Buying a home is a significant financial commitment. It is critical that you secure the appropriate legal documents when buying a property as part of your protection and due diligence. The primary reason for retaining these records is for future reference or in the event that they are required for legal purposes.
The following are seven legal documents that you should obtain following the home buying process:
1. Letter of Intent
This is the first document you submit to the seller as a home buyer to express your intent or interest in purchasing the property being offered.
The letter of intent contains detailed information about the terms of the sale, including the date of the offer, a description of the property, the price you are willing to pay, the amount of the spot cash down payment you intend to make, and other pertinent financing details.
Additionally, the document contains the seller’s and buyer’s names, the property’s address, financial clauses, and special requests for the seller to comply (e.g. asking the seller to sell the property with furniture at a certain price).
After you have decided on a specific property you want to purchase a letter of intent should be given to the developer from your end as a property buyer.
Ascertain that the terms are unambiguous (payment scheme, schedule of payment, etc.). Additionally, indicate whether you intend to pay via bank financing.
2. Reservation Agreement
This document will ensure that the property you intend to purchase is reserved and removed from the market, preventing the seller from selling it to another party. The Reservation Agreement should include basic information and specifications about the property, such as the property’s complete address, property type, floor area, preferred payment method (cash, in-house, or bank financing), and payment terms agreed upon by both parties.
When you submit an offer, particularly for a pre-sale property, you will be required to provide “earnest money” or what is frequently referred to as the reservation fee in real estate advertisements. This demonstrates your sincerity in making an offer to purchase the property. When money is involved, it is a given that you keep receipts and secure photocopies.
Before paying the reservation fee, the reservation agreement should be signed by the buyer.
Determine the duration of your reservation. If you are unable to pay the reservation fee on the agreed date, notify your agent or broker and submit a promissory note to avoid the agreement being cancelled.
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3. Contract to Sell
This is the document containing the written agreement between you and the seller regarding the purchase of your home. It details the sales provisions that must be adhered to by both buyer and seller; prior to the home being paid in full. The Contract to Sell is only issued to homebuyers who have made a downpayment and finance the remainder of the purchase price.
When all conditions are met properly, the Contract to Sell serves as the basis for the execution of the Deed of Absolute Sale. It is prepared by the broker or developer.
After the homebuyer has paid the initial down payment the contract to sell should be given to the buyer from the developer’s end.
Ascertain that you have thoroughly read the contract cancellation and default clauses. Examine the contract’s terms for provisions authorizing the seller to increase the property’s price or alter its physical specifications.
4. Letter of guarantee
This is a written guarantee provided to the developer by your bank or financial institution indicating that you have been approved for a loan to cover the remaining balance on the property you have purchased. It specifies the amount of money that the bank or financial institution will lend, the date on which it will be released, and so forth.
This is provided when the home buyer gets approved by the bank for a home loan. Every piece of information in a Contract to Sell and Letter of Guarantee must be identical, including the parties’ names (buyer and seller).
5. Deed of absolute sale
It is the final document for the transfer of ownership that is filed with the Registry of Deeds. This is for issuing a Certificate of Title for a house and lot; or a Condominium Certificate of Title for a condominium purchase ; in order to transfer the real estate property into the new owner’s name.
Once you have fully paid for your home, in this case, your mortgage this document will be given. This document may be prepared by either the seller or the buyer; what matters is that it has been previously executed and notarized by a Notary Public.
6. Certificate title
After a homebuyer has completed the payment for his or her new property, the certificate title is the next document to secure. This is the final document that verifies the successful transfer of ownership of your home to your name.
For those who have purchased a house and lot, a Transfer Certificate Title is required. For condominium purchasers, the document would be a Condominium of Certificate Title (CCT), as condominium TCTs are named after the building’s developer. The title to the certificate is obtained through the Registry of Deeds. Depending on your RDO, the title will be released between three and six months.
The title is given after the complete payment of the real estate property. Paperwork is done to transfer the title to the new owner’s name.
The title of the Certificate should be issued in duplicate. One should be given to the new homeowner, and the other to the Registry of Deeds. Ascertain the legitimacy of the document. Here’s how to tell if you’re dealing with a forgery.
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7. Tax Declaration
You will request a Tax Declaration from the Assessor’s office as the new owner of the property. To complete the transaction, you must present the new title and a photograph of the purchased property.
Once this has been released in your name as the new owner of the property, you will be responsible for all tax obligations. Along with the publication of the new tax declaration is the success of the property purchase transaction.
Be Critical Before Buying a Home in the Philippines
As a prudent home buyer, it is critical to exercise due diligence. To safeguard your investment, keep a copy of all documents you receive during and after the home buying process.
Are you in the market to purchase a home? Wait! Do not sign the contract until you have thoroughly read the fine print.
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