All properties that are offered in the market should have a Property Folder. Offering properties for sale without property folder, it is like selling canned goods without labels.
A Property Folder is a real folder that contains full-disclosure paperwork which proves two things, that: (1) the property is properly documented, and (2) the person who is offering it is the right person who has the authority to offer the property.
The Property Folder must be organized BEFORE a property is offered for sale in the market. The offeror of the property must always be ready to present the folder to ANYONE who wants to see it, whether the requestor is another Agent or a Potential Buyer.
Who should organize the Property Folder?
Ideally, the property owners must be the ones who will organize their own property folder. But of course, the Listing Agent can do it for the seller.
What is the workload in Property Folder preparation?
There are two parts of the property folder preparation workload.
(1) CHECKLIST PREPARATION - The workload includes an interview with the property owner and a read through the available documents to come up with a Checklist of documents that should contain the Property Folder.
(2) GATHERING OF DOCUMENTS - The workload includes gathering of documents to complete the Checklist.
How much is the fee for the workload?
Some agents call this workload "Documentation Service", but it is strange that they do this only when the sale is consumated. Most Listing Agents I know are not charging fees in preparing property folders because they consider the service already paid by the commission. However, I think real estate brokers should charge professional fees this service because no agent is sure yet if he/she can sell the property. Property folder preparation is a lot of work, and ideally, it must be done before exposing the offer to the market. Agents spend days and trips to various government agencies just to complete a folder. So, it is just fair if the property owners pay for this service in advance.
What is your advice if property owners prefer to do a self-help in property folder preparation?
Of course, self-help is what we always wanted. But the property owner should go through weeks of study to know everything a Broker knows about documentation. If self-help is what the customer wants, you may advise the customer to study ALL information in the REIBS.COM Website, which contain links to all instructional information every Broker must know. The REIBS.COM Online Library is open and free, and no log-on is required.
What are the Four (4) Types of Folder Tags?
Color coded tagging is a unique innovation of the Bank of the Philippine Islands for the forclosed properties that they sell. So I will just adopt their techinique, plus a minor addition.
- GREEN TAG - Neat documents, no issues. These properties are very easy to sell.
- YELLOW TAG - With issues, title has cloud, but not yet in court. Some of these kinds have liens and encumbrances. These propertise must be offered at discounted price, and need a lot of guarantees, warranties, and are difficult to sell. It requires a lot of work for the Broker.
- RED TAG - Property ownership is ongoing judicial proceedings. These properties are cheap but almost impossible to sell.
- WHITE TAG - advertiser/owner has no property folder or lacking basic document. I call this "selling of canned good without label". White Tags are supposed to be ignored by intelligent potential buyers. These are types of properties that are normally carried by unregistered real estate agents, and even by licensed agents who have "shady" operation. Various real estate agent anomalies surround these white tags - taking a trip to see these white tags is not advisable.
What are the Required Documents?
BASIC - the basic contents of the Property Folder are:
- Certified true copy of title, stamped by the Registry of Deeds.
- Certified true copy of tax declaration, stamped by the Assessors Office of the City Hall.
- Location Map and pictures.
- Owner's offer to sell stating his/her initial asking price.
- Appraisal Report - any seller could wild-guess the asking price, but it is not advisable and there is a lot of reasons why. The seller must get an appraiser from IPREA or PARA (see my favorite links). Alternatively, a property owner may use as reference an appraisal report of any similar property in the area as long as the recycled report is not more than two years. Please advice the property owner to ask the officers of his/her Homeowners Association if they know someone in the neighborhood who had their property appraised for the last two years.
- Photocopy of the ID of the Seller.
CASE-TO-CASE - the other important contents varies on a case-to-case basis, depending on the applicability, such as the following:
- If there is a Broker involved - the folder requires Authority to Offer for Sale granted to a Licensed Broker and photocopy of the license and registration of the Broker.
- Notarized Power-of-Attorney granted to a Non-Broker Agent who is not expecting a share of the commission. If the seller is overseas, the Power-of-Attorney should be notarized a a Philippine Consular Officer.
- Marital Consent - this is always required if the property owner is currently married.
- Notarized Extrajudicial Settlement - this is always required if there are multiple heirs who are entitled a share if the property is sold. Real Estate Brokers DO NOT do any assistance in this document that is a job of another profession we call LAWYERS.
- Statement of owners of adjacent properties - the owners of the adjacent properties surrounding the property on board have the first right to buy the property. You must always ask the adjacent owners first and have them sign a statement that they are not interested to buy the property. Because you would be wasting your time and effort to find buyer everywhere, only to find out in the end that the adjacent property will exercise their right to buy.
- Statement of Current Tenant - the current tenant have this thing they call "right of first refusal". It is something similar to the right of adjacent properties. So, get a statement that they are not interested to buy the property.
- Owner's Statement of Improvements that is undeclared in the latest Tax Declaration - this is very important to determine if there are Real Property back-charges that the City Hall will charge for undeclared improvements. Back charging can only go back to the last 10 years.
- Notarized Corporate Resolution to Sell the Property - this is very important if the owner of the property is a corporation. This document will prove that the corporation has indeed officially approved that they are going to sell the said property.
- Mortgage Contract and Bank's Statement of the Status of Mortgage - you can get a current statement of account from the bank.
- Foreclosure Documents - this is normally available with the legal department of the bank if the property went through a foreclosure proceeding in court.
- Statement on liens, encumbrances, tenants, and cloud of title - the property owner must prepare a statement that discloses these information.
- Homeowners Association By-laws and monthly association dues rates -- this can easily be secured by the Property Owner from the office of the homeowner's association.
- Project Profile -- HLURB License to Sell, available subdivided lots, amortization proposal, developer profile, etc..
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