Guide to the Selling Process of Real Estate Properties in the Philippines

1. Owner and Broker will sign a contract of agreement

The seller and real estate agent will discuss and agree on the terms of the sale,
the professional fee or the commission. 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 entails the condition of the land title if it
is free from loans, liens and encumbrances.

2. Owner should issue an Authority to Sell

This contract will stipulate whether the owner will bestow upon the broker
exclusive rights to sell or a non-exclusive authorization to sell his or her property.
This agreement will 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 will also serve as proof that the broker was legally authorized
to represent the owner in selling the property.

The broker usually gets hold of 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
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 be able to check the property in order to make an assessment
of its current market value. 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 market and offer the property

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 add value to your property.

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

This is 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

o Capital Gains Tax / Creditable Withholding Tax ( whichever

applies )
o Documentary Stamps Tax
o Transfer Tax
o 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:

o Transfer of Certificate of Title – ( land ) – Owner Copy

o Condominium Certificate of Title ( condominium )
o Tax Declaration ( Declaration of Real Property )
o Tax Clearance – ( both land and improvement )
o 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.