STEP 4: REVIEW - Understand legal and documentary requirements and study financing options.

Under Philippine law, the purchase of real property must be in a public instrument in order for the purchase to be registered with the Register of Deeds. Thus, the Contract to Sell and Deed of Sale shall only be considered public instruments in the Philippines if attested by a notary public and, if executed outside the Philippines, authenticated by the Philippine consul as to the due execution of the relevant document or instrument in the country where such document or instrument was executed.

Notarization is the process by which the person executing the document personally appears in person before a Philippine notary public and represents to such notary public that the signature on the instrument or document was voluntarily affixed by him for the purposes stated in  the instrument or document, declares that he has executed the instrument or document as his free and voluntary act and deed and, if he acts in a particular representative capacity, that he has the authority to sign in that capacity. Consularization is the process by which the consular agent or officer in the foreign service of the Philippines stationed in the country where the record is kept authenticates a document by the seal of its office. A document is deemed consularized when executed before and notarized by a foreign notary, and such notarization is authenticated by the Philippine consular agent or officer, or when directly authenticated by such Philippine consular agent or officer, in either case, sealed by the seal of the office of the Philippine consul. A listing of consular offices may be found iin the website of the Philippine Department of Foreign Affairs  (DFA): http://www.dfa.gov.ph

Execution of documents means the signing and accomplishment of documents under the proper, legally prescribed conditions, such as before witnesses if required.

Age

Under Philippine law, only persons of legal age (18 years and above) are allowed to enter into contracts.  A minor may, however, be allowed to purchase real property from his/her own funds if represented by a legal guardian.  The legal guardian is required to furnish a bond in such amount as the court may determine, but not less than 10% of the value of the property or annual income of the minor, to guarantee the performance of the obligations prescribed for the guardian.

The guardian purchasing the property on behalf of the minor must submit a Certificate of Finality of the Order of the court appointing him/her as guardian of the minor child and approving the bond posted by him in compliance with the requirements of the Family Code of the Philippines.

Status

Under Philippine law, all property acquired during the marriage is presumed to be community property of the married couple, unless it is proved that the couple agreed in a marriage settlement to be governed by another type of property regime prior to their marriage.  Thus, in the absence of a pre-nuptial agreement, the contract shall be executed, and the property registered, either (1) in the names of "Spouses Mr. X and Mrs. X" if bought from the common funds of the spouses, or (2) in the sole name of "Mr. X, married to Mrs. X," where Mr. X buys the property using his own funds.  This rule applies even if the married spouses are separated in-fact (i.e., not legally separated).

 

However, if the spouses are legally separated, or their marriage has been annulled or declared null and void, the property may be registered solely in the name of the spouse buying the property upon submission of the Certificate of Finality or Entry of Judgment of the decision of the court granting the legal separation or annulment of marriage and the separation of properties.

For married persons, the property may be registered solely in the name of the spouse buying the property upon submission of a duly executed pre-nuptial agreement.

If the property was acquired in the name of a Philippine citizen or former natural-born Philippine citizen who is married to a foreigner, the Philippine citizen is required, as a precondition to the registration of the property in his or her name, to execute a Certificate of Paraphernal Property which states that the property was purchased by the Filipino spouse with his or her own money.  In such case, the document shall be executed, and the property registered, in the name of the Philippine citizen or former natural-born Philippine citizen, with the spouse's name indicated as being "married to" such Philippine citizen or former natural-born Philippine citizen.

Citizenship

The discussion on "Who may Own Real Property" applies in the determination of whether a Philippine citizen, foreigner, or former natural-born Philippine citizen may execute agreements for the sale and purchase of private lands.

The child of a natural-born Philippine citizen who subsequently loses his Philippine citizenship may acquire private land in the Philippines provided; he or she is of legal age and is a Philippine citizen.  The citizenship of the child is determined, however, by the circumstances prevailing at the time of his or her birth, such as the date of his or her birth and the citizenship of the child's parents and such other factors as may be applicable under Philippine law.

Representation through an Attorney-in-Fact

If the buyer wishes to transact through his or her representative, Philippine law requires that a Special Power of Attorney (SPA) be executed by the buyer in favor of such representative to act as his or her attorney-in-fact.  The SPA shall bear the signature of the buyer and the specimen signature of the qualified representative, and expressly specify the authority of the qualified representative to, among others, sign the sale documents and obtain and receive, for and on behalf of the buyer, the owner's duplicate of the certificate of title to the property.

Documents executed by the buyer submitted in support of his or her personal circumstances must be certified and/or attested by a notary public and, if executed outside the Philippines, must be authenticated by the Philippine consul as to the due execution of the relevant document or instrument in the country where such document or instrument was executed.

Ownership of a subdivision lot is evidenced by a transfer certificate of title (TCT) issued by the Register of Deeds of the relevant city or municipality where the subdivision project is located. Ownership of a condominium unit is evidenced by a condominium certificate of title (CCT) issued by the Register of Deeds of the relevant city or municipality where the condominium project is located.

Ownership of a single-detached house or townhouse constructed on a subdivision lot is evidenced by a Tax Declaration (TD) issued by the City Assessor of the city or municipality where the project is located.  Subdivision lots and condominium units are also covered by a TD.  The TD shows the assessed value of the property which is used as basis for charging the  real property tax (RPT) imposable on the property.

Upon the payment of the relevant taxes and fees to the government units and agencies, and obtaining the necessary clearances to register the property from the BIR and the local government unit concerned, the TCT or CCT shall be transferred from the name of the developer to the buyer by the appropriate Register of Deeds.

The TD covering the lot and/or dwelling unit or condominium unit shall be transferred by the appropriate City Assessor from the developer to the buyer upon submission of the sale documents and the BIR tax clearance authorizing the registration of the property in the name of the buyer.

The TD for a subdivision lot in the name of the buyer is issued after the issuance of the covering TCT. The TD for a dwelling unit, whether a single-detached house, townhouse, or a condominium unit, is issued only after the local government unit has issued an occupancy permit which allows the occupancy of the same by the owner of the unit.

A Contract to sell or CTS is a document where developer promises to transfer to the buyer the ownership and physical possession of the property upon the buyer's fulfillment of the terms of the sale, and the buyer obliges himself to pay the purchase price and comply with the other terms and conditions of the sale.  Once the property is paid in full, a Deed of Sale (DOS) is executed by the developer and buyer.

A Deed of Sale or DOS is a document executed when buyer pay the developer in cash (whether  using his or her own funds or through funds barrowed from bank or financing institutions). In the DOS, the developer transfer ownership of the property to the buyer, subject to the compliance by the buyer with the Deed of Restrictions or Master Deed with Declaration of Restrictions governing the project and the other terms and conditions of the sale.

A Transfer of Certificate of Title (TCT) is a proof of ownership of a subdivision  lot issued by the Register of Deeds of the relevant city or municipality where the subdivision project is located.

A Condominium Certificate of Title is  proof of ownership of a condominium unit issued by the Register of Deeds of the relevant city or municipality where the condominium project is located.

A corporation is a juridical person capable of having rights and obligations, with a personality separate and distinct from that of its shareholders.  Corporations may be classified into two general classes:  stock and non-stock.  Stock corporations are governed by a board of directors and its shares are held by persons referred to as shareholders.  Stock corporations have capital stock divided into shares and are authorized to distribute to its shareholders dividends out of its surplus profits.  Non-stock corporations are governed by a board of trustees and the persons constituting it are referred to as members.  Non-stock corporations exist for purposes other than profit, like religious, civic, and charitable organizations, and no part of its income is distributable as dividends to its members, trustees or officers.

Foreigners may indirectly own land by investing in Philippine corporations registered with the Securities and Exchange Commission (SEC) subject to the foreign equity restrictions for ownership of private land discussed above. Such Philippine corporations may then acquire the land.

The Securities and Exchange Commission (SEC) website http://www.sec.gov.ph/  provides a listing of all the documentary requirements and the procedural steps for incorporation a domestic corporation.

The additional expenses which you have to pay for include taxes, fees, and association dues.

The typical taxes/transaction cost in the sale of real property from the developer to a buyer are the following:

Income/Creditable Withholding Tax

The developer is subject to a 35% income tax payable to the Philippine Bureau of Internal Revenue (BIR) on income derived from the sale of property.  As a general rule, the buyer is required to withhold 5% of the purchase price, zonal value or TD value of the property, whichever is higher, to be credited to the income tax of the developer.  The developer may cause such withholding to be made on behalf of the buyer and remitted to the BIR.

Value-added Tax

Value-added tax at the rate of 12% of purchase price, zonal value or TD value of the property, whichever is higher, is payable on each sale of real property to the BIR.

Documentary Stamp Tax

Documentary stamp tax at the rate of 1.5% of the purchase price, zonal value, or TD value of the property, whichever is higher, is payable on the execution of the DOS to the BIR.

Local Transfer Tax

Local transfer tax is imposed by the local government unit where the property is located generally at the rate of 50% of 1% of the purchase price, zonal value, or TD value of the property, whichever is higher.

Registration fees are payable to the Register of Deeds where the property is located at the rate of P8,796.00 for the first P1.7million plus P90.00 for every P20, 000.00 or fraction thereof in excess of P1.7 million.

The typical association due cost for lot is P25/sqm, for condominiums is P75-90/sqm.

The cost of the property is typically affected by the factors which buyers take into consideration when buying.

A typical lot:

Ayala Land Premier - minimum package price of Php4 million
Alveo Land Corp. - minimum package price of
Avida - minimum package price of Php0.8 million

A typical house-and-lot:

Ayala Land Premier - minimum package price of Php17 million
Alveo Land Corp. - minimum package price of
Avida - minimum package price of Php1.8 million

A typical condo:

Ayala Land Premier - minimum package price of Php9 million
Alveo Land Corp. - minimum package price of
Avida - minimum package price of Php1.2 million

Payment schemes vary on a per-project basis.  Typical payment schemes include cash, near-cash, (with a certain % due for downpayment and the balance payable within 90 days), in-house financing (with a certain % due for downpayment and the balance payable within 1 to 10 years, subject to in-house approval), and bank financing (with a certain % due for downpayment from the buyer and the balance financed by the bank, payable up to a maximum of 25 years, subject to bank approval).      

Detailed Payment Schemes click here. (Home Buying Financing Options)

For cash or near cash schemes (i.e. a portion of selling price is paid on the first 30 days and the remaining balance on the next 60 days), following are the factors that you should consider:

1.  How much money you have saved (which will help you pay the entire price within the 30-day/60-day period)

2.  Amount of discount offered by Ayala Land as compared to your foregone investment earnings for in-house financing, you need to consider: 

• How much money you have saved (which will help you pay for downpayment and closing costs)
• How much net cash flow you have on a monthly or periodic basis (which will help you pay for monthly or periodic installment payments)
• Interest cost attached to the payment scheme (if any)
• Ease of transacting directly to Ayala Land as compared with a bank (i.e. less documentation requirements)
• The advantage of not paying up a large one-time amount

For bank financing, the factors are similar to in-house financing, except for lower interest rates, stricter bank requirements, and the benefit of having the Title transferred to your name sooner if you use a different property as your collateral.  If you choose to use the property you purchased as your collateral, the Title will be transferred to your name, however, it will be kept by the bank until you complete your mortgage payments. 

A Property Specialist will be able to give you an idea of how much the price of the unit is, how much downpayment is needed, and how much the monthly amortizations and/or the lumpsum payments are, if applicable. 

You can also use the mortgage calculators provided in this website to enable you to estimate what kind of a property you can afford, how much you can borrow, how much you can afford to pay on a monthly basis.

The amount of bank financing extended varies with each bank and is affected by both the property's appraised value (as determined by the bank) and the capacity of the buyer to pay (as evaluated by the bank). Typical bank financing is normally up to 80% of the selling price (VAT included) but BPI Family Bank has recently launched a program allowing buyers of Ayala Land Premier and Community Innovations developments to borrow up to 90%.

Downpayment varies for each type of project. Typical amount of downpayment ranges from 10 to 30% of the package price. Most downpayments are due upfront.  In some cases especially for Avida, it may be spread over a number of months. 

Typical closing costs include taxes, registration fees, insurance, etc.  Please contact your seller for the applicable closing costs particular to the property you are interested to purchase.

For in-house financing, financing is extended by the company who is selling the property.  Under this scheme, there is no transfer of ownership to the buyer until the property is fully paid.

If you are interested in securing in-house financing,

• Gather information about your savings and monthly cash profile.
• Having an idea of your funding resources, estimate what kind of a property you can afford, how much you can borrow, how much you can afford to pay on a monthly basis.

Typical factors affecting evaluation and approval of a request for in-house financing include the following:

1. Proof of monthly or periodic net cash inflow
2. Size and quality of assets and investments currently owned
3. Credit track record (as verified with other bank dealings and the presence of any court cases)
4. Purchase of and good payment track record in other Ayala Land properties, etc.
5. Tenure with the employer or number of years in business, in case of a professional or an entrepreneur.

An application for in-house financing is typically evaluated within a period of two weeks to one month.  This timetable assumes complete documentation and solid evidence presented to support the various factors being used for evaluation.  Length of processing may be prolonged by incomplete documents or insufficient evidence of capacity to pay. 

For bank or external financing, financing is extended by a bank or financial institution such as Pag-Ibig or NHMFC (National Home Mortgage and Finance Corp.).  Under this scheme, ownership of the property is transferred to the buyer.  The buyer in turn mortgages the property to the bank.  This is typically covered by a Deed of Mortgage.

If you are interested in securing bank financing, 

• Gather information about your savings and monthly cash profile.
• Estimate what kind of a property you can afford, how much you can borrow, how much you can afford to pay on a monthly basis.
• Contact the bank to secure a list of the documents required for bank financing. Ask the bank representative or mortgage officer for clarification on the factors which will affect their evaluation of your financing application. Also gather information on applicable interest rate, term, and processing timetable.
• Await advice from the bank mortgage officer for any additional documents they may request or for a formal advice of approval for financing.
• Immediately advise your Seller once you have been informed by the bank of the approval of your financing application. Typically, loan proceeds will be released by the bank directly to Ayala Land as the seller. In exchange, Ayala Land will release the proof of ownership (e.g. Transfer Certificate of Title) directly to the bank, upon your endorsement.

BPI Family Bank, Banco de Oro, Chinabank, EquitablePCI Savings, Metrobank, and Philippine National Bank offer financing for ALI properties. For AVIDA, BPI Family Bank, PS Bank, and EquitablePCI Bank are preferred.  A bank directory shall be provided to buyers upon their request

Typical factors affecting evaluation and approval of a request for bank financing include the following: 

1. Proof of monthly or periodic net cash inflow
2. Size and quality of assets and investments currently owned
3. Credit track record ( as verified with other bank dealings and the presence of any court cases)
4. Tenure with the employer or number of years in business, in case of a professional or an entrepreneur.

An application for bank financing is typically evaluated within a period of two weeks to one month.  This timetable assumes complete documentation and solid evidence presented to support the various factors being used for evaluation.  Length of processing may be prolonged by incomplete documents or insufficient evidence of capacity to pay.