PROPERTY DUE DILIGENCE – Basic guide in buying Philppine property part 3

<— From Part 2

… See part 1 here…

MAKE A FORMAL OFFER

 

Let’s say you already went to look at the properties with your real estate broker, that’s the time to take another look at your check-list. Buying real estate property is a major investment that needs careful consideration.

Have you inspected the property? –> Check!

Does the property meet your basic requirements? –> Check!

Is the price close to your budget range? —> Check!

Are the terms and conditions agreeable? —> Check!

 

If all the factors mentioned above are OK, then it is time for you to make a formal offer. In your offer letter, you have to indicate these following information:

– Name of the registered buyer/s.

– Address of the property you wish to buy.

– Express your intention to purchase the subject-property.

– Amount of money or valuable consideration that you offer to pay for the purchase of the subject-property.

– The payment break-down, time-frame, terms and conditions on how you would like to pay for this particular transaction.

– Indicate how much would you offer as “Earnest Money Deposit” to reserve the property you wish to purchase.

– Also mention how much time you need for you to pay the remaining balance.

– Are there any special terms and condition you’d like to request for this Transaction? Such as Escrow Agency? Would you like to pay it in cash? Managers’ check? Wire transfer? Etc.

– Do you need to appoint a representative to sign in your behalf or your corporation’s behalf? Please indicate that in the offer letter as well so that the sellers would know who shall be transacting with them. For corporation, you’ll need a board resolution authorizing your representative to enter into this purchase contract. For individual, you’ll need a Special Power of Attorney to authorize your “Attorney-In-Fact”.

 

Once you have your Offer letter done, send it to your real estate broker to present it to the seller.

 

CAVEAT EMPTOR!

 

If the seller approves the offer, ask copies of the documents pertaining to the particular real estate transaction. When you have the copies of the documents, it is time to do “Due Diligence”.

There’s a saying in law that says “CAVEAT EMPTOR!” or in English it means “Let the buyers beware”. It is suggested that it is the prospective buyers’ obligation to do everything in his power to check and protect himself from troublesome deals. Negligence to do this can produce disastrous results!

Hence it is always important to verify and check everything before you buy.

To verify if property area and all the boundary markers are correct, like perimeter fence, cylindrical marker, etc. you can hire one of our trusted professional Geodetic engineers to survey and measure the area of the property and provide comprehensive survey reports at very reasonable price.

If you want to check on the structural, plumbing, electrical and architectural aspects of a house or building, you can also hire one of our very reputable construction engineer/architects to do some building/house inspection then provide you with a comprehensive report.

If the improvements and the land are OK, then it’s time to verify the Title. You real estate broker can assist you to the City/Municipal Hall and  “Registry of Deeds” where the property is registered.

 

At the City/Municipal Hall and Registry of Deeds, you may try to get the following documents:

Updated Certified True Copyer of the Property’s Certificate of Title – In this document, we will find the name of the registered owner of the property inscripted on the title. We can also read in the certificate of title the technical description of the property as well as its’ land area. Through the certificate of title we can also initially check if there are mortgages, announcements, restrictions, terms and conditions, encumbrances or lis pendens (pending case) involving the property, that may have been registered with the registry of deeds.

 

Tax Declaration of the Property – Tax Declaration will show you the “Zonal Values” of the property and the title of the improvements/house/building. It also shows you the Property Identification Number, as well as the “Tax Base” for the property.

 

Tax Clearance- This document will show you if the the annual Real Property Tax are paid and updated, and will also show you the amount of the yearly tax for the property.

 

You can also check with the municipal/city planning about the government plans and developments in the location of the property. Check if the government has plans to take-over the subject-property for public use, such as road expansion, community development, etc. You can also verify with the city planning department other important aspects of what you intend to do with the proposed-property, such as the maximum elevation of the building you can erect in the property, the set-backs or indention from the road, structural restrictions, etc.

 

You can also check if your purpose for the property you plan to buy complies with municipality/city Zoning ordinances. For example if you’re planning to purchase a land to build a poultry to raise pigs as livestock farm, better check if the Zoning ordinance allow such livestock farm in the area. Otherwise, you might encounter problems in the future.

 

If the seller is being represented by an Attorney-in-Fact by virtue of Special Power of Attorney, I highly suggest to verify the S.P.A. document as well. Ask about the whereabouts of the registered owner/s. Inquire for the reason why the registered owner of the property cannot do the transaction himself/herself, check if the reason is valid. Make sure that the Special Power of Attorney Document is accompanied by copies of valid ID’s of both the registered owner and the representative. If you can verify the validity of these ID’s, will be much better. If there’s a way for the buyer to call the seller by phone, I highly advise for our clients to do so. You can also look at the stamps and the notarization seal on the Special Power of Attorney document. Check if the lawyer that notarize the document is legitimate and has the authority to notarize public documents. You may find the contact details of Integrated Bar of the Philippines right here –> http://www.ibp.org.ph/  . You can look at the documentation number of the S.P.A. and verify it. The S.P.A. is considered a “public document” therefore it must be registered in the notarizing lawyer’s record book and the local courts’ record book as well. If there are no records in any of the two record books mentioned, then there is something wrong with the S.P.A.

 

A buyer must also check the validity of ownership and the capacity of the seller to sell the property.

 

If the property is an inheritance, therefore it must be accompanied by either a Judicial Order of liquidation of Assets, or an Extra-Judicial Settlement of Property, and Special Power of Attorney authorizing the representative of all the heirs to the property.

Read more on inheritance and inheritance taxes right here —> WHO INHERITS WHAT? AND INHERITANCE TAX?

 

If the property is owned by a juridical person such as a cooperative, corporation, foundation, partnership, etc. A board resolution stating the intention to sell the said property and appointment of the juridical person’s representative, which are authorized by the board of directors. This board resolution shall then be accompanied by an updated General Information Sheet of the Corporation, Foundation, Cooperative, etc. that show who are the authorizing board of directors, as well as the valid ID’s of the directors and their appointed representative.

 

If the property is owned by a married couple, a buyer must verify what governs the property relationship of the subject-property. Is the subject-property an exclusive Paraphernal/Capital Property? Is it part of Absolute Community of Property? Is it a Conjugal Property? Are the married couples have a “Pre-nuptial Agreement” that separates their properties? Do the married couples have Judicial Separation of Properties? Does the sale needs marital consent from both spouses? Are both the married couples still alive? Are the married couples present to sign the Absolute Deed of Sale? These are the questions a buyer needs to answer when purchasing a property owned by married couples.

To learn more on the AFFECT OF MARRIAGE IN PROPERTY RELATION please read here —> WHO OWNS THE PROPERTY? THE HUSBAND? OR THE WIFE?

 

 

If the property is owned by a foreigner, does the foreigner have the legal capacity to sell the property?

Read more on FOREIGN OWNERSHIP OF PHILIPPINE PROPERTY <– CLICK HERE.

 

If you are buying subdivision project or condominium from the developer, then the first thing you need to do is verify if that project has an HLURB (Housing and Land Use Regulatory Board) License to Sell.

For more information, please read HLURB guidelines in purchasing subdivision and/or condominium projects <— click here.

 

Read more about the law on Subdivision and Condominium Buyers’ Protective Decree or Presidential Decree 957 <— right here.

 

If all the Due Diligance turn out to be in order, it is time to draft —>  CONTRACT TO SELL – Basic guide in buying Philppine property part 4

 

 

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Cheers,

Gary Louis David

Real Estate Broker License No. 0003469

VP for Marketing KingDavid Realty Co.


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