Buying a property in the Philippines is probably the best investment in the world. We have seen double-digit annual returns. The Philippine economy is booming, and property prices are still relatively low. With the pesos being low against other currencies, buying a property is a great investment. But before you rush into that great deal, you need to read this post. We have been dealing with properties for just about 10 years and have seen the full range of issues. Honestly its getting better, in the big cities they have electronic records of the title process. Here are some steps to consider before you invest in a property:
1.) Check your finances or budget
It takes patience to find a property that you want. If you travel around the roads in the Philippines, you see many houses started but not finished. A shell of a dream for sure. You do not want to be like that.
Most deals are on a cash basis. Some allow for payments by installments but the terms are usually just a couple of years. The typical cost, of the building, in the provinces, began at around 15k a square meter for a mid-level acceptable quality, to well over 50k a square meter for a luxury project.
If you really want to buy the property no matter what the price is – fix your budget, be wary of the low downpayment and later payments that balloon.
2.) Know the Cost
Most of the time, you won’t be informed about the other costs when you purchase a property.
There will be a closing cost like the permits, value-added tax, transfer tax, registrations fees, and documentary stamps tax. Other costs can be separate such as the electric hookup, fence, water tank, and simple details like including insulation, or towel rack can be an extra charge.
This may or not may be integrated with the purchase price and may be charged to you separately.
You should ask the developer or seller if these costs will be added to your expenses. And regularly check the costs.
3.) Research on the Developers Track Record
It is advisable that you do a background research about the developer. You have to be in good communication with the foreman or subcontractor and will always need to check on the work.
The best advice we have is to see the builders actual previous work and projects. You should not rely solely on recommendations.
You have to make sure that the developer has a track record of success, sufficient experience, and knowledge and also that they are locally established. We have seen some builders from other regions come in and after a couple of projects disappear with the money of their clients. Also, consider all aspects of a builder. We have seen a developer who can build great houses but has a terrible history with swimming pools.
4.) Be Patient with the Process of the Paperwork
I have seen people who are processing papers for the property they were buying. I know that it takes a lot of patience in processing and there are a lot of papers needed to sign too, going back and forth. Often you will find someone who needs to sell for quick cash because of some problem.
That can be a great bargain but do not rush. The seller may pressure you for a quick sale but you will need to push back and take your time.
The seller may have a real legitimate hardship, a rushed sale will lead to mistakes!
Remember buying a property is a business decision, not a heart decision.
The Philippines has a slower pace of life and that is true also for completing a deal.
5.) Request a certified true copy of the Land Title from ROD (Register of Deeds) office
If you are sending a representative, create a letter of authority indicating your name, the representative’s name, and your title number.
Check to see if the land title is the latest title and look for any amendments.
You can go to ROD (Register of Deeds) office and get the latest certified copy.
Usually certified true copies take 3-5 days.
Most amendments are harmless and usually are about name changes.
If you see an amendment take it to an attorney for a consultation, and he will charge you for a consultation fee.
6.) Verify if the person whose name appears on the said Land Title is still living. (not deceased)
Check the ID of the person selling the property, is the actual person.
Sometimes a relative desperately seeking money will try to sell a property.
The actual owner maybe a sibling or cousin that works overseas or is a seaman.
There can be an exception, a relative or friend can be appointed as power of attorney to represent the owner.
But always try to contact the actually named owner on the title to verify the power of attorney and the sale of the property.
7.) Check the Land Title
Counter check the Land Title thoroughly if the information and the details match on the information and the description of the land property such as owner’s name, lot number, location, title number on the Tax Declaration Clearance.
Check the Land Title if there are no encumbrances and lien holds of the property on the Title attached at the back or on the 2nd page of the Title.
Check at the municipal office to see if all taxes have been paid off and updated.
The seller may be behind on the taxes paid and you as the buyer will need to pay back before you can get a tax clearance document.
8.) Check if the land property to purchase has a Transferable Permanent Road Right of Way Agreement or Permanent Easement Right of Way.
Easements and rights-of-way are usually registered on the certificate of title to the property.
The easement will remain until the holder will discharge their rights from the certificate of title.
If you have been granted a road right of way verbally it can be nullified verbally.
When receiving a road right of way for access to your property it is better to pay for a road right of way and have it drawn up by a lawyer so as to avoid suddenly being denied access and entering into an unwinnable battle.
I suggest a long-term lease and or road rights access agreement which cannot be withdrawn if it’s done legally. Do not skip this step. We have seen people assume that a dirt road guaranteed the right of way to their property and they were wrong.
9.) Check Permanent Road Right of Way
Ask for a permanent Road Right of Way Agreement Document from the Seller.
Check the compatibility of the land property description and information is correct based on the details provided in the Land Title or Tax Declaration Clearance.
10.) Verify legal heirs of Road Right
Verify if the legal heirs assigned on the road right of way lot documents is correct with their signatures and it has to be notarized.
The legal heir certificate mainly used for acquiring the inheritance of the property which is left behind by the dead person.
11.) Permanent Road Right of Way documents should be transferable
Be sure that the said Permanent Road Right of Way documents is transferable to the heirs and successors of the land property.
12.) Road Lot VS Road Right of Way
Road Lot is an official Registered Right of Way Access at Register of Deeds office, should be at least 6-8 meters wide.
Road Right of Way is a private agreement between seller and buyer, should be at least 4-6 meters wide.
13.) Get a Land Survey by a Geodetic Engineer.
Sometimes the property being sold to you is in a different spot entirely.
The seller could be trying to offload another less desirable property but in a different location.
For example, the property is in a flood area or the property is behind the one being sold but as a second lot.
A second lot is behind the properties, along the road, the property may or may not have road right of way access.
Another good reason is to make sure of the fence line of the neighbors. We have seen fences extend over the property line. Also if the property is located along the road you have to consider the setback for the road. The engineer can tell you the proper setback of what you may have to give up for a road.
14.) Consider the difference between Title Property over Tax Declaration Property.
Titles are safer and the paperwork is easier.
A tax declaration can take up to 2 years to process, and requires a check at ROD for any additional deed of sales.
15.) Verify Land Property with Tax Declaration
Ask a Family History/Family Tree from seller related to the land property you would like to purchase.
Check all the names in the Tax Declaration Papers, the less the better.
For example, there could be 7 names listed on the Tax Declaration. Of those names, perhaps 2 are deceased and then the descendants would be entitled to claim.
Remember that not all the names are listed in the Tax Declaration. You have to track down the descendants.
Proof of estate taxes paid, this is the tax on all their land holdings, not just the one you are buying, and is different from Capital Gains tax. This document is called a CAR( Certificate Authorizing Registration).
16.) Ask from Seller the Extrajudicial Partition Documents of the land property
If there are multiple land heirs/owners ask the Extrajudicial Partition Documents of the land property.
This document can be drawn up by your lawyer and in the said documents, the signature of all heirs/owners should appear.
It basically means that all the heirs agree to sell and will distribute the proceeds of the sale among themselves and the document has to be notarized.
The fact of the extrajudicial settlement or administration shall be published in a newspaper of general circulation in the manner but no extrajudicial settlement shall be binding upon any person who has not participated therein or had no notice thereof.
17.) Request Tax Declaration Clearance
The documents needed for the issuance of the Tax Clearance are Original and one photocopy of the Deed of Absolute Sale, Photocopy of the Tax Declaration, Official Receipt of Payment of Real Property Tax and Special Education Fund Tax for the current year.
Check declared owner/s of the land property on the Tax Declaration Clearance.
The name on the Land Title should coincide with the name indicated on the Tax Declaration.
The Tax Declaration Clearance will be checked in Municipal Assessor’s Office.
18.) Verify/Double Check to DENR if land property owner/s name matches to the Tax Declaration Clearance
Go to DENR (Department of Environment and Natural Resources) office to verify if the Tax Declaration land property has no other claimants/adversities whatsoever.
APPROVED subdivision plan is needed, not just a proposed one. DENR and HLURB are getting stricter on what can and cannot be subdivided.
19.) Consider the Density (For Condominium Project)
In these type of investment, consider the number of residents and tenants in the building, and to take into account the number of floors, units per floor, and numbers for elevators service.
If you are a foreigner, remember that the Condo units have to be 60% Filipino owned.
20.) Check the TIN (tax id number) number of the seller.
After the property is bought, you will need to go to the BIR to pay the capital gain taxes. You will need the TIN number of the seller. If you they do not have a TIN number you can not process the title in your name. If the seller does not have a TIN they will need to apply for one at the BIR. But do this before the seller disappears.