BUYING THE RIGHT HOME AT THE RIGHT PRICE
By Doug Marsh, Manageing Director; Real Estate and Property Investment Counselor
Whether you are buying your first home or you’re fifth, the process of buying a home can be an emotional and time-consuming venture. Feeling that, in the end, you made the right decision and got a good deal can make all the difference. As with most major decisions, the amount of work and research you undertake before you start shopping can have a dramatic effect on how well you do in the end. The following 20 tips are for all Buyers to consider before, during and after your new home hunting experience. (Not in any special order of importance).
#1 – Do you really need that backyard Tennis Court or Swimming Pool: Everyone can picture their ideal home. If you haven’t thoroughly prepared yourself prior to viewing houses, chances are that you will find what you may think is your ideal home, and will wind up paying too much for it. It is essential to treat the buying process in a slightly detached manner. Those who fall in love with houses usually pay too much. That’s why it’s recommended that you develop two lists, one of NEEDS and one of WANTS. When looking at houses, make sure that they cover all of your NEEDS – things like adequate space, well maintained, a good neighborhood, perhaps a garage – and then have fun with items on your WANTS LIST. Treating the process in a regimented manner will help you to make a rational, informed decision.
#2 – Get Pre-Approved: Visit your local Bank that you will be using for financing a home prior to shopping to get pre-approved. Be sure to get a mortgage commitment in writing. Being pre-approved gives you a solid price range, and lets your Broker and potential sellers know that you are serious and not just a browser.
#3 – Get the right people behind you: Buying a home is a complicated process, with many people possibly getting involved. Having the right people on your side can make a big difference. An experienced, dedicated, and knowledgeable PRC Registered Real Estate Broker can put a team of advocates, including Lenders, Lawyers, Property Appraisers and Movers, on your side immediately.
#4 – Communicate: The more you share with your Licensed Broker, the better he or she will be able to represent you. Letting your Broker know exactly what you’re looking for, in terms of needs/wants, price range, and location, this can eliminate unnecessary trips to unsuitable homes and can help ensure that you wind up in the right home.
#5 – Location - Location and Location: It’s still true. The desirability and resale value of your home depends on location more than any other single factor. People want a desirable community that includes character, quality of schools, access to work, major transportation arteries, recreational facilities, etc. On your viewing trips, take a careful look and ask the following questions: How does this home compare to others in the neighborhood? Are yards fenced? Are there many children playing in the streets? Are the front and back yards and the exteriors of the homes properly maintained? The less expensive houses in a better area tend to appreciate faster than the most expensive houses in a less desirable area. Additional factors that affect the property value of a home include traffic, sounds, smells, Zoning laws, Home Owners Association By-laws and many others. Be objective. Be sure you are completely satisfied with the neighborhood. If you choose a neighborhood with problems, you likely won’t get as much as you hoped with it when it comes time to sell.
#6 – Use Your Brokers Knowledge: Your licensed Broker will be trained in all aspects of real estate, including understanding supply and demand, economics, and the neighborhoods of the cities in which they practice. A professional licensed Broker can do much of the work for you, by reviewing your needs, reviewing available properties, and making an informed match. A comprehensive knowledge of the available homes in your neighborhood is one of your Brokers strongest assets. With the aid of computers and the MLS Systems, a professional licensed Broker is usually notified within hours when a home becomes available.
#7 – Pay Attention to Red Flags: When looking at and evaluating a home, be sure you know the difference between acceptable and unacceptable problems. Cosmetic items like peeling paint, worn or cracked floor tiles, or unattractive wallpaper can be easily remedied, and can be used as negotiation items, as they will be extra costs to you in upgrading the home. Major problems, however, are clearly Red Flags. Look for items such as major foundation cracks, water damage, old and worn roof and soffets, outdated or inadequate electrical systems and plumbing. These items could be very expensive to repair to make the home a worthwhile investment for you.
#8 – Think of Hiring a Licensed Real Estate Appraiser: A Licensed Real Estate Appraiser will not only be able to give you an accurate Home Appraisal but will point out any major or potential problems/defects that will affect the price of the home. It is an inexpensive way to gain peace of mind, and guard your pocket book. A proper appraisal will cover all areas of the house and property, it will also compare the house to other similar ones in the area that are either on the market or have recently been sold. A professional appraiser can give you an objective and unbiased view of the property and the surrounding neighborhood, with an Official Written Report, indicating the present condition and items that will need repair. Cost of an appraisal is dependant on the size of your home.
#9 – Be Cautious with Fixer-Uppers: Sometimes, a fixer-upper can be purchased below market value, and once sufficient repairs are made, can be sold at a significant profit. However, not all fixer-uppers will bring in the profits you might expect. Consumers often overestimate their level of dedication to doing extensive renovation work, and underestimate the costs associated with such work. A wall that needs to be replaced can often lead to the discovery of faulty plumbing, electrical, or other major undertakings. Your Broker and Property Appraiser are your best allies when it comes to cost-benefit analyses.
#10 – Consider your Future Needs: A move can be a major undertaking. Take a good look at your current lifestyle and consider the future. Will you need extra space for a home office, a child, or perhaps a child moving back home? Perhaps it may be easier and less expensive if you purchase a home that can meet these needs now, rather than moving up to a larger home a few years down the road.
#11 – Proceed Quickly: When you’re ready to buy, act quickly. Good properties sell fast. This is especially true given the current state of the real estate markets. However, when you work with a licensed Broker, you have access to the latest technology. As part of the MLS and some Agent Handshake networks, a Broker has access to properties within hours of when they are listed. Technology works to your advantage. Many Brokers now have personalized websites which allow you to sign on as a client, and receive notification of new listings via email. You save time and effort, and you can view only those homes that come closest to meeting your needs.
#12 – Clarify Relationships: In any real estate transaction, be very clear about who is working for whom, and what the relationship represents. Unless otherwise stated, a Selling Broker represents the Seller in transactions for the sale of a home. The Selling Broker, as part of his or her duty, must ensure that the Seller’s (and not your) position is represented throughout the entire process. This is why you should have a Broker to act in your behalf and for your protection. Get a Broker on your side, they will ensure your satisfaction and protection at all times.
#13 – Try to find out a little about the Seller: Understanding a seller’s reasons for moving could work to your advantage during negotiations. For instance, a seller who has been transferred to another city may be more motivated to sell than someone who is still shopping for a new home. A vacant house, or a house that has been on the market for several months and has been reduced in price, could also provide the opportunity for lucrative negotiations.
#14 – Keep it Impersonal: Conversely, information could be used to your detriment. Information about your mortgage, size of down payment, move-in deadline, or circumstances for buying could be used to the seller’s benefit in negotiations. While you want your Broker to know these details, maintain your poker face and keep your cards hidden with the sellers and their Broker.
#15 – Measure Twice, Sign Once: While you definitely want to move quickly once you’ve made the decision to purchase, you don’t want to cave in to pressure for a quick close. Someone who is trying to pressure you into buying a home is likely doing so for a reason. Make sure the reasons for you to buy a home are your reasons, not theirs.
#16 – Exercise your Negotiating Skills:
Even if you prefer not to negotiate or haggle, it’s worth it, especially when it’s going to be your home and one of your biggest investments. Most people expect to haggle over the price. There is always room for negotiation, and you’re experienced and knowledgeable Broker should be a professional negotiator.
#17 – Avoid Bidding Wars: In some cases, the Seller’s Broker may use scare tactics to rush the sale or increase the price. Falling for this trap could cost you money. If there is another buyer, or some other reason this pressure is being applied, whoever wins also loses because they tend to overpay. Let reason be your guide, not passion.
#18 – Get it in writing: Legally, Sellers in the Philippines do not have to disclose all known material defects of a property as is required in the U.S. However, your Broker can ask the Selling Broker about any known defects or problems. Hopefully, the Selling Broker would be ethical enough to ask the Seller this and provide a responce. Also be sure to consider the ramifications of these defects. Will they be costly down the road? Are they “serious” defects?
#19 – Be Aware of Hidden Costs: While some Brokers often tempt first-time buyers with rent/mortgage comparisons, there is more to a home than simply the mortgage. You will be responsible for other items including, Documentary Stamps, transfer taxes, title registration fees, property taxes and of course the increased monthly utility bills, etc. Ask your Broker, he or she will give you a good idea of the costs associated with buying a home that are beyond its final negotiated price.
#20 - Your Broker: Last, but not least, be sure to deal with only a Real Estate Broker that is registered and licensed by the Professional Regulation Commission of the Philippines (PRC). Always ask for their PRC ID Card. If they can not provide one, then they are not licensed to practice the Real Estate profession. Dealing with an unregistered Broker or Agent is against the law (RA-9646) and could be more costly to you and your family as they are not educated or trained in the Real Estae profession.
These are just some of many things to consider when shopping for and buying a Home. The most important tip of all is to find and employ a Licensed Broker that will advise and assist you in all these matters every step of the way. We at Marsh Real Estate Agency® do just that and so much more.
“Trust only a Licensed and Professional Real Estate Broker”
Who Can Own Property in the Philippines?
By law, foreigners don't have the right to own land in the Philippines. Only Filipino citizens can own land (there have been many proposals to amend this law but as of this writing, the law remains unchanged.) The simplest way for a foreigner to acquire real estate properties is to have a Filipino spouse purchase a property in his/her name. Another way is to acquire a long term Lease of the property for 50 years, reneable every 25 years after that (see below for details and example).
Corporations or partnerships that are at least 60% Filipino owned are entitled to acquire land in the Philippines. An exception to this rule, is foreign acquisition of a Philippine real estate in the following cases:
* Acquisition before the 1935 constitution.
* Acquisition thru hereditary succession if the foreigner acquireing the property is a legal or natural heir. This means that when you are married to a Filipino citizen and your husband/wife dies, you as the natural heir will become the legal owner of his/her property. The same is true for the children. Every natural child (legitimate or illegitimate) can inherit the property of his/her Filipino father/mother even if he/she is not a Filipino citizen.
* Purchase of not more than 40% interest in a condominium project (See Below).
* Purchase by a former natural-born Filipino citizen subject to the limitations prescribed by law. (natural born Filipinos who acquired foreign citizenship is entitled to own up to 1,000 square meter of residential land, and 1 hectare of agricultural or farm land)
* Filipinos who are married to aliens who retain their Filipino citizenship, unless by their act or omission they have renounced their Filipino citizenship.
Owning of houses or buildings is legal as long as the foreigner does not own the land on which the house is build.
Setting up a corporation with 40% of the stocks in the foreigner's name and 60% to Filipinos is a good alternative. There must be a minimum of 5 stockholders, and a foreigner can have the Filipino stockholders sign blank transfer of the stocks for security.
Long Term Lease By a Foreigner:
The land can be leased by the foreigner or a foreign corporation on a long term contract for an initial 50 year period and renewable in 25 year increments after that. A foreigner can Lease a lot and at the same time legally own the house and all improvments on the Leased land. EXAMPLE: A house and Lot has a Selling Price (SP)of Php 10,000,000.00. A foreigner can pay the owner the entire SP and can hold the Title (TCT) for the land. There will be no transfer of the Title to the foreigners name. But, the foreigner will receive a Special Power of Attorney (SPA) from the owner allowing the foreigner to be able to sell and/or transfer the Title to anyone else at any time at the foreigners discretion. The owner and the foreigner will also execute a notarized Memorandum of Agreement (MOA) with all the terms and a Long Term Contract of Lease. With these documents in hand, the SPA, MOA, Contract of Lease and the original Title (TCT), the foreigner has all the legal rights to do anything with the property that he or she wants (live on, make improvements and even sell the property, if and when they want). The foreigner will also have the Tax Declarations registered in their name and be responsible to pay the yearly Real Estate Taxes for the Land and Buildings on the property when they are assessed by the the Bureau of Internal Revenue (BIR).
The Condominium Act of the Philippines, R.A. 4726, expressly allows foreigners to acquire condominium units and shares in condominium corporations up to 40 % of the total and outstanding capital stock of a Filipino owned or controlled condominium corporation.
Those who claim that foreigners can own a house & lot in the Philippines have a condominium title (CCT) to their property. There are very, very few single-detached homes or Townhouses in the Philippines with CCT's. Most condominiums are mid rise and/or high rise buildings.
Guide to Taxes, Commission & New Registration when
Buying Real Estate in the Philippines
by Doug Marsh, Philippine Real Estate and Investment Counselor
Here is the Standard sharing of expenses between the Buyer and the Seller when transferring the Real Estate Property Title/Deed (TCT - Transfer Certificate of Title or a CCT - Condominium Certificate of Title) to the new owner:
The SELLER pays for the:
- Capital Gains Tax equivalent to 6% of the selling price on the Deed of Sale or the zonal value, whichever is higher. (Withholding Tax if the seller is a corporation)
- Unpaid real estate taxes and Association Dues (if any).
- The Broker's Commission.
The BUYER pays for the cost of Registration of the TCT or CCT in their name:
- Documentary Stamp Tax - 1.5% of the selling price or zonal value or fair market value, which ever is higher.
- Transfer Tax - 0.75% of the selling price, or zonal value or fair market value, which ever is higher.
- Registration Fee - 0.5% of the selling price, or zonal value or fair market value, which ever is higher.
- Incidental and miscellaneous expenses incurred during the registration process.
The above sharing of expenses is the standard practice in the Philippines. However, Buyers and Sellers can mutually agree on other terms as long as it is done during the negotiation period and incorporated into the Deed of Sale/Deed of Absolute Sale).
The "Deed of Sale" or "Deed of Absolute Sale" is the Notarized Document showing the legal transfer of Real Estate Property ownership. The deed of sale is then taken to the Municipality/City Registry of Deeds to be officially recorded after the buyer pays the documentary stamp, transfer tax and registration fees. Always have your Broker verify from the Registry of Deeds the authenticity of a Transfer Certificate of Title before buying a property.
Your Broker will do the entire registration process for you (part of the service they provide for their Commission), however, the payment of all government taxes, transfer fees and notary expenses will be shouldered by the buyer.
Documents needed when transferring the title (TCT or CCT) to the new owner:
- 2 Certified true copies of the title.
- 2 Copies of the “Deed of Sale” or “Deed of Absolute Sale”.
- Latest Tax Declaration of the property.
- Certificate Authorizing Registration (CAR) from the Bureau of Internal Revenue that the Capital Gains Tax and all Realty Taxes have been paid.
- Receipt of payment of the Transfer Tax and new Registration Fees
An adapted form of the "Torrens" system of land registration is used in the Philippines. The system was adapted to assure a buyer that if he buys a land covered by an Original Certificate of Title (OCT) or the Transfer Certificate of Title (TCT) issued by the Registry of Deeds, the same will be absolute and final.
Always consult first with your PRC Licensed Broker about the latest Government information on the above Fees, Taxes and Commission, as these may change periodically.