Procedure on Real Estate Sale Transaction - Part 2 of 3
This is the complex step-by-step procedure followed by a licensed Real Estate Broker to perfect a real estate sale transaction.
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Submit written computation of expenses to be shouldered by the seller
The seller would like to know the expenses he will shoulder and the net amount he will get in the sale of the property.
§ Capital Gains Tax / Credit Withholding Tax
§ (6% of the zonal value or selling price, whichever is higher)
§ Documentary Stamp Tax (DST)
§ (1.5% of the zonal value or selling price, whichever is higher)
§ VAT, if applicable
§ (10% of the zonal value or selling price, whichever is higher)
§ Business Tax (This applies to properties located in Pasig City and Quezon City)
§ Broker’s fee or commission
§ Other arrears
Documentations involved in marketing the property
Prepare the marketing materials- the following data are needed in preparing the materials:
§ Pictures of the property (remember the camera)
§ Location plan
§ Selling price
§ Special features, etc.
Promote the property
§ Advertisements in newspapers
§ Emails to clients and brokers
§ “For Sale” signs on the property
§ Tip: Prepare winning and attractive advertisements. Look at the ads in the papers and see what catches your attention. Design your ads around them. Two to 3 good ads can be alternately published in the newspapers. Vary the theme of your ads presenting different features of the property.
Create a Buyer’s Information Sheet (BIS)
This where you can record important information about the client and his requirement. The BIS contains general information data of the prospective buyer (name, address, telephone number) and the allocated budget, preference, etc.
Tip: Index cards are handy in organizing and classifying the buyers according to their requirements.
Prepare a list of properties that you intend to show the client
Give the client a copy of the itinerary of the tripping. At the end of the tripping, ask the client to sign your copy of the listings. This is a proof that you showed client the properties to protect you from buyers who decide to bypass you and deal the sellers.
Give a copy of the assigned document to the seller
Better yet prepare a letter registering the buyer’s name to the seller and have it acknowledged by the seller. Indicate the date when the seller received the letter.
Documentations involved during the negotiation
Offer to buy- the buyer may give an oral or written offer to buy the property. A written offer is preferred with the affixed signature of the buyer an received by the seller. The written offer shows the seriousness in buying the property.
Items that should be in the offer:
§ Price being offered
§ Deposit money
§ Mode of payment- cash or installment
§ Dates of payment
§ Expenses to be shouldered by the buyer
§ Other conditions
Tip: Keep a diary- At this stage of the transaction, you will be communicating both with the seller and the buyer very often. Record all conversations and meetings with the buyer and seller in your diary. Write all the dates of activities pertaining to the transaction. You can refer back to these records if there are some events you need to recall.
Closing the sale
The sale is consummated when there is the meeting of the minds between the buyer and seller on the price, terms and conditions on the property.
Tip: Always put in writing the agreed terms and conditions and have it signed by the seller and buyer to avoid misunderstanding. If the seller and the buyer are not present, you can fax or email the agreed terms and conditions to each party and have them confirm it. This will now be your guide in preparing the sales contract.
Documenting the sale
Determine the appropriate contract to complete the sale. The kind of contract you need depends on the nature of the sale transaction. There are two principal kinds of sale:
§ Absolute Sale- It is an outright sale. The buyer will pay the amount in full and the seller will immediately transfer the owner of the property to the buyer. There are no conditions imposed in this kind of sale.
§ Conditional sale- There are conditions set on the sale which should be fulfilled by the parties involved before the owner can pass the ownership of the property to the buyer. Normally, payment of the purchase price is on installment or staggered basis.
Draft the contract
§ The real estate broker drafts the contract as prescribed by the client. There are available legal forms that can be used as guide for making the contract. Remember, the fewer the terms of the contract and the briefer they are, the better.
§ Present the draft to the seller and the buyer
§ Suggest that they hire the services of a lawyer to review the draft of the contract. This will relieve you of the burden of having to worry about legalities and accurateness of the contract.
§ Tip: Unfortunately, not all lawyers are familiar with real estate transactions especially when the sale requires bank financing.
Finalize the contract
After the seller and buyer with their lawyers have agreed on the final provisions of the draft, you may now make the final contract. Again have the contract reviewed and approved by the seller and buyer.
§ Schedule signing of contract and make sure that all the necessary documents are available for turn-over to the seller/buyer
§ Prepare acknowlegement receipts to be received by the buyer and the seller enumerating all the documents that were given to them. Some of the documents submitted to the buyer will later be turned over to the broker to be used in processing the taxes to be paid to the BIR and in transferring the title to the buyer.
Payment of Capital Gains Tax/ Documentary Stamp Tax
The BIR, Registry of Deeds and the Treasurer’s Office only accept cash or manager’s check. Here is how the checks should appear:
§ Payee: Name of BIR accredited bank and branch
§ For the account of BIR
§ For the account of (name of taxpayer)
§ TIN of taxpayer
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