Contract of Sale of Real Estate Property

Summary: Are you planning to buy or sell a property in the Philippines? We’ve made an easy-to-follow guide on what buyers and sellers should look for when conducting a property purchase.

Read time: 7 minutes.

Selling your property or purchasing one may not be as easy as it looks. For a sale to be legal and binding, several factors have to be considered during purchase. Let us highlight these conditions in this short contract to sell real property guide.

What Type of Land Sale Contract are You Looking For?

There are two major contracts for buying or selling a real estate property: Deed of Absolute Sale and Deed of Conditional Sale.

●      Absolute Deed of Sale

This is a type of contract in which the buyer provides full payment. After full payment, there will be an immediate transfer from the property owner. This transaction includes a deed of sale of land, a deed of sale of land rights, and more.

●      Deed of Conditional Sale

When an installment payment is arranged to purchase a property, a Deed of Conditional Sale is agreed upon. This type of contract is also applied when the parties have a condition before the complete ownership transfer.

Determine the Proper Parties for the Sale

Before establishing a sale or interest in a deal, consider the parties involved. Carefully scrutinizing the identity of the seller and the buyer is necessary for all types of real estate transactions. Consider the following details.

●      Seller Background

If the seller is married, their spouse should signify their consent over the sale. If consent is not asked, the sale of the property is void. The family code states that if a property is sold without the knowledge and full consent of the seller's spouse, then the sale will be null. But the transaction will be classified as a continuing offer which will only be completed after the seller's spouse agrees to the deal.

If the spouse has sold the property with their spouse's knowledge but not with consent, the contract to sell is annullable. In this case, the seller's spouse is allowed up to 5 years from the contract date to go to court to annul the contract.

●      Buyer Background

There's no need to secure spousal consent when buying a property when it comes to the buyer. The spouse will be automatically included in the Absolute Community of Property or Conjugal Partnership of Gains.

●      Age and Other Restrictions

During the time of sale, all the parties involved must be of legal age (in the Philippines, a person is of legal age when they reach 18 years old). The seller and the buyer must be of sound mind and should be free from restrictions under guardianship.

●      Important Details

Aside from the conditions of the seller and buyer, you must also note the complete names of the buyer or the seller, their addresses, civil status during the time of the sale, and the Tax Identification Numbers of the involved parties.

Consider the Property Details Before any Agreement to Sell of Property

Aside from the identity/background of the parties, you must also check the property details. The buyer must look at three crucial factors.

●      Property’s Address

The property's address must include the lot and block number or house number, street name, barangay, district, city, and zip code. Other types of addresses exist in rural or remote areas, so be sure to consider the complete address. Visit the tax assessor's office in the local city hall where the property is located if you're unsure about the property's full address you wish to buy or sell.

●      Property's TCT Number

The Transfer Certificate of Title contains specific details of the property, such as all the geophysical elements, property registration number, and the owner's identity.

Whether you're the seller or the buyer, you must ensure that all the documents you have on hand about the sale are accurate and genuine. You can tell that a TCT is confirmed when the SN No. is in red. Check the page number located at the upper right-hand of the page; the last two numbers should be the same as the previous two numbers of the TCT. This certificate has a red-blue border, and this must be slightly embossed, not flat.

●      Property’s Technical Description 

The technical description, including the property boundaries, should be specified. These will be included in the owner's scope of ownership.

Other essential terms of the land sale contract

After determining the identity of the parties involved in the transaction and the property’s description, you should also scrutinize the following.

●      Property Price

The property price is needed when assessing the capital gains tax of the property by the Bureau of Internal Revenue. If the property's zonal value is higher, the BIR will use this to compute the capital gains tax.

Take note that the capital gains tax is 6% of the property's value. The seller must shoulder the amount, but the buyer may decide to pay for it in some cases.

●      Transfer Taxes

The buyer must settle the transfer of property taxes in the local Register of Deeds or to a local government office.

●      Any Downpayment Details

If the property is sold on an installment basis, the downpayment amount must be indicated in the property sale agreement or land purchase agreement. Also, all parties should consider the method of installment payment. In most cases, the buyer provides post-dated checks for every amortization.

While there are many factors to look at before closing a property sale, it’s important to go through the right process to protect both the seller and the buyer. Taking time to follow the legal process not only saves money but also secures the purchase from potential issues in the future.Back To Home         A Closer Look At Earnest Money