DUE DILIGENCE IN BUYING PROPERTIES

Buying real estate in the Philippines. A list of key things to check before you
buy. You have to be very careful when making real estate investments in the
Philippines. The market for Philippine real estate is quite illiquid. Once you have
bought your property, you may have a hard time selling it. Here are a few
suggestions for doing your Philippine real estate due diligence.

1. FORECLOSED PROPERTY. There are many complicated legal issues involved in

buying foreclosed property. If the foreclosure was not handled properly you
may lose the property and have no recourse to the seller. If you decided to
buy foreclosed property, make sure you have a trusted, experienced attorney.

2. TITLE. Make sure the seller is the owner of the property as shown on the title. Ask
for ID. It’s not unknown for persons who don’t have full (or any) ownership to
try to sell real estate. Get the seller to give you a copy of the title, a copy of
the survey plan, and a copy of the latest tax declaration. Take the copy to the
Register of Deeds and ask to see the master copy and make sure both agree.
Make sure that the copy the the seller gives you has the same annotations on
the back as the one at the register of deed. Verify that title is clean – meaning
the property is not mortgaged (no liens & encumbrances on the property). You
can see that at the back of the title with the heading “Encumbrances”. This
page must be empty if you are told that the title is “clean”. But sometimes the
space for the technical description of the property on the front page of the
title is not enough and the description of the property is continued on the
“Encumbrances” page, this is of course all right.

HISTORICAL TRACEBACK with the RD.

3. TAX ASSESSOR. Check with the tax assessor to see if the tax files agree with the
Registrar of Deed’s files. A property title with home or any permanent building
improvement will have a counterpart pair of tax declarations, one for the land
and the other for the improvement. Bring the photocopy of tax declaration to
the Municipal Assessor (if property located in municipality) or City Assessor (if
property located in city) and request a Certified True Copy of Tax
Declaration. If the property is currently or long past mortgaged or
encumbered, one will see that “stamped” in the Certified True Copy of Tax
Declaration. If the property is clean, meaning not mortgaged or encumbered,
compare the photocopy with the Certified True Copy of Tax Declaration. If the
entries are not the same, ask the Assessor the reason for the discrepancy.
4. TAX MAP OFFICE. Bring Certified True Copy of Title to the Tax Mapping Office.
This is the office where archives of lot plans and vicinity maps of properties
located in a province. Request copies of lot plan and vicinity map.

5. SURVEY. Make sure that the land described on the title is really the land that
you are buying. If there is any question about this, hire a private land surveyor
or a geodetic engineer to mark the boundaries of the property you are buying.
This is what is called as RELOCATION SURVEY.

6. ACCESS. If the property does not front on a public road, make sure of the
validity of any easement or right-of-way to the property. If you are buying
during the dry season, consider what your access road will be like during the
wet system. We bought our property when it was dry. Access was fine but
became nearly impossible during the wet season. Who will be responsible for
maintaining a private road giving access. It will probably be you as other
property owners will be unable or unwilling to shoulder the expense.

7. MUNICIPAL TREASURER/BACK TAXES. Bring the Certified True Copy of Tax

Declaration to the Municipal Treasurer (if property located in municipality) or
City Treasurer (if property located in city) and request a Real Property Tax
Computation. This is to find out if the property owner is up to date with real
property tax payments.

8. PRESCRIPTIVE EASEMENTS. Check for any existing prescriptive easements or

existing uses such as water lines, sewer lines, power lines, paths, trails or roads
not noted on the title.

9. NEIGHBORS, BARANGAY CAPTAIN. Talk to everyone around the property,

neighbors, etc. Talk to the barangay captain. Talk your fool head off to anyone
walking near the property and see if they have any claims or info.

10. VACANCY. Check to make sure no one is living on the land. If they are, getting
rid of them can be a major headache and/or expense. If anyone is living on
the land make it the responsibility of the seller to deliver the land vacant. After
closing, take steps to ensure that the property stays vacant.

11. If in a subdivision, any underlying problems, encumbrances which could

impact your property?

12. IS PUBLIC WATER/SEWER AVAILABLE? If not, how will these be arranged. Is

landline telephone service available? What about Internet access? Is DSL
available? If too far from the nearest cell tower, wireless Internet may not
work. If this is important to you (and it is to most foreigners) ask Smart or Globe
to check the signal strength before buying.
13. OUTSTANDING BILLS. Seller must provide proof of payment of outstanding
electric, water, telephone, Internet bills. Otherwise, the utility company will
require you to pay any outstanding bills before giving you, the new owner,
service.

14. IS TELEPHONE/INTERNET AVAILABLE? While wireless options are available, wired

internet access is usually better, plus, if you have a wired telephone
connection, domestic phone calls are much cheaper than cellphone calls.

15. ELECTRICAL CONNECTION. Is the property close to public utility lines. If not it,
you may face and expensive ordeal to bring power to your property.

16. CAPITAL GAINS TAX. Legally, CGT is the responsibility of the seller but who pays
the CGT is part of the purchase negotiations. The seller may get satisfaction
out of getting the buyer to pay and may be willing to concede on other issues.

17. TITLE. Property should be titled to both the Filipina wife and the foreign
husband. Those who claim that land must or should be titled only in the name
of the Filipina wife, should note that the courts in various cases have accepted
the fact that land was titled in one name only, as being evidence of the
separate nature of the land holding.

18. REGISTRATION AND DELIVERY OF TITLE. Ask your attorney for a proposed closing
statement. Make sure that your attorney handles title registration and that all
fees and documentation needed for registration are in your attorney’s hands
at closing.

19. LEGAL REPRESENTATION. Hire an experienced real estate attorney to represent

you. NEVER agree to use the seller’s attorney to represent you. Try for a 2% flat
fee.

20. NOISE. Noise is a fact of life in most places in the Philippines. This can be a
special problem if you are near a barangay (municipal) hall. Check the
distance form your dream property to the nearest barangay hall. For fiestas
and other events, huge sound systems are moved in and can make your life
miserable. Don’t bother complaining, it will only make matters worse for you.