The Legal Side of Real Estate

[julz2006]

Julz2006

 

Special purpose vehicles have accumulated over the past 3 years a lot (read: billions) of foreclosed assets from banks. I am also aware of a clique of lawyers/brokers who actively participate in auctions in local governments. Your first step maybe is to buy newspapers and watch out for auction announcements. You can also check the websites of banks and government financial institutions.

 

Good luck!

 

..great!..i appreciate these a lot azayco (yours and dr.pepper's response).m doing this now and would really want to shake that billions a bit mski barya lng..you also mentioned about that "group",well i guess it's too much to ask - it's a clique after all..what im gonna be after next time is give u guys some scenarios and im gonna drill on the dirty details and the nitty-gritty..i hope y'all won't lose patience and kindness..

 

let's start:

 

they call this "flipping" the property or getting it "no-money-down" - sometimes using somebody else's (most of the time the bank's buyer's buyer,,whew!) money to pay downpayment to the bank...so when i do that,what do i get from the bank?a contract to sell?when i finally "flip" the property to my "end-buyer"(note first parenthesis),how do they go ahead with the paperworks

 

i guess that's all for now..a lot more coming if i'm to be allowed..heheh

 

Edited July 11, 2008 by julz2006

[wizard23]

..great!..i appreciate these a lot azayco (yours and dr.pepper's response).m doing this now and would really want to shake that billions a bit mski barya lng..you also mentioned about that "group",well i guess it's too much to ask - it's a clique after all..what im gonna be after next time is give u guys some scenarios and im gonna drill on the dirty details and the nitty-gritty..i hope y'all won't lose patience and kindness..

 

let's start:

 

they call this "flipping" the property or getting it "no-money-down" - sometimes using somebody else's (most of the time the bank's buyer's buyer,,whew!) money to pay downpayment to the bank...so when i do that,what do i get from the bank?a contract to sell?when i finally "flip" the property to my "end-buyer"(note first parenthesis),how do they go ahead with the paperworks

 

i guess that's all for now..a lot more coming if i'm to be allowed..heheh

 

 

 

IMO, you are the one that the bank recognizes as the client so from start to finish, you will be the bank's client even though youre using your client's money to pay for the foreclosed property. so what will you get from the bank? i think basically, you'll have a contract with the bank and depends how fast you fully pay the property. if not, they'll keep the title if you obtain bank financing. now if you are doing this without your buyer's knowledge, i don't know how but definitely, your buyer is not recognized by the bank. in terms of paperwork, it will be between you and your buyer. i don't know if banks honor deed of assignment where you will transfer ownership to your buyer in the middle of the term.

 

correct me if i'm wrong guys. thanks.

Edited July 12, 2008 by wizard23

[julz2006]

IMO, you are the one that the bank recognizes as the client so from start to finish, you will be the bank's client even though youre using your client's money to pay for the foreclosed property. so what will you get from the bank? i think basically, you'll have a contract with the bank and depends how fast you fully pay the property. if not, they'll keep the title if you obtain bank financing. now if you are doing this without your buyer's knowledge, i don't know how but definitely, your buyer is not recognized by the bank. in terms of paperwork, it will be between you and your buyer. i don't know if banks honor deed of assignment where you will transfer ownership to your buyer in the middle of the term.

 

correct me if i'm wrong guys. thanks.

 

 

..thanks wizard23..that helps..

..any other ideas?

[pol22366]

..thanks wizard23..that helps..

..any other ideas?

 

Looking at your proposed business, the down side of this would be on the contract between you and the "end buyer," and the contract between you and the bank...If anything changes in the former (because banks are regulated and always have a right to change some of the provisions of their contracts like the interests, surcharges, etc. depending on the dictates of the Central Bank) you cannot probably do the same with your contract with the end user. This will expose you to charges of misrepresentation, i.e. Estafa of at the very least other deceits. It would therefore be safer if you'll keep the "end buyer" informed of the transactions with the bank.

[julz2006]

Looking at your proposed business, the down side of this would be on the contract between you and the "end buyer," and the contract between you and the bank...If anything changes in the former (because banks are regulated and always have a right to change some of the provisions of their contracts like the interests, surcharges, etc. depending on the dictates of the Central Bank) you cannot probably do the same with your contract with the end user. This will expose you to charges of misrepresentation, i.e. Estafa of at the very least other deceits. It would therefore be safer if you'll keep the "end buyer" informed of the transactions with the bank.

 

hey pol22366!,,thank you for that..a bit scary,huh?hahah...it crossed my mind too,,it's good to have numerous input on an issue really,i appreciate it..

 

...conversely,some people say it's ok..check out this forum: http://www.entrepreneur.com.ph/board/index...opic=20004.1620 (i hope this is permitted)..one of those reasons it piqued my interest...been reading/writing about it and the reason i opened it up here is that at least we have lawyer-members on the forum who are so generous enough to impart some knowledge..

[azayco]

let's start:

 

they call this "flipping" the property or getting it "no-money-down" - sometimes using somebody else's (most of the time the bank's buyer's buyer,,whew!) money to pay downpayment to the bank...so when i do that,what do i get from the bank?a contract to sell?when i finally "flip" the property to my "end-buyer"(note first parenthesis),how do they go ahead with the paperworks

 

 

 

Let me make it clear and please do correct me if I misunderstood your business model:

 

These are the participants to the transaction:

 

Seller 1: Bank

Seller 2: Julz

Buyer

 

Julz will buy from Bank at P100 and immediately "flip" it to Buyer for P110, thereby generating profit of P10. Julz will use the payment of Buyer to pay the Bank.

 

I think these are the potential risk areas and concerns:

 

1. Timing

 

Julz needs to close the deal with the Bank before closing the deal with the Buyer. One potential risk here is the speed by which the bank can finish the documentation.

 

If it's full payment, the deed of sale between the Bank and Julz will have to be done before Julz executes a similar Deed of sale with Buyer. Timing here can be nail-biting.

 

If it is via installment, you will need to check the contract to sell with the Bank whether Julz will be allowed to dispose of the property prior to full payment. Remember, the Bank is the owner of the property until full payment.

 

2. Need for bridge financing

 

There may be instances when you will need financing to bridge the gap between closing with the Bank (cash out) and closing with Buyer (cash in). Dapat haba pisi. Kung di haba pisi, baka wala kita.

 

3. Tax exposure

 

There will be two sale transactions that will be subject to tax.

 

It is also possible that you will be considered a real estate dealer and hence, subject to VAT. Hehe

 

Good luck :zorro: :boo:

[julz2006]

Let me make it clear and please do correct me if I misunderstood your business model:

 

These are the participants to the transaction:

 

Seller 1: Bank

Seller 2: Julz

Buyer

 

Julz will buy from Bank at P100 and immediately "flip" it to Buyer for P110, thereby generating profit of P10. Julz will use the payment of Buyer to pay the Bank.

 

I think these are the potential risk areas and concerns:

 

1. Timing

 

Julz needs to close the deal with the Bank before closing the deal with the Buyer. One potential risk here is the speed by which the bank can finish the documentation.

 

If it's full payment, the deed of sale between the Bank and Julz will have to be done before Julz executes a similar Deed of sale with Buyer. Timing here can be nail-biting.

 

If it is via installment, you will need to check the contract to sell with the Bank whether Julz will be allowed to dispose of the property prior to full payment. Remember, the Bank is the owner of the property until full payment.

 

2. Need for bridge financing

 

There may be instances when you will need financing to bridge the gap between closing with the Bank (cash out) and closing with Buyer (cash in). Dapat haba pisi. Kung di haba pisi, baka wala kita.

 

3. Tax exposure

 

There will be two sale transactions that will be subject to tax.

 

It is also possible that you will be considered a real estate dealer and hence, subject to VAT. Hehe

 

Good luck :zorro: :boo:

 

 

thanks for that,azayco..that link i posted several posts up has something really intriguing going on..i wanna join that club later on..heheh..only that they lack some expert lawyer-type advise in there so i post it here...we have some nice things going here,too! ...i wanna learn more about real estate,really, and i already coordinated with the rebapqc chap to attend their seminar for aspiring real estate brokers...comes with a fee of 3k++ but that's nothing...i wanna learn the ropes first then strike on my own when ready,,

 

I really appreciate those replies...keep 'em coming!..( sometimes i almost forget to visit the regular threads anymore like the mps,mpas,ktvs, and all the other good things with this,damn!!)

Edited July 17, 2008 by julz2006

[moed]

Kailangan mo abogado dito at medyo complicado. May mga penalties ka na dahil delayed na ang filing and payment mo ng estate tax na dapat na file at nabayaran within 6 months pagkapatay ng father mo. May determination pa yan sa percentage of ownership dahil inheritance yan at kailangan rin extrajudicial settlement of estate of deceased person na medyo marami ring procedural matters.

[moed]

Pagkatapos pala sa city o municipality naman kung saan lupa, kailangan bayaran transfer tax tapos submit mga requirements sa Register of Deeds para matransfer sa inyo pangalan ang TCT.

[ela_bat]

that simple? i remember the last time my bro. in law requested for the change, they were asking for a fee something like P10,000.... geez, some people talaga... anyway, thanks dr. pepper. will just take care of it myself.

 

 

Most Cities or Municipalities charge fees for the transfer of ownership of tax declaration based on the purchase price or cost of the property. In our city for example, they charge .075% for the transfer of the ownership in the tax declaration. So the 10k they you mentioned, i would assume would cover for this.

[accountingboy]

you can hire a law office to handle this for you...if anyone is from cebu...just pm me..i can recommend you to one..thanks

[redax]

Most Cities or Municipalities charge fees for the transfer of ownership of tax declaration based on the purchase price or cost of the property. In our city for example, they charge .075% for the transfer of the ownership in the tax declaration. So the 10k they you mentioned, i would assume would cover for this.

 

You are referring to the tax on the transfer of real property ownership. This is a tax you pay to either the province or city to transfer ownership of real property in their jurisdiction, not the fee to change the reflected owner on the tax declaration. Payment of this tax is required before the TCT can be transferred to your name. The fee to change the owner reflected on the tax declaration is just minimal. If you already have a Certificate Authorizing Registration from the BIR, you don't really need a lawyer to fulfill requirements the Deed of Registry demands. The Deed of Sale, capital gains tax payment, CAR, payment of the transfer tax, clearance from the Real Estate Division, doc stamps from the BIR, and the previous TCT are all you need. Changing the tax declaration to reflect new owner's name is even simpler.

Edited August 2, 2008 by redax

[patdura]

I dont know kung OT ito, Id like to know kung ma itransfer sa PAG-IBIG ang property na nakaprenda sa BPI ng neighbor ko because he is selling it to me. Hope someone helps.Regards

[Dr_PepPeR]

I dont know kung OT ito, Id like to know kung ma itransfer sa PAG-IBIG ang property na nakaprenda sa BPI ng neighbor ko because he is selling it to me. Hope someone helps.Regards

 

If you mean the property is mortgaged to BPI, your seller will have to get the consent of BPI for the sale of the property, since mortgage contracts require the consent of the mortgagee and the Register of Deeds will also ask for this when you have the title transferred. This is more difficult than it looks so I suggest you coordinate closely with BPI to avoid hassles.

[rexroxas52]

If you mean the property is mortgaged to BPI, your seller will have to get the consent of BPI for the sale of the property, since mortgage contracts require the consent of the mortgagee and the Register of Deeds will also ask for this when you have the title transferred. This is more difficult than it looks so I suggest you coordinate closely with BPI to avoid hassles.

 

sir, with all due respect. IMHO, the seller does not have to get the "consent" of the mortgagee - BPI. A piece of land or real property if mortgaged, acts as a security for the payment of the LOAN-the principal contract in a mortgage contract. The land is still owned by the mortgagor or the debtor or the person who incurred the loan. Ergo, under the property law in the civil code, the real owner may sell or exercise his/her right of disposition without intervention from a third person. If the seller would be required to secure the consent of the mortgagee, this would amount to an undue imposition to the right of the seller to dispose of his/her property. This should not happen. The seller then, may just "notify" the mortgagee, in this case the BPI, of the sale. The sale will still be valid subject to the mortgage enetered into between the seller/mortgagor(original owner) and the mortgagee (BPI). Meaning, although the piece of land was effectively transferred to the new owner (buyer), the same will still be subjected to the mortgage agreement.

 

PLEASE CORRECT ME IF I'M WRONG.

[azayco]

Better to check the Mortgage Deed to see whether it requires consent or mere notice. But knowing BPI, I am betting it will be a consent requirement.

[rocco69]

Better to check the Mortgage Deed to see whether it requires consent or mere notice. But knowing BPI, I am betting it will be a consent requirement.

 

In Litonjua v. L & R Corporation (320 SCRA 405), the Supreme Court said that a clause in a deed of mortgage requiring the consent of the mortgageee before the mortgagor can sell his property is void, being contrary to Art 2130 of the Civil Code. Clearly, even if there is a provision in the Mortgage Deed requiring consent, the same would not be binding upon the seller. rexroxas 52 would thus be correct.

 

However, the usual practice by banks in mortgages is that it requires the borrower to surrender the OCT or TCT of the property being mortgaged to the bank. Kung ikaw naman ay buyer, di ka bibili kung hindi ibibigay sa iyo ang titulo (kaliwaan baga, bigay ko sa yo ang pera, bigay mo sa akin ang titulo). Since the seller will not be able to get the title from the bank without first repaying the loan, mahihirapan siyang ibenta yung lupa without first getting the consent of BPI to the transaction (not because of Art. 2130, but because he cannot get the Torrens title).

 

Isa pa, kung ipapasa ang pagkakautang sa Pag-Ibig, baka hindi rin pumayag ang Pag-Ibig na maging 2nd mortgagee lamang dun sa lupa. You (patdura) will have to coordinate with BPI and Pag-Ibig on this. I suggest you talk to BPI whether they will be amenable to a sale of the mortgaged property, as well as talk to Pag-ibig [Pag-Ibig Hotline (02)7244244 or you may visit their website at http://www.pagibigfund.gov.ph/index.asp) whether they allow loans to purchase properties already mortgaged to another institution.

[Dr_PepPeR]

sir, with all due respect. IMHO, the seller does not have to get the "consent" of the mortgagee - BPI. A piece of land or real property if mortgaged, acts as a security for the payment of the LOAN-the principal contract in a mortgage contract. The land is still owned by the mortgagor or the debtor or the person who incurred the loan. Ergo, under the property law in the civil code, the real owner may sell or exercise his/her right of disposition without intervention from a third person. If the seller would be required to secure the consent of the mortgagee, this would amount to an undue imposition to the right of the seller to dispose of his/her property. This should not happen. The seller then, may just "notify" the mortgagee, in this case the BPI, of the sale. The sale will still be valid subject to the mortgage enetered into between the seller/mortgagor(original owner) and the mortgagee (BPI). Meaning, although the piece of land was effectively transferred to the new owner (buyer), the same will still be subjected to the mortgage agreement.

 

PLEASE CORRECT ME IF I'M WRONG.

 

No you are correct. I'm talking about REMs in favor of banks. When a bank gives a loan, the primary source of repayment is the cash flow of the borrower, who is usually the mortgagor. The REM is as you said, is just the collateral, but which is essential to the consideration of the bank in granting a loan. Normally, there are representations, warranties and covenants that are part of the REM contract, violations of which are considered an event of default. All these are considered essential in ensuring that the value of the property mortgaged does not deteriorate while the loan is outstanding. If the bank cannot enforce these provisions on the owner, such as when the property is sold to a third party, then the conditions for granting the loan have changed. Thus there is a consent requirement before the mortgaged property is sold to a third party, the violation of which may trigger an event of default, which then could cause the foreclosure of the mortgaged property. In any case, you can always try to have the mortgaged property transferred, assuming you can get hold of the Owner's Duplicate Transfer Certificate of Title. In my experience, the Register of Deeds will require the consent of the Mortgagee. Then you can tell him about the legal niceties and go through an LRA consulta/RTC case.

[moed]

Unfortunately, in real life, its not only the law and jurisprudence that matters, but standard practices as well.

[rexroxas52]

nice discussion...

i learned a lot...

[selset45]

Tulong po mga Sir:

Kabibili ko lang po ng lote, last week nagkabayaran at ok ang deed of sale, na-notaryo rin, at hawak ko rin po ang original owner's copy of TCT. Then pagpunta po sa BIR para bayaran ang capital gains tax at doc. stamp, napansin sa BIR na may tatak ng banko sa likod (sanla) way back 1972 pa yung tatak. Sabi sa BIR ay kailangan ng clearance sa banko, kaso mo yung banko eh non-existent na ngayon - after over 30 years.

Kinausap namin yung seller at sabi nila na release na yan sa mortgage kaya nga ayan na ang original na titulo. Eh kung hindi release yan eh di nailit na yan ng banko. Kaso namis-place na yung clearance. Totoo naman po na existing pa yung lote dahil malapit lang sa amin at wala naman nagke-claim na iba, ganon din po sa register of deeds, walang claim ang banko at naroon pa rin ang original title. Yun nga lang may tatak nga po sa likod.

Paano po kaya ang nararapat na solusyon dito?

Thanks in advance.

[pol22366]

Tulong po mga Sir:

Kabibili ko lang po ng lote, last week nagkabayaran at ok ang deed of sale, na-notaryo rin, at hawak ko rin po ang original owner's copy of TCT. Then pagpunta po sa BIR para bayaran ang capital gains tax at doc. stamp, napansin sa BIR na may tatak ng banko sa likod (sanla) way back 1972 pa yung tatak. Sabi sa BIR ay kailangan ng clearance sa banko, kaso mo yung banko eh non-existent na ngayon - after over 30 years.

Kinausap namin yung seller at sabi nila na release na yan sa mortgage kaya nga ayan na ang original na titulo. Eh kung hindi release yan eh di nailit na yan ng banko. Kaso namis-place na yung clearance. Totoo naman po na existing pa yung lote dahil malapit lang sa amin at wala naman nagke-claim na iba, ganon din po sa register of deeds, walang claim ang banko at naroon pa rin ang original title. Yun nga lang may tatak nga po sa likod.

Paano po kaya ang nararapat na solusyon dito?

Thanks in advance.

 

Selset:

 

My initial suggestion to you is to visit Banko Sentral ng Pilipinas and ask them where are the records of the already non-existent bank, on the (sanla) way back 1972, in relation to your title. Usually they will have such records and they will know what really happened through the documents of the said bank. If you succeed, then ask for a certification to that effect.

 

If that does not work, then you have to file a case to have the annotation removed from your title, with the Banko Sentral as one of the respondents, as well as the concerned Register of Deeds.

[Dr_PepPeR]

Selset:

 

My initial suggestion to you is to visit Banko Sentral ng Pilipinas and ask them where are the records of the already non-existent bank, on the (sanla) way back 1972, in relation to your title. Usually they will have such records and they will know what really happened through the documents of the said bank. If you succeed, then ask for a certification to that effect.

 

If that does not work, then you have to file a case to have the annotation removed from your title, with the Banko Sentral as one of the respondents, as well as the concerned Register of Deeds.

 

You will need lots of patience and time Selset. Remember you are asking for records that date way back to 1972. More than 30 years ago. Document your query with the Banko Sentral, tell everything that happened in your letter, including documenting what actions they took. Keep received copies and any letters they send back to you. Write to the Head of the Central Point of Contact so they kick it to the proper Department. You will need these when you file a case for removal of the annotation, which is where I think it will end up anyway. For the record, you should have made sure that the Cancellation of Mortgage was submitted to you as the Buyer. If I were you, I would have withheld payment until the mortgage annotation was removed. That is the responsibility of the Seller especially if he had made a warranty in the Deed of Sale that the property is free and clear from all liens and encumbrances. This should have been the Seller's problem, not yours. Put pressure on him as well.

[selset45]

^ many thanks sir Pol22366 and dr_pepper.

Following your suggestions, I just checked the website of Central Bank at found out that the old bank was a thrift bank and granted to operate as a rural bank under a new name since 2002. This new "rural bank" is still operating and we will visit tomorrow.

Sana ok naman ang maging pag-uusap sa banko at makakuha ng clearance. I will keep you posted sirs, I'm sure other members will also learn a lot thru this forum..

[wizard23]

Hi again. my client is selling his 1st property, house and lot, and i think there's already a sure buyer. reason for selling is that my client just bought a 2nd property - bigger house and lot, and they need the money to pay for the amortization. they bought the 2nd property via bank financing.

 

question 1. now that my client is selling his 1st property. is he still liable to pay the CGT? i've done some backreading in this thread and i read somewhere that the owner/seller can actually avoid paying capital gains tax if the original owner/seller purchases another property of equal or greater value within 18 months.. yun nga lang, in my client's case, he bought the 2nd property first before selling the 1st property.

 

i think this was Dr. Pepper's quotes in the early pages of this thread when the issue was how to avoid paying cgt:

 

"Or if the seller uses it for renovation of real property (building or other improvements). But the owner/seller has

to enter into an escrow agreement with the BIR and the bank of his choice."

 

as a follow up question, will this apply to my client as well? can you enlighten me on the escrow agreement? how does it work?

 

i will take care of the documentation and i realized i don't have a Deed of Sale template. but i found a template here. kindly check the Deed of Sale template.

 

question 2. i realized the Deed of Sale i'm familiar with involves vacant lots only. is there a Deed of Sale template involving house and lot or all Deed of Sale pertains to the land only? i just want to make sure that when we execute the Deed of Sale, the deed covers not only the land itself but also includes the improvement. can anyone give me a template of Deed of Sale for house and lot if there's one?

 

question 3. di ba, the CGT is usually 6% of the selling price. so when you say the cgt will be imposed on the land and the house. so based on the selling price, it already covers both the house and the lot? or is there a separate computation of cgt for the house and the lot?

 

i got a bit confused here so i would appreciate your expert advice.

 

that's all for now. thanks a lot for your help.

Edited August 21, 2008 by wizard23