transportation and communication expenses. Although, the common practice nowadays is that the broker will shoulder the expenses depending on the amount of his or her commission.

5. Property Viewing

Once prospective buyers get in touch with the broker, viewings of the property will be scheduled. Make the property presentable to make it more attractive for selling.

6. Letter of Intent or Offer to Buy

A Letter of Intent is a legal writing offered by the buyer to the owner of the property to declare his or her intention to purchase. This is usually set the first stage in documenting a sale of real property. The letter of intent is a non-binding document which provides for the key transaction agreements such as the price, amount of deposit, length of due diligence period (a stipulated time for a buyer to investigate the property to ensure that they are satisfied before finalizing the purchase) , treatment of financing (period of amortization or loan) and other pertinent terms.

7. Acceptance of Owner

Once the owner has signed the Letter of Intent, this will signify the acceptance of the terms given by the buyer. The seller is bound to promise not to offer the property to other buyers as long as the purchaser does not breach the conditions provided in the letter.

8. Earnest Money

The property owner and seller may get lucky to have a buyer that acquires the property in lump sum payment. But there are instances in which the buyer will also pay in installment according to the payment terms agreed between the broker and buyer,

The earnest money is then existent in this kind of transaction wherein it pertains to the amount of money given by the home buyer while seeking or applying for financing in order to pay the remaining balance. The earnest money is provided to hold the property subject to the due diligence of the buyer and can be forfeited once there is default on his or her part. The money can also be refundable subject to deductions depending on the agreement between the parties.

9. Legal Documents

At this point or even earlier, 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.

Here is a list of documents that the owners or brokers must obtain from the Register of Deeds (you may check with your local ROD if you can avail of the Electronic Land Title) to finalize the transfer of ownership to the new owner:

• Certified True Copy of Transfer Certificate of Title ( Land )
• Certified True Copy of Condominium Certificate of Title ( Unit )
• Certified True Copy of Condominium ( Parking – if applicable )

Documents to be procured by owners or brokers from the Assessor’s Office 

• Certified True Copy of Tax Declaration ( Land )
• Certified True Copy of Tax Declaration ( Improvement / Building )
• Certified True Copy of Tax Declaration ( Condominium )
• Certified True Copy of Tax Declaration ( Condominium parking, if applicable )
• Real Estate Tax Clearance for Current Year
• 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:

• Certificate Authorizing Registration from the Bureau of Internal Revenue (BIR)
• Original Real Estate Tax Receipts – Current Year
• Lot Plan / Subdivision Plan

10. Prepare the Deed of Sale

Once the price is fully paid, a Deed of Absolute Sale will be signed whereby the seller relinquishes or transfers ownership of the property to the buyer. When signed by both parties, the buyer is considered to be the absolute owner of the property.

11. Payment of expenses for both Seller and Buyer 

• Capital Gains Tax / Creditable Withholding Tax ( whichever applies )
• Documentary Stamps Tax
• Transfer Tax
• Registration Fees

12. Mutually agreed and signed Deed of Absolute Sale

Upon full 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.

13. Have the Deed of Absolute Sale Notarized

After having the deed of sale signed by both parties, the document must be notarized to protect the document from fraud. Once a document has been notarized, it will become a public document and would be binding to third persons. This means that if anyone wishes to prove a right of ownership on the property, he or she must be able to prove that they have a right even before the execution of such document. Notarization will protect the buyer from fraud and possible unfounded claims by third persons in the future.

14. Seller must turn over the ORIGINAL copies of the following:

• Transfer of Certificate of Title – ( land ) – Owner Copy
• Condominium Certificate of Title ( condominium )
• Tax Declaration ( Declaration of Real Property )
• Tax Clearance – ( both land and improvement  )
• Tax Clearance – ( condominium unit and parking if applicable )

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.

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.

With so many steps in acquiring a property, it is important for the buyer to have an understanding of the role of the broker as the middle man and main service provider for the selling transactions.

This process has been curated from the original article at Hoppler.com