Buying real estate anywhere in the world can be exciting, whether it’s going to be for your own use (like an exotic beach home for retirement) or for investment (like a condominium unit you rent out on AirBnB).

However, the acquisition of a real estate investment can vary from country to country. So if you’re looking to buy here in the Philippines, look no further than this article!

In this step-by-step guide, I’ll walk you through the important details you need to know when you’re looking for and buying real estate in the Philippines.

Let’s get started!

Buying Real Estate

Step 1: Have an idea of what you’re looking for

There are thousands of properties available to purchase in the market right now. And that’s just in Metro Manila! Having a short checklist of the kind of property you’re looking for can help you narrow down your search, and aid your broker in finding the perfect property for you.

A general checklist could include:

Approximate size

You can give a minimum, maximum, or range of sizes. Sizes would largely be determined by the number of bedrooms you require. Studio units are the smallest type, which typically range from 22 square meters to 36 square meters and are characterized by just an open layout and a bathroom. One-bedroom units can range from 32 square meters to 52 square meters and two bedroom units can range from 50 square meters to 175 square meters. However, these also still vary depending on the developer of the condominium and the year the condominium was constructed. Older condominiums would tend to have bigger cuts.

Alternatively, you can also just mention how many bedrooms you prefer.

Also tell your broker if you’ll need a separate maid’s room and maid’s bathroom. The number of bedrooms depicted in ads excludes the maid’s room and maid’s bathroom.

Type

The type of property you’re looking for can sometimes determine the broker you will be working with, since brokers tend to specialize in either residential or commercial. Most brokers have access to databases of available properties for both types, but tend to stick to selling one type because the sales and paperwork processes are different from one another.

Budget

  • Provide your broker with a minimum and maximum range you’re willing to pay for the property so that they do not show you options that are too shabby or too expensive. This also gives an idea on the geographical area and building that your broker can start your search with.
  • Usually, when a broker mentions a price, it includes capital gains tax and the professional fees of the broker but does not include the documentary stamp tax, transfer taxes, and registration fees (which aggregately equate to roughly 3% of the contract price). If you want those included, you can just inform your broker that this is your “all-in” price. A good broker would clearly explain to you the fees and taxes that buyer would need to shoulder, apart from the total contract price.
  • Decide also early on your preferred payment term: cash or bank financing. This is also important, as some sellers prefer cash buyers. Sellers shy away from bank financing since this usually involves transferring the Title to the buyer’s name even before they get full payment. Moreover, bank financing tend to take 1 to 2 months longer than a straight cash purchase.

Amenities

  • Should there be active community events hosted by homeowners or the village association? Some villages also have a community gym and/or pool, along with a basketball court and a playground. Others have only one or two of these. Decide what’s important to you and what you can do without.
  • If it’s a condominium unit, is a gym or a pool important to you? How about a jogging path, children’s playground?

Location / general area

  • This is considered to be one of the most vital considerations in your search. Having to decide on a particular area helps you and your broker narrow down properties and as well as managing expectations in terms of prices and availability of inventory.
  • It would help to choose a particular village (Bel-Air 2, Salcedo Village, Legazpi Village) than an entire city (Makati City).

Accessibility and security

  • How easy or difficult is it to access the property via main roads and highways?
  • Are there multiple points of entry from the surrounding area? Are these points of entry secure or unmonitored?
  • Are there any security risks in the surrounding area? If so, how has the village association or building administration addressed these risks?
  • Have there been any major breaches of security in the past? If so, what happened and how was it handled?
  • Ask about the history of flooding and the proximity of the nearest fault lines. For condos, make sure they have elevated parking areas if the building is located in a flood-prone area.

General Preferences for Residential Lots

  • If you’re planning to sell the property later on, make sure to stay away from lots that:
    • are found along the perimeter of the village,
    • are found at the end of T-junctions,
    • are near a creek,
    • are found at the bottom of a hill,
    • have irregular shapes, and
    • have an elevated terrain

as these are significantly harder to sell.

Purpose

  • Are you going to live, flip, rent, or lease the property? Some sellers only allow certain purposes. For example, some tenants have gotten away with subletting a property out through AirBnB. Not all condominium associations/lessors allow this. It’s important to respect the wishes of the owner of the property on how it should be used when you are only renting. Some condominium associations also prohibit AirBnB setups.

Pets

  • For condominium buildings, you will have to inform your broker if you intend to have pets in the unit. Sadly, not all condominiums allow pets.

Property Provisions

  • It would also be good to check the provisions of the village or the condominium building.
  • Some villages have design themes that you have to follow (e.g. Mediterranean) or have height restrictions (e.g. 9 meters from the highest point of the lot).
  • Some villages also prohibit cutting the trees found on the lot (even if they’re found in YOUR lot.
  • Also make sure that the lot you purchase does not have any immovable structure (e.g. Meralco transformer) that would be difficult or impossible to take out later on.
  • For condos, check how many occupants are allowed in the unit.
  • It would also be good if to check:
    • If there are enough air conditioning units in the property to keep the place cool;
    • Whether the condo building is fiber-ready for ultra fast internet connection; and
    • There’s a provision for a washing machine/dryer and dishwasher.
    • There’s a trash chute (some condos don’t have one and unit owners simply leave the trash bags outside their door for them to be picked up at certain times of a day).
    • If the building can still accommodate foreigners as the law dictates that foreigners can only occupy a maximum of 40% of the floor area of the building.

Bear in mind that you don’t have to fill out this entire checklist. Sometimes viewing properties will help you get a better idea of what you are looking for, so refining this checklist is a gradual process.

Now, if your checklist ends up being too specific, it may be difficult to find exactly what you’re looking for. In this case, keep an open mind and trust your broker when they recommend a property that may be a “wild card” or not exactly what you’re looking for, at least on paper. You might be surprised once you view the unit that you like it or would view similar units.

 

Step 2: Share your checklist with your broker

Now that you know what to start looking for, share your checklist with your broker so they can get to work on finding you options. Brokers usually collate a list of properties for you so you can view options that would fit your requirement.

If you don’t have a local real estate broker yet, don’t fret. Here are the top 4 best ways to find and choose independent licensed broker:

  1. Search for listings in the internet and contact the listing agent for those properties. The broker you choose should be able to answer your query within 12 hours (or at the very least tell when they will be able to get back to you if they’re busy).
  2. Ask the broker if they’re associated with any group (e.g. Pasay Makati Realty Board, RE/MAX, etc.).
  3. Communicate with the broker through email and see how formal/professional his writing is. This person will be drafting your contracts and you want a very sharp person for this.
  4. Ask for his opinion about certain developments. Not all properties are made perfect and the best brokers will be able to highlight both the good and the bad points of properties.
  5. Ask for a broker who knows how to do transfer works himself.
  6. Look for a broker who knows how to calculate potential rental yields.

REMEMBER! Working with a licensed real estate broker that you trust can literally make or break your real estate investing experience. When things get complicated, especially with legal or financial matters during the paperwork process, you need to be able to rely on your broker and believe that they are making the right decisions for you behind the scenes. It is your broker’s goal to protect your interests as a buyer.

 

Step 3: Go shopping 

Once your broker gets back to you with a list of properties that fit your criteria, it’s time to schedule viewings and see the properties. For some real estate investors, this is one of the most exciting and fun parts of the entire process despite also being the most time consuming.

Aside from the Top 5 Essential Tips When Shopping for Real Estate in the Philippines that I’ve already shared, it’s also best practice to:

Ask for an signed Authority to Sell agreement and any proof of ownership (i.e. Title) from the broker showing you the property to make sure that:

  • The broker is indeed authorized to sell the property;
  • The seller is the owner/sole owner of the property to avoid cases of misrepresentation;
  • The real asking price (sadly some brokers increase the selling price beyond the asking price of the owner to earn more from the transaction).

Getting these documents beforehand prevents any unfortunate surprises later on.

  • Take photos of all the properties you view, even the ones you’re not sure about. Some properties don’t always make the best first impression. Other times, what you’re looking for can change. Keeping photos of every property helps you look at them again with fresh eyes, and you may notice a few things you didn’t notice before. Properties that you turned down at first might be just what you’re looking for after a change in your checklist. Also, try to take a picture of the number of the house or the number of the condo unit before everything else. This way you know which property the series of pictures belong to.
  • Write down your questions about each property, even if you broker is already taking them down. This is you to remember what is important to when you attend a second viewing or go through the photos you took. Your broker should coordinate with the seller and make sure all your questions are answered, but again, sometimes what you’re looking for can change. Sometimes your questions will change! Keeping track of the Q&A between yourself and the seller can provide some key insights about the seller’s personality and motivations (yours too!) that may be useful further into the process.
  • Be patient. Some days, you will look at many properties that just don’t fit the bill. Don’t be disheartened. Your broker will find more options for you to view. Remember, this is the most time consuming part of the process, but it can also be the most fun.

 

Step 4: Create a shortlist and schedule second visits

After viewing a few options, you should already have at least one or two that you really like. After the seller gets back to you on your questions, it doesn’t hurt to schedule a second viewing of the property. A second viewing will give you the chance to see if the seller addressed any of your immediate concerns or not.

TIP: Schedule the second viewing on a day and time that is different from when you first viewed it, so you can check what the surrounding area and accessibility is like. For example, if you viewed the property on a weekend afternoon, try going on a weekday or at night. This will give you new insights into the quality of the property and the general area, as well as your potential future neighbors and association/administration.

 

Step 5: Decide if it’s time to choose, or keep shopping

By now, you might have a standout property you’d like to move forward with, or none at all.

If it’s the former, great! If everything checks out, make sure your finances are ready then let your broker you’re ready to start the paper work. Don’t forget to let your family know too – in some cases, they will be affected by your purchase. Don’t blindside them!

If you still aren’t convinced by any of the properties you’ve seen, that’s okay. Go back to Step 3. You can always advise your broker to continue your search until you find the right property for you.

REMEMBER! Don’t be pressured to buy something you are not 100% sure about. Don’t feel obligated to keep working with brokers who you feel you’re pressured with. Save yourself the headache and restart a professional relationship with another broker. It will be cheaper and more time efficient in the long run, trust me.

 

Step 6: Make an offer!

Once you’ve finally chosen a unit, make an offer! Avoid offering too low as this might insult the owner. If the property is among the lowest priced in the market and your budget can meet the seller’s asking price, lock it in! Time is of the essence and you want to prevent other buyers from coming in to steal the purchase. In this regard, it is also advisable to do verbal offers first since drafting an offer letter might take time and other buyers may come in and steal the purchase. Once your offer is accepted, that’s when you have your broker prepare a written offer letter to formalize what was agreed on. Also prepare payment of earnest money (typically 10% of the purchase price or Php1,000,000)

In the offer letter, be sure to include clauses to cover events of forfeiture and refund of the earnest money especially in cases of fortuitous events (e.g. destruction of property due to earthquakes, civil war, etc.). If there are more than two tranches of payments, it is advisable to draft a Contract to Sell (CTS). A CTS is a more detailed agreement (compared to an offer letter and a deed of absolute sale) that would indicate the step-by-step process for completing the sale.

Make sure to state in the offer/CTS who would shoulder the Value Added Tax (VAT) in the event that the Bureau of Internal Revenue decides that the sale should be subjected to VAT. It is very important to include this clause even if the seller and broker believe that the sale will not be subjected to VAT.

 

Step 7: Due diligence of documents and Preparation for Closing 

Your broker should be able to conduct the due diligence for you. But just so that you’re aware, here are some of the important things to check:

  • All owners of the property (if more than one) have consented to the sale of the property;
  • All owners listed in the Title still live (you can check this by asking for copies of IDs that need to be renewed on an annual basis);
  • Names of the owners listed in the Title are spelled properly;
  • Technical details of the Title don’t have typographical errors;
  • Special Power of Attorney naming their representative have been executed at least one owner resides abroad;
  • Owner’s copy of the title exactly matches the certified true copy of the Registry of Deeds;
  • Property is mortgaged or encumbered;
  • Owner is up-to-date with all subscription, bills, taxes, and dues; and
  • Tax declaration on the improvement is up-to-date.

These things aren’t necessarily deal breakers. Knowing these would manage expectations and help you prepare for extra steps to take to finalize the transaction.

It is also good practice to prepare the following documents and items before the closing day:

Broker to Prepare:

  1. Acknowledgement Receipt of SELLER for Full Payment (4 copies)
  2. Approved Draft of Deed of Absolute Sale
  3. Closing Cost Breakdown (delineates various payments deductible from Total Contract Price)
  4. Certified True Copy Condominium Certificate of Title (2 copies)
  5. Certified True Copy of Tax Declaration of Unit (2 copies)
  6. Certified True Copy of Tax Declaration of Parking (if applicable) (2 copies)
  7. Tax Clearance from City Treasurer’s Office (2 copies)

Seller to Prepare:

  1. Owner’s Copy Condominium Certificate of Title of Unit
  2. Owner’s Copy Condominium Certificate of Title of Parking (if applicable)
  3. Owner’s Copy of the Tax Declaration of Unit
  4. Owner’s Copy of the Tax Declaration of Parking (if applicable)
  5. BIR Certificate Authorizing Registration (CAR, if purchased after 2007) from when they acquired the property
  6. Seller’s TIN and verification whether he is subjected to VAT
  7. Special Power of Attorney to be able to secure documents, transact, and make payments on behalf of the SELLER and BUYER with BIR, Treasurer’s Office, Registry of Deeds and Assessor’s Office
  8. SELLER’s valid government ID’s with 3 original signatures of all signatories (3 copies each)
  9. Official Receipt for Realty Tax for the Year
  10. Official Receipt Most Recent Utility Bills
  11. Official Receipt Condo. Association Dues for the Month
  12. Colored photos of property (Door no., interiors and building facade) for new Tax Dec. purposes
  13. Keys to the property
  14. If SELLER is represented by Attorney-in-Fact:
    • Notarized Special Power of Attorney (SPA) from SELLER assigning their Attorney-in-Fact
    • Attorney-in-Fact’s valid government ID’s with original signatures (3 copies)
  15. If SELLER is a company:
    • SEC Certified True Copy of Articles of Incorporation & By-Laws
    • SEC Certified True Copy of Latest Audited Financial Statement
    • SEC Certified True Copy of General Information Sheet
    • Official Receipt of SELLER for full payment (should have BIR ATP)
    • Secretary’s Certificate of Authorized Signatories (Notarized)
    • Board Resolution authorizing to engage in a sale (Notarized)
    • Certified True Copy of BIR Certificate of Registration of SELLER (Form 2303)
    • BIR Withholding Tax Remmitance Return (Form 1606) – For remittance of Creditable Withholding Tax
  16. If property is mortgaged:
    • Release of Mortgage Certificate from Bank
    • Cancellation of Mortgage Fee payable to the Registry of Deeds
  17. Affidavit of one and the same person (if there are discrepancies in the names of owners/directors/shareholders)

BUYER to Prepare:

  1. Manager’s Check / Cash Payment
  2. Refund of Association Dues for unused portion of the year
  3. Refund of Realty Tax for unused portion of the year
  4. BUYER’s TIN
  5. Special Power of Attorney to be able to secure documents, transact, and make payments on behalf of the SELLER and BUYER with BIR, Treasurer’s Office, Registry of Deeds and Assessor’s Office
  6. BUYER’s valid government ID’s with 3 original signatures (3 copies)
  7. If BUYER is represented by Attorney-in-Fact:
    • Notarized Special Power of Attorney (SPA) from BUYER assigning their Attorney-in-Fact
    • Attorney-in-Fact’s valid government ID’s with original signatures (3 copies)
  8. If BUYER is a company:
    • SEC Certified True Copy of Articles of Incorporation & By-Laws
    • SEC Certified True Copy of Latest Audited Financial Statement
    • SEC Certified True Copy of General Information Sheet
    • Secretary’s Certificate of Authorized Signatories (Notarized)
    • Board Resolution authorizing to engage in purchase (Notarized)
    • Certified True Copy of BIR Certificate of Registration of SELLER (Form 2303) 

 

Step 8: Closing

Schedule the date of signing to be on an early part of the calendar month to give you ample time to settle tax payments before deadlines and prepare you for any surprises. For example, it would be ideal to schedule signing between the first to tenth days of the calendar months. Moreover, schedule signing in the morning and within banking hours as a precaution so each party has ample time to review all documents especially since closing can take as long as a few hours. Never schedule the closing after banking hours or on weekends.

On signing dates, make sure that the documents brought by the seller are the same documents presented to you beforehand. The brokers are also present on signing date to make sure all documents including receipts and transmittals.

 

Step 9: Transfer Works

Once that’s complete, all you have to do is sit back and wait. Your broker will take it from here and update you on the status of your papers being verified, as well as the seller’s.

If you’re sure that all your paperwork is complete and valid, you should have nothing to worry about here. Delays may arise because of the seller, the village association or building administration, and/or government offices. That is normal and just part of the process that could take anywhere from 5 to 8 weeks.

Once the new title (which will be in your name) comes out, make sure to check if your name is spelled correctly and if the technical description of the property is perfectly the same as originally written in the old title. These details are manually typed by people so it is prone to human error. If there’s a mistake, bring it immediately back to the Registry of Deeds so they can be revised. Safekeep ALL documents which include receipts and architectural/building/floor plans.

If this is also your first time to complete a real estate purchase, then you are now officially a real estate investor! Nothing can compare to the feeling of successfully going through the purchase process and now being able to enjoy the fruits of your labor.

Pat yourself on the back and take some time to enjoy your brand new real estate property in the Philippines.

So, there you have it!

If you’ve ever thought becoming a real estate investor or owning property in the Philippines was a confusing or intimidating task, I hope this guide helped shed some light on how easy it can be with the right broker.

Everything you want to accomplish becomes 10x easier if you work with an independent licensed real estate broker that you can rely on and trust. Behind the scenes of this process is countless other tasks that your broker will take care of on your behalf.

That’s why this entire process becomes 10x harder when you try to do it yourself, but 100x harder when you work with a broker you don’t trust.

So my last piece of advice to you is this: be careful when choosing a broker. ALWAYS check their PRC license, and ask around about their reputation if you can.

Of course, once you choose someone as your broker, give them a chance to earn your trust if you do not have a personal relationship with them before working together. Trust is a two-way street and you have to give it to get it.

Disclaimer: This material, which is strictly for information purposes only. The views and opinions expressed in this article are those of Juan Patag’s and do not necessarily reflect the position of RE/MAX Capital, or any other RE/MAX franchise. Any information is subject to change without prior notice. No liability whatsoever is accepted for any loss that may arise (whether direct or consequential) from any use of the information contained herein. Information Each RE/MAX franchise is independently owned and operated.

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