Step-by-Step Guide to Buying Real Property from a Private Seller Philippines

Step-by-Step Guide to Buying Real Property from a Private Seller (Philippines)

For buyers, counsel, and brokers who want a practical, end-to-end workflow—with legal touchpoints, documents, taxes, and common pitfalls—under Philippine law.

1) Know the Players and Capacity to Sell

  • Private seller (individual): Verify full legal name, civil status, and capacity.

    • If married and the property is conjugal/community, both spouses must consent to the sale (Family Code).
    • If separated in fact, demand proof of property regime or judicial decree.
    • If the property is a family home, disposition requires spousal consent and must not prejudice beneficiaries.

  • Multiple owners / co-ownership: All registered owners must sign. If one signs by Special Power of Attorney (SPA), the SPA must be notarized (and consularized/apostilled if executed abroad).

  • Seller is a corporation/partnership: Secure Board Resolution/Secretary’s Certificate authorizing the sale, specimen signatures, and confirm the signatory’s authority. If foreign-owned, be mindful of constitutional/foreign ownership restrictions on land.

  • Seller is an estate (owner deceased): Require extrajudicial settlement (or court-approved partition), TIN of the estate, Estate Tax eCAR, and proof of payment of estate taxes before any sale.

2) Identify the Property

  • Title

    • For registered land, obtain a Certified True Copy (CTC) of the TCT (Transfer Certificate of Title) for land; CCT for condominium. Get it directly from the Registry of Deeds (RD) with the latest date.
    • Check: title number, registered owner(s), technical description, area, encumbrances/annotations (mortgage, liens, lis pendens, adverse claims, easements, restrictions), RD and book/page/QR validation marks.

  • Tax Declaration & Real Property Tax (RPT)

    • Get the latest Tax Declaration from the City/Municipal Assessor and Real Property Tax Clearance and Official Receipts from the Treasurer. Confirm no arrears or penalties.

  • Zonal Values / FMV

    • Note BIR zonal value (per street/barangay and property class) and the Assessor’s Fair Market Value; your taxes will be computed on the higher of: selling price, zonal value, or Assessor’s value.

  • Physical & Legal Due Diligence

    • Site inspection: boundaries, access/right-of-way, informal settlers, encroachments, improvements matching the Tax Dec, flood risk, geohazards.
    • Subdivision/Condo restrictions: Deed of Restrictions, Master Deed, HOA/Condo dues and Seller’s clearance from the association.
    • Mortgages/loans: If mortgaged, require bank cancellation (Release of Real Estate Mortgage) simultaneous with closing.
    • Land use: If agricultural, check DAR coverage (e.g., CLOA/EP restrictions, 10-year prohibitions, right of retention, DAR clearance for conversion or transfer, if applicable).
    • Tenancy/lease: Identify occupants; secure vacant possession undertakings or assign/terminate leases correctly.

Red flag checklist: mismatched seller name vs. title, missing spousal consent, unpaid RPT, un-cancelled mortgage, long annotations on title (especially lis pendens, adverse claim), ownership by deceased without estate proceedings, and tax-declaration-only (untitled) land.

3) Deal Structure & Documents

A. Offer Stage

  • Letter of Intent (LOI) or Offer to Purchase, plus Buyer’s ID/TIN and source of funds declarations (anti-money laundering compliance).

  • Earnest Money / Option Money

    • Earnest money is typically credited to the price and indicates a perfected sale unless parties stipulate otherwise (Civil Code).
    • Option money pays for a binding option to buy; without separate consideration, an option is generally revocable.

B. Preliminary Agreement

  • Memorandum of Agreement (MOA)/Contract to Sell (CTS)

    • Use when there are conditions precedent (e.g., title clean-up, bank loan approval, tax payments, release of mortgage, subdivision of title).
    • Include: property particulars, price, payment schedule, risk allocation, deliverables, walkthrough, timeline, tax-sharing, default and remedies, and who handles BIR/RD filings.

C. Final Conveyance

  • Deed of Absolute Sale (DOAS) (or Deed of Sale with Assumption of Mortgage, as applicable)

    • Must accurately describe the property (title number, area, technical description), price, tax allocation, and warranties.
    • Notarization is essential for registration; keep multiple originals.
    • For condos: cite parking slot CCT, shares in common areas, and condo corp membership.

  • Ancillary Docs you may need:

    • IDs/TINs of parties, marital documents (marriage certificate, CENOMAR if applicable).
    • SPA/Board Resolutions/Secretary’s Certificate.
    • Latest RPT receipts, Tax Clearance, HOA/Condo Clearance.
    • Lot Plan/Approved Survey, Vicinity Map (if boundaries are contentious).
    • Release of Mortgage and Cancellation of Encumbrance forms (for RD).
    • Certificate of No Improvement or With Improvement (Assessors), where required.

4) Taxes, Fees & “Who Typically Pays”

Parties can agree otherwise, but practice commonly allocates as follows:

  • On the Seller (default market practice)

    • Capital Gains Tax (CGT): 6% of the higher of selling price, BIR zonal value, or Assessor’s value—if the property is a capital asset of an individual.

      • If the seller is a real estate dealer/developer or the property is an ordinary asset, CGT does not apply; income is taxed as ordinary income and may be subject to creditable withholding tax (CWT) by the buyer.

    • Broker’s commission, if the seller engaged the broker.

  • On the Buyer (default market practice)

    • Documentary Stamp Tax (DST) on sale of real property: effectively 1.5% of the higher of selling price, zonal value, or Assessor’s value.
    • Transfer Tax (Local Government): generally up to 0.5% of consideration or FMV in provinces; up to 0.75% in cities and Metro Manila.
    • Registration Fees (Registry of Deeds): schedule-based; roughly proportional to property value.
    • Notarial Fees: market-based (often a fraction of 1% with minimums).
    • Association Dues / HOA/Condo Clearance Fees, if any.

  • VAT (seller-side, if ordinary asset and VAT-registered; certain residential sales may be VAT-exempt subject to statutory thresholds). Confirm current thresholds before closing.

Tip: Fix tax-sharing in writing. Even if the buyer agrees to shoulder seller-side taxes, statutory filings (e.g., CGT return) often remain in the seller’s name—coordinate on signatures and TINs.

5) Filing Sequence (ONETT ➜ LGU ➜ RD ➜ Assessor)

Step 1: BIR “One-Time Transaction” (ONETT) Processing

  1. Prepare ONETT set (usually filed by the buyer or their processor, but signed by both parties where required):

    • Notarized DOAS (at least 2–3 originals).
    • TCT/CCT (CTC) and Tax Declaration.
    • IDs/TINs of both parties.
    • RPT Receipts & Tax Clearance.
    • SPA/Board Resolutions (if applicable).
    • Other: Marriage docs, proof of relationship (if needed for exemptions), subdivision/condo clearances.

  2. Tax Computations & Returns (forms and deadlines evolve—verify current versions):

    • CGT Return (for individuals selling capital assets).
    • CWT (if ordinary asset/real-estate dealer seller).
    • DST Return for conveyance.
    • VAT (if applicable).

  3. Pay taxes and submit supporting docs.

  4. Obtain eCAR (Electronic Certificate Authorizing Registration). This is the BIR’s clearance for RD registration.

Time-sensitivity: CGT/CWT and DST have statutory deadlines measured from the date of notarization/transfer. Penal surcharges and interest accrue if late. File promptly.

Step 2: Local Government (LGU)

  • Pay Transfer Tax at the City/Municipal Treasurer within the period set by the LGU (often within days from BIR clearance/transaction). Obtain the Transfer Tax Receipt.

Step 3: Registry of Deeds (Registration)

  • Submit to RD:

    • Owner’s copy of Title,
    • Notarized DOAS,
    • BIR eCAR(s) (seller-side and buyer-side as issued),
    • DST proof, Transfer Tax Receipt,
    • RPT clearances, IDs, and any bank releases/cancelations of liens.

  • RD will:

    • Cancel the seller’s title and issue a new TCT/CCT in the buyer’s name,
    • Annotate cancellations (e.g., mortgage release) and any new encumbrances.

Pro-move: If you’re using a bank loan, the bank may require simultaneous registration of the Real Estate Mortgage (REM) against the new title; coordinate RD steps so the REM is annotated immediately upon issuance of the buyer’s title.

Step 4: Assessor’s Office (Tax Declaration Update)

  • Present the new title and DOAS to the Assessor to transfer the Tax Declaration to buyer’s name. Ensure RPT billing rolls over to you starting the next period.

6) Special Scenarios

  • Property with Mortgage:

    • Close with escrow-style mechanics: a portion of the price goes to fully settle the loan; bank issues Release of Mortgage to be filed at RD concurrently with the transfer. Avoid releasing full price until the release is secured.

  • Installment Sales / Contract to Sell:

    • Title transfer may be deferred until full payment. Protect the buyer with clear conditions, possession terms, and remedies. Consider escrow for title documents or post-dated checks backed by penalties and cancellation rights.

  • Assumption of Mortgage:

    • Secure the lender’s written consent and a Novation/Assumption Agreement; update Fire Insurance endorsements; make sure the bank’s internal title/loan files are consistent.

  • Condominium:

    • Check condo corporation approvals, by-laws, dues, and Special Assessments. Ensure parking CCTs are properly transferred together with the main unit CCT.

  • Agricultural Land (DAR-covered / CLOA):

    • Transfers may be restricted for a period; usually require DAR clearance, affidavits, and sometimes right-of-way or tenancy clearances. Extra diligence is vital.

  • Untitled Land (Tax Dec only):

    • High risk. A Deed of Sale cannot be registered to produce a Torrens title without proper judicial/administrative titling. If you proceed, understand you are buying possessory rights, not indefeasible ownership.

  • Right of Way / Landlocked Parcels:

    • The Civil Code recognizes a legal easement of right-of-way for landlocked estates, subject to compensation and least prejudicial route. Document easements expressly when possible.

7) Buyer’s Timeline (At-a-Glance)

  1. Week 0–1: Due diligence (CTC of title, Tax Dec, RPT, site check, HOA/condo clearance, bank pre-approval if financing).
  2. Week 1–2: Negotiate and sign LOI/MOA; pay option/earnest money with clear conditions.
  3. Week 2–4: Sign and notarize DOAS; assemble ONETT set; file and pay taxes; obtain eCAR.
  4. Week 3–5: Pay Transfer Tax; register at RD; receive new title; update Tax Declaration.
  5. Immediately after: Change utility names, HOA records, insurance, and begin RPT payments under your name.

(Actual durations vary by RDO, LGU, and RD workload.)

8) Warranties, Risks, and Remedies

  • Statutory Warranties

    • Warranty against eviction: Seller assures legal and peaceful ownership; if buyer is evicted by a superior title, seller may be liable for return of price, damages, etc.
    • Hidden defects: For improvements, Civil Code warranties may apply.

  • Contractual Protections

    • Seller’s representations: sole ownership, authority, absence of liens (except those disclosed), taxes paid, no illegal occupants, accuracy of areas/improvements.
    • Conditions precedent: delivery of clean title, eCAR issuance, mortgage release, vacancy.
    • Holdbacks/Escrow: retain part of the price until conditions are met.
    • Liquidated damages & dispute resolution clauses (venue, arbitration/mediation).

9) Practical Checklists

Buyer’s Due Diligence Pack

  • ✅ CTC of TCT/CCT (latest) with encumbrance page
  • ✅ Tax Declaration (land and improvements), Assessor’s FMV sheet
  • ✅ Latest 4 quarters’ RPT ORs + RPT Clearance
  • ✅ Zonal value printout (for your file)
  • ✅ HOA/Condo Clearance and account status
  • ✅ IDs/TINs of seller(s), marital docs, board resolutions/SPA if applicable
  • ✅ Site photos, vicinity map, boundary markers, neighbors’ statements (optional)
  • ✅ For mortgaged property: bank payoff and release commitments
  • ✅ For estates: extrajudicial settlement/court order + estate tax eCAR
  • ✅ For agri land: DAR clearances / restrictions

Closing & Filing Pack

  • ✅ Notarized DOAS (multi-originals)
  • ✅ BIR returns (CGT/CWT/DST/VAT if any) and eCAR
  • ✅ Transfer Tax receipt
  • ✅ RPT clearance & receipts
  • ✅ Title (owner’s copy) for cancellation & RD forms
  • ✅ IDs/TINs; SPA/Board docs; HOA/Condo clearance
  • ✅ Bank mortgage release (if any)

10) Negotiation Tips

  • Fix tax allocation in the MOA to avoid last-minute disputes.
  • Condition your payments on milestones (e.g., partial on DOAS, balance on eCAR, final on title release).
  • Escrow complex deals or where trust is low.
  • Survey if area matters (condos/house-and-lots can have discrepancies).
  • Handle possession carefully: agree on turnover date, keys, utilities, and penalties if delayed.
  • Record-keeping: keep certified copies, ORs, and validated forms—these will be needed for resale or loan refinancing.

11) Frequently Asked “What Ifs”

  • Name on title differs from ID (spelling/initials): require Affidavit of One and the Same Person and supporting civil registry documents; consider title correction if material.
  • Area discrepancy vs. actual use: commission a relocation survey; if significant, consider re-titling/subdivision before closing.
  • Buyer abroad: use a consularized/apostilled SPA appointing an attorney-in-fact.
  • Lost owner’s duplicate title: seller must secure RD-issued owner’s duplicate via administrative/judicial process before sale.
  • Tenant refuses to vacate: negotiate surrender with consideration, or require seller to deliver vacant possession and hold back funds until turned over.

12) Sample Clause Starters (for your lawyer to refine)

  • Tax-Sharing “Seller shall pay CGT (or CWT, as applicable) and any VAT due. Buyer shall pay DST, Transfer Tax, and RD registration fees. The parties shall cooperate to secure the eCAR and complete registration.”

  • Condition Precedent “Buyer’s obligation to pay the Closing Balance is conditioned upon issuance of the eCAR(s), payment and cancellation of existing encumbrances, and acceptance of vacant possession.”

  • Holdback “Buyer shall hold back ₱___ in escrow to be released upon annotation of the Release of Mortgage and issuance of the new TCT/CCT in Buyer’s name.”

  • Possession “Possession, risk, utilities, and HOA responsibilities transfer to Buyer upon signing of the Turnover Certificate on ___, subject to no remaining occupants.”

13) Final Reminders

  • Always verify with original sources (RD, Assessor, Treasurer, BIR RDO) because forms, fees, and thresholds are periodically updated.
  • Keep TINs ready; BIR processing won’t proceed without both parties’ TINs.
  • Never pay the full price until documentary conditions are satisfied (or funds are safely escrowed).
  • Use a licensed real estate broker (RESA Law) and a Philippine lawyer to review documents, especially for non-standard cases.

One-Page Summary (Workflow)

  1. Verify seller & authority → 2. CTC of title & due diligence → 3. LOI/MOA & earnest/option money → 4. Draft & notarize DOAS → 5. BIR ONETT: pay CGT/CWT, DST (and VAT if any) → get eCAR → 6. LGU: pay Transfer Tax → 7. RD: register, get new TCT/CCT → 8. Assessor: transfer Tax Declaration → 9. Turnover & possession → 10. Update utilities/HOA & keep records.

This guide is for general information and planning. Complex facts (estate sales, agricultural land, foreign parties, large liens) require tailored legal and tax advice.

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.

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