3 Ways to Avoid Pitfalls in Real Estate Transaction

Ms. Charmaine • February 20, 2014


Vox emissa volat; litera scripta manet - Words spoken vanish; the written letter remains. Maybe it’s one of the reasons why Statutes of Frauds provides that agreements to be enforceable needs to be in writing and subscribed by both parties, like an agreement in real estate. While, there are instances wherein some choose not to write down every agreement because of the trust reposed towards the other party, always remember that writing it down is a necessity no matter how simple the agreement is. When you are buying a million worth of property, it always follows that you have something as a proof that payment has been made as well as conveyance of ownership, otherwise you are just throwing away your money for property which is only half yours. Writing it down doesn’t mean that the element of trust isn’t there, it’s a matter of preserving your interest so in case of conflict in the future there is a document to guard and protect you. Provided further that before signing any agreement, make sure to read the entire provisions, since maybe an item you missed will have a big deal in the future.

Normally, it is the seller who pays for the capital gains tax/creditable withholding tax, however, there's no exact provision in the law as to who will shoulder for the expenses of the sale, it’s always upon the agreement of the parties concerned and there enters the indispensable role of a contract.

It really pays to have technical know-how in real estate since we adhere to the latin maxim of Ignoratia legis non excusat, which means ignorance of the law excuses no one. As experience, there are some who buy properties without knowing that the sale is subject to VAT, thus the contract is silent as to who shoulders the VAT, which is a big problem and causes further delay in the transfer and titling rocess especially if there's no one who wants to give way.

To give you a better understanding, the following, among others, are VAT exempt transactions (BIR Revenue Regulations 03-2012):

Sale of Dealer/Developer

  • Vacant Lot: Php1,919,500 and below
  • House and Lot: Php3,199,200.00 and below 


It is based on the premise of Caveat Emptor, or let the buyer beware, in so doing, before committing yourself in buying a property, check not only the certified true copy but the original copy of the title at the Registry of Deeds, check whether there are annotations at the back of the title like encumbrances, liens, mortgage, adverse claim, or pending suit (lis pendens), Section 4, Rule 74 of the Rules of Court, sale or donation of undivided portion and any other claims to the property depreciative to its value, because without doing it, you will take and shoulder all risks and the one at loss due to such negligence. There are some instances also where there are fake titles roaming around, and it really pays to take extra attention to the authenticity of the title and the reliability of the person you are contracting to.

Here are simple ways of checking the authenticity of titles:

For new titles:

1. Check the bar code at the lower left portion, it should reflect the title number when scanned.

2. Check the bar code on the lower right portion of the title, it should reflect the serial number of the title when scanned.

For old titles:

1. Date of registration should be after the date of printing of the title

2. Check water marks or security marks- it must be either NLTDRA or LRA

3. Check the name and signature of the RD at the time of registration

  • Another proof of ownership is the tax declaration, so you also have to get a certified true copy of the tax declaration, Check also whether the tax are properly paid at the Assessor's office, and get statement of account from the treasurer’s office of tax clearance to know the extent of unpaid taxes if there are any. Don’t just buy a property when you are in doubt or cross fingers that no problem will arise after you take possession of the property.
  • Check also whether the local government requires payment of business tax (for corporations only). For properties sold within Quezon City, Pasig City, Taguig City, Caloocan City and Las Pinas City all in Metro Manila, and according to a source Antipolo City also requires payment of business tax, it is also a factor to consider by the contracting parties.
  • A wise buyer ALWAYS CONDUCTS OCULAR INSPECTION: one PRINCIPLE OF VALUE is EXTERNALITIES, wherein the value of the property depends on the environment that surrounds it, thus value tend to be enhanced by superior realty (PROGRESSION), while it is adversely affected when subjected to inferior realty (REGRESSION). Should you have plan to sell your property in the near future (buying it today merely for investment) it’s better to apply the principle of PROGRESSION, and of course always apply this principle in all your real estate transactions.
  • Exercising due diligence is a must since there are problems that arise even after the consummation of a sale, for example, area sold (as stated in the contract) is different from the actual area, here are your remedies:
    1. If you pay a lump sum, you are not entitled to reimbursement if the area of the property stated in the title is lesser than the actual area and you are not obligated to give it back if its greater. You are lucky if it’s greater but how about if the area is lesser?
    2. However, if the sale states the price per square meter, you have the right to demand for deficiency, however refund or rescission can be resorted only if the lacking area is not less than 10% of the area stated in the contract. In case of greater area, you should pay for the excess area or to give it back.

To determine the exact area of the lot, plot the technical description using lot plotting by computer (Informatik MapDraw Software)

  • For condominium unit buyers - check whether what you are buying is perpetual ownership or just a leasehold right, check for the unpaid bills, condo dues, and taxes and determine whether the condominium developers perform utmost adherence to the law, such as limitation on use, height limitation, floor area ratio and set back requirements.
  • Do not even forget to know whether you are negotiating with the registered owner, heirs or a representative, if just a representative, there must be a special power of attorney. If the owner is based outside the Philippines, the SPA should be authenticated by the Philippine Consul.
  • Do not even forget to know whether you are negotiating with the registered owner, heirs or a representative, if just a representative, there must be a special power of attorney. If the owner is based outside the Philippines, the SPA should be authenticated by the Philippine Consul.

1. When the property regime governing the spouses is absolute community of property except when the property is acquired by gratuitous title, or acquired before marriage by a spouse who is survived by a legitimate descendants by a prior marriage.

  • 2. When the property regime governing the spouses is conjugal partnership of gains except, when the property is acquired by gratuitous title or with the exclusive funds or property of the acquiring spouse.

  • • Lastly, do not forget to register the sale even if it is only a mutual promise to buy and sell (contract to sell) since mere possession of the property does not vest title, you are just a de facto owner, and in case of conflict or double sale, the law favors the one who registers first and is given the greater right.


While long term payment is not a heavy burden than outright cash payment, for wise buyers and for those who are practical, buying a property on a cash basis poses many benefits wherein you can enjoy the benefit of a discount, as compared to long term payment, wherein aside from having no discount, your payment is subject to monthly amortizations.

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