FAQ on Home Guaranty Corporation

What is the role of the Home Guaranty Corporation in the government's shelter program? How does it differ from the roles of the Home Development Mutual Fund (HDMF), the "Pag-Ibig Fund" and the National Home Mortgage Finance Corporation (NHMFC)?

HGC supports homeownership among Filipinos by encouraging banks and financial institutions to lend to home/housing developers. It assures lenders and investors in housing by issuing loan and securitization guarantees. The HMDF/Pag-ibig Fund and NHMFC, however, directly lend money to housing developers and individual/group borrrowers.

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What are the benefits of the HGC Guaranty?

1. It guarantees the payment of the guaranteed loan or investment balance outstanding and due on the principal obligation, plus interest yields of up to 11%;

2. It exempts the interests derived and other yields from the loan from all forms of taxes(up to 11% rate of interests);

3. For socialized housing, those with contract prices of P 300,000.00 and below are entitled to lower premium fees and to the maximum cover and tax-exempt interest of up to 11%, and;

4. The Government of the Republic of the Philippines guarantees the payment of HGC's obligations.

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What are the guaranty programs of the HGC?

1. Developmental Loan Guaranty, which covers loans extended to developers for the development of subdivisions, townhouses, dormitories, apartments and other residential dwellings.

2. Retail Loan Guaranty, which covers loans and credit facilities extended for the purchase / acquisition of a single family residence.

3. Guaranty for Securitization Schemes, which provides guaranty cover on securities and/or financial instruments or on the receivables backing-up the securities.

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Who may avail of HGC guaranty?

Banks, government and private financial institutions, housing developers, and Building and Loan Associations (BLAs) may avail themselves of the HGC Guaranty. These institutions must apply for a Guaranty Line from HGC. Upon approval, they may enroll their accounts against their approved Guaranty Line.

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Why was the HGC Charter amended?

The corporate life of the HGC expired in 2000. To ensure that its mission of promoting home ownership by providing a viable system of guaranty for the housing sector shall continue, the HGC Charter was amended, which among others, has extended HGC's corporate life for another fifty (50) years.

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What are the salient points of Republic Act 8763 or the HGC Act of 2000?


1. It gave the HGC another fifty (50) year corporate life;

2. The name of the Corporation was changed from Home Insurance and Guaranty Corporation (HIGC) to Home Guaranty Corporation (HGC);

3. The authorized capital stock was increased from PhP 2.5 billion to PhP 50 billion;

4. Included the Secretary of Finance and the Director General of the National Economic and Development Authority (NEDA) as Chairman and ex-officio member of the HGC Board of Directors, respectively;

5. Transferred the supervision and regulation of Homeowners' Associations to the Housing and Land Use Regulatory Board (HLURB);

6. Mandates HGC to promote the secondary mortgage market, and;

7. Prioritizes socialized and low-cost housing projects.

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What is a Building and Loan Association (BLA)? What is the role of HGC on BLAs?


BLA encourages and promotes affordable means of capital formation for housing. The HGC is mandated to issue contracts of guaranty for the accounts of the BLAs.

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Why does HGC have acquired Assets/Properties?

In the event that the borrowers defaulted in their amortization payments, the bank calls on the guaranty of the HGC. Upon payment by the HGC of its guaranty obligation, the banks subsequently assigns all their rights over the assets / mortgages of the said defaulted loan to the HGC.

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How does HGC recover from/dispose of its acquired Assets/Properties?


If the original borrower cannot pay the arrears, HGC will accept purchase proposals from interested buyers, and in compliance with all governing laws regarding the sale of acquired and foreclosed properties of government agencies.

The property/ies shall be sold on an “AS IS, WHERE IS” basis.

Negotiated offers may be made in cash or on terms, on special cases.

1. Cash Purchase/s

Payment Period = Discount Rate

Spot Cash = 15%

30 days = 10%

60 days = 6%

90 days = 3%

2. Installment Term

Required Minimum Downpayment: 10% of selling price
Maximum Term: 15 years

For Hard to Sell Assets

1. Up to PhP 225,000.00 = 6% per annum

2. PhP 225,001.00 to PhP 2.0 Million = 9% per annum

3. More than PhP 2.0 Million = 12% per annum

For Regular Assets

1. Up to PhP 225,000.00 = 9% per annum

2. PhP 225,001.00 to PhP 2.0 Million = 12% per annum

3. More than PhP 2.0 Million = 14% per annum


3. Rent-To-Own Program

The lease shall be for a non-renewable period of five (5) years. However, the lessee can pre-terminate the lease at anytime before the end of the 5 th year of the contract, and exercise the option to purchase the property in cash or thru a housing loan from any financial institution.

* The initial cash out - two (2) months advance payment of rental and 1 month deposit is paid directly to the HGC.

* All payments made (net of penalties and VAT) by the lessee during the term of the lease shall be applied as downpayment for the purchase of property as follows:

Year = Percentage of Application

1 = 100%

2 = 90%

3 = 80%

4 = 70%

5 = 60

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SOURCE URL: http://www.hgc.gov.ph/faqs.html

Accretion means land area increased naturally

QUESTION: Sir John, we left our land twenty years ago. Our house stood by the river. Last week, I visited it and it seems the land at the back of our house increased in area by around 400sqm. It no longer matches our title. Who owns that additional 400sqm?

ANSWER: What happened is called ACCRETION - an addition to land from natural causes as, for example, from gradual action of the ocean or the river waters.

You may go to the municipal hall and request for a CADASTRAL SURVEY of the extra 400sqm that was added to the boundary of your land. Then CONSOLIDATE that 400sqm to your current land and get a new title.

Real Estate Appraiser's Reviewer - Part 1 of 3

[Advance Knowledge for Brokers Series]

As an Exclusive Buyer Agent (EBA), I always keep on saying that I do not allow my client-buyers to be exposed to properties for sale like canned goods without proper label and full disclosure of contents. This article explains further the mechanics of real estate appraisal, which is one of the requirement in selling a property. In this connection, you may want to check out first my article entitled Property Folder Prep Guide.

This article is a self-help reviewer of Real Estate Appraisers.

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What is a Real Estate Appraiser?

According to the Real Estate Service Act of the Philippines (RA 9646), Real Estate Appraiser is defined as someone who is duly registered and licensed natural person who, for a professional fee, compensation or other valuable consideration, performs or renders, or offers to perform services in estimating and arriving at an opinion of or acts as an expert on real estate values, such services of which shall be finally rendered by the preparation of the report in acceptable written form.

What is an Appraisal?

Appraisal is the process of estimating or making an opinion on the market value of an adequately described property as of a specified date.

What are the factors affecting accuracy of appraisal?

• § Competence of the appraiser
• § Integrity of the appraiser
• § Soundness of the procedure used in the appraisal
• § Availability of the pertinent data

What are the purposes/ functions of appraisal?

For banks/ financing institutions:

• § loans purposes
• § insurance purposes
• § selling purposes

For other purposes:

• § real estate tax assessment purposes
• § zonal valuation purposes
• § merger and consolidation
• § going concern value
• § liquidation purposes
• § joint venture purposes
• § determination of just compensation for eminent domain purposes
• § extrajudicial purposes or to distribute the assets of an estate

Why there is a need for an appraisal?

1. In connection with the transfer of ownership

• § To help prospective buyers decide on offering prices
• § To help prospective sellers determine acceptable selling price
• § To establish a fair basis for exchange of real property
• § To establish a basis for reorganization or merger of business companies
• § To distribute the assets of an estate

2. In connection with financing and credits

• § To arrive at the value of the security offered as collateral for a mortgage loan
• § To provide an investor with a sound basis for deciding whether to purchase real estate mortgage or bond

3. To establish just compensation in condemnation proceeding

• § To estimate value as a whole or before the taking
• § To estimate value after the taking
• § To allocate value between the part taken and damage to the residue

4. To establish a basis for taxes

• § To distribute assets into depreciable items such as building and non-depreciation items such as land and to estimate applicable depreciation rates
• § To determine gift or inheritance taxes

What is Value?

• § As per US Society of Residential Appraisers. “Value is the present worth of future benefits to a typical buyer.”
• § As per American Institute of Real Estate Appraisers. Value (actual cash) is the price property will bring in a fair market, after a fair and reasonable effort has been made to find a purchaser who will give the highest price.
• § In general, value refers to what a willing buyer, not forced to buy, will pay, and what a willing seller, not forced to sell, will accept, after exposing the subject property in a fee and an open market within a reasonable period of time.

What are the types of value?

• § Sale price vs. value
• § Cost vs. value
• § Value in exchange. This refers to the worth of an object relative to other objects with which it can be compared and for which it can be exchange.
• § Value in use. This refers to the use an object is put to, the service it renders, and the wants it satisfies.
• § Market value
• § Fair value
• § Investment value
• § Reversion value
• § Assessed value
• § Condemned value; consequential damage and severance damage
• § Insurable value
• § Loan value
• § Liquidation value
• § Book value

What is Market Value?

It is the highest price in terms of money which a property will bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus.

What are other values derived by appraisal?

• § Insurable value- to serve the need of insured, insurer and adjuster
• § Going concern value- to serve for corporate mergers the issuance of stock, revision of book figures and so forth
• § Liquidation value of price- for forced sale or auction proceedings
• § Assessed value- to establish a uniform schedule and tax roll for ad valorem taxation
• § Condemnation value- for eminent domain case
• § This list does not include all the function of appraisals but does indicate the broad scope of the professional appraiser’s activities.

What is the history of Value Theory?

• § Ancient Romans and Greeks- value of goods absolute, fixed by state and owner
• § Merchantilism- value in exchange affected by law of supply and demand, gold is the source of all wealth
• § Physiocrats- productivity of land, not gold as source of wealth; value created by the utility of an item
• § Adam Smith- natural price, (i.e.) the cost of production is equals the value of an item consuming land, labor, capital and coordinations
• § Austrians- cost of production is unimportant, value is determined by utility of and demand for the last, marginal item
• § Today’s concept- value is not objective and absolute, but is subjective and relative to the forces that create and forces that affect it.

What are the forces affecting value?

• § Utility- usefulness; ability to arouse a desire for possession
• § Scarcity- a relatively short supply; lack of abundance
• § Demand- desire to possess plus the ability to buy; effective purchasing power
• § Transferability- the ability to change ownership or use

What are the forces affecting/influencing value?

Natural Forces - physical resources

• § -location
• § -shape
• § -topography
• § -depreciation
• § -climate condition
• § -soil depth and fertility
• § -size

Social Forces - developed resources

• § Family size and age group distribution
• § Neighborhood stability and attitudes about property
• § Population growth, decline, or shifts at the community, regional and national levels
• § Lifestyles and living standards, often combined with other forces
• § Attitudes about law enforcement, the role of government and individual responsibility
• § Attitudes about development, growth and ecology
• § Attitudes toward public education

Economic forces

• § Income level of neighborhood and community residents
• § Employment opportunities and trends
• § Level of wages
• § Availability of money and credit and interest rate levels
• § Price levels and property tax burdens
• § Personal savings and investment returns
• § General business activity
• § Supply and demand in housing
• § Production of goods and services

Political force

• § Zoning and land use regulations
• § Building and safety regulations
• § Environment protection laws
• § Police, fire and health protection services
• § Crime prevention, education and recreation services
• § Public works, power, water, transportation, sewage and flood control
• § Fiscal policy and taxation
• § Monetary policy and controls
• § Government-sponsored urban redevelopment and housing finance programs
• § Regulation of industry and business

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Real Estate Appraiser's Reviewer - Part 2 of 3

[Advance Knowledge for Brokers]
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What are the guiding principles in valuation?

Principles of real estate MARKETABILITY

• § Principle of substitution. This states that a prudent buyer will pay no more for a property than the cost of a substitute property that will provide equivalent usefulness.
• § Principle of conformity
• § Principle of progression and regression
• § Principle of change. This states that the real estate market is dynamic rather than static; socio-economic forces are constantly changing, causing constant changes in value. Thus, market value today may not be the same as market value yesterday or tomorrow.
• § Principle of supply and demand
• § Principle of completion

Principles of real estate PRODUCTIVITY

• § Agents of production: land, labr, capital, coordination
• § The principle of contribution states that the value of a given feature of a property is worth only as much as the amount of money it contributes to the value of the property as whole. For example, improvements to property may add more, less, or as much value to the property as they cost, depending on what the market is willing to pay for the features.
• § The principle of increasing and decreasing/diminishing returns states that states that with each additional unit of improvement, the marginal utility of each unit declines until the point at which any additional units cost more than the additional value they add to the property.
• § This principle of “highest and best use” and consistent use states that the “highest and best use” of a property is the use that will bring the owner the highest economic benefit over the long run. Determining highest and best use is central to estimating market value because the use of a property for other than the current (or proposed) use may yield higher benefits to both the investor and the lender regarding greater investment returns and/or less risk than originally anticipated.
• § Principle of anticipation. This states that the property’s marker value is based on the investor’s expectation about the future benefits the property will provide and the present value of those benefits.

What is Replacement Cost?

§ It is the cost of replacing the property being appraised with that of another having equivalent utility and amenities.

What is Reproduction Cost?

§ It is the amount of money required for the exact reconstruction of the improvements being appraised similar to the original.

What is Depreciation?

• § For valuation purposes, depreciation is defined as a loss in value from any cause. It represent the difference in value between the building under appraisal and a new, substitute building.
• § Depreciation for valuation purposes is not in any way related to depreciation used in accounting sense or in income tax accounting.
• § Depreciation here can be in terms of physical depreciation or functional and economic obsolescence.

What are the different kinds of Depreciation?

• § Deterioration or the physical wearing out of the property. This is represented by normal wear and tear, the action of the elements and catastrophic events such as earthquakes, typhoons and fires.
• § Curable- if by treating the defects, the expected increase in value of the property will at least be more than the cost of treatment
• § Incurable- if the cost of treating the defect will be more than the expected increase in the property value
• § Functional obsolescence- or lack of desirability in terms of layout, style, and design as compared with that of a new property serving the same function. The loss in value from a decrease in functional utility due to technological improvements, new materials, and other innovations that make existing buildings obsolete for their original purpose.
• § Economic obsolescence- relating to loss of value from causes outside the property itself. The loss in value from forces external to the property such as the deterioration of a neighborhood, encroachments of such nuisances as noise and smell.

What are the basic approaches* to valuation?

Cost approach

• § The current cost of reproducing a property less depreciation from all source that is, deterioration, and functional and economic obsolescence

Income approach

• § The value which the property’s net earning power will support based upon a capitalization of net income

Market data approach

• § The value indicate by recent sales of comparable properties in the market

*The appraiser utilizes all three approaches in most of his appraisal work. He may believe that the value indicated by one approach will be more significant than that of the other two, yet he will use all three as a check against each other and to test his own judgment. However, there are appraisal problems in which they cannot be applied such as in vacant land, the use of the cost approach, or in the case of an owner-occupied home, the use of income approach. All three approaches are needed in the solution of most appraisal problems.

What is a Cost Approach in Real Estate Valuation?

§ In cost approach, the appraiser obtains a preliminary valuation by adding to his estimate of the land’s value, his estimate of the depreciated reproduction cost of the building and other improvements. This approach is based on the assumption that the reproduction cost is the upper limit of value. This also assumes that a newly constructed building would have advantages over the existing building as compared with the new building. The measure of this deficiency is called depreciation. For valuation purposes, depreciation is defined as a loss in value from any case. It represents the difference in value between the building under appraisal and a new, substitute building. Depreciation for valuation purposes is not in any way related to depreciation used in accounting sense or in income tax accounting.

What are the steps in Cost Approach?

• § The estimate of the land’s value as if it is vacant
• § The estimate of the current cost of reproduction of the existing improvements
• § The estimate and deduction of depreciation from all causes
• § The addition of the land’s value and the depreciated reproduction of improvements

What is Income Approach in Real Estate Valuation?

§ In income approach, the appraiser is concerned with the present worth of the future net income of a property which will be produced in its remaining economic life. This future net income is then capitalized by computing its present worth. Choosing what capitalization rate to apply is one of the most critical steps in the income approach. A variation of only one half of one percent can make a difference of many thousands of pesos in the capitalized value of the income.

What are the steps in income approach?

• § Obtaining the rent schedule and the percentage of occupancy for the subject property and for comparable properties for the current year and for several years in the past. This information provides gross rental and the trends in rental and occupancy. This data is then related and adjusted by the comparative method to ascertain the estimate of gross income which the subject property should produce to attract investors in the market.
• § Obtaining expense data such as taxes, insurance, and operating cost being paid by the subject property and by comparable properties. The trend in these expenses is also necessary.
• § Estimating the remaining useful economic life of the building to establish the probable duration of its income.
• § Selecting the appropriate capitalization rate and the applicable technique and methods for processing the net income.

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FAQ on Condominiums - Part 1 of 2

[ Basic Knowledge for Brokers ] This article contains answers to frequently asked questions about condominiums.

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What is the law that governs Condominium Development?

§ Republic Act 4626 and House Bill 970 Amendment.

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What are the stages in putting up condominium?

§ Planning stage

§ Development stage

§ Condominium management stage

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What are the things to do during planning stage?

§ Choosing a suitable location, normally in high-population density areas

§ Determining the following: USAGE TYPE- residential, commercial, office, hotel; Budget- high or low; DESIGN - high rise, townhouse, twin tower; FUNDING - bank financing or direct investment or joint; CONSTRUCTION FEATURES- number of floors, units/floors, basement levels, facilities and services, land area; ARCHITECTURAL DESIGN - choice of architect

§ Selection of constructor or builder

§ Consolidation of the master plan

§ Cost estimates- labor, material, miscellaneous

§ Bid solicitations and adjudication

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What are the things to do during development stage?

§ Application/ registration for building permit

§ Application with DENR for Environmental Compliance Certificate

§ Application for development permit with HLURB

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Where to get the application building permit?

§ Application must be done with city or municipality where the project will be constructed as in ordinary building construction. Application is coursed through the city/municipal engineer, the fire department, the planning and zoning authority, and finally, to the city/municipality mayor.

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What is an Environmental Compliance Certificate?

§ This is the Environmental Compliance Certificate attesting that the land on which the project is to be constructed is not within the prohibited zones where the environment is projected; or so that the project will observe rules set to promote environmental protection.

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What are the requirements in getting development permit from HLURB?

§ Description of land (with survey plan)

§ Description of building, number of stories, units and their accessories (with diagram of floor plans)

§ Description of the common areas and facilities

§ Description of the interest to be acquired by unit-buyers and those of the common areas

§ Declaration of restrictions or purposes for which the condominium project is intended or restricted as to usage

§ Certification of the registration if such is undertaken for him by representative

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What are the things to do during the condominium management stage?

§ Declaration of Restrictions shall provide for the management body i.e. condominium corporation if units may be offered for sale to foreigners or association of condo owners, or board of governors elected or managements agent likewise elected or by the board of directors or if corporation, whether stock/ non-stock

§ It shall also provide for voting majorities, quorums, meeting dates, and other rules to govern such body

§ Power to enforce declaration of restrictions

§ Insurance and bonding of members

§ Provide for maintenance, utility, gardening, etc.

§ Purchase of equipments, supplies, etc for common areas

§ Payment of taxes, assessments and discharge encumbrances

§ Reconstruction and repairs of common areas

§ Delegation of its powers

§ For allowed entry into any unit for maintenance, etc

§ For power of attorney in its favor from members

§ To amend restrictions by a majority vote of members

§ For reasonable assessments to meet expenditures

§ For partition, dissolution and/or sale of condominium as authorized by law of the courts

§ Others as authorized by secondary purposes of articles and by-law.

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What are the other authorized by secondary purposes of articles and by-law that needs to be done during condominium management stage?

§ Buy and sell independent units in exercise of rights of first refusal

§ Otherwise lease such units for the corporation’s benefit

§ Assume mortgage on independent units

§ Establish service cooperatives among the unit-owners

§ Other undertaking for benefit of the corporation and its members (shareholders or stockholders)

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What are the incidents of a condominium grant?

§ The boundary of the unit granted are the interior surfaces of the perimeter walls, floors, ceilings, windows and doors thereof

§ An exclusive casement (right to enjoy) for the use of the air space encompassed by the boundaries of the unit

§ The common areas are held in common by the holders of the units, in equal share one for each unit

§ A non-exclusive casement for ingress, egress, and support through the common areas in apartment to each unit and the common areas are subject to such casement

§ Exclusive right to renovate, remodel, redecorate or refinish the inner surfaces of the unit (walls, ceiling, floors, window and doors bounding the units), provided value is not impaired

§ Exclusive right to mortgage, pledge or encumber his unit and to have the same appraised independently of the other units of the condominium (subject to restriction in the Declaration of Restriction)

§ Absolute right to sell dispose of the condominium unit (subject to the right of first refusal) (Sec. 6, RA 4726)
What is the right of first refusal?

§ A requirement in the master deed or declaration of restriction that the property be first offered to the condominium corporation or its management body within a reasonable period of time before the same is offered to outside parties

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What is the main difference between master deed and declaration of restrictions?

§ In a general sense, the Master Deed or Enabling Act states what acts the unit holders/owners can legally do. The Declaration of Restrictions specify the acts that cannot be legally done.
In what situations involuntary dissolution is applicable?

§ Three (3) years after damage or destruction, no rebuilding or repair has been made to a material part rendered unfit for use

§ More than ½ of project rendered untenantable- owners of more than 30% interest in the common areas are opposed to repair

§ Project in excess of 50 years, obsolete an uneconomical to repair- owners holding over 50% interest in common areas opposed to repair

§ Project is condemned or expropriated, no longer viable- owners of 70% interest in common areas are opposed to the continuation after condemnation or expropriation of a material part of project

§ That conditions for such partition are set forth in the Declaration of Restrictions duly registered (Sec. 8, RA 4726)
What is the effect of involuntary dissolution?

§ Common areas owner or held by the condominium corporation are transferred pre-indivise by way of liquidation an in proportion to their interests to the members or stockholders subject to the superior rights of creditors. Such transfer is deemed all liquidation and the condominium corporation is deemed to sell the entire project for the benefit of all the owners.

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In what situations voluntary dissolution is applicable?

§ When the Master Deed is revoked upon registration of an instrument executed by the condominium corporation and consented to by all the registered holders of any lien or encumbrance on the land or building

§ When the condominium corporation is dissolved through an action for dissolution filed by the affirmative vote of all stockholders or members at the general meeting called for the purpose provided all the requirements of section 62 of the Corporation Law are compiled with. (Sec. 13 and 14, RA 4726)


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What is the effect of voluntary dissolution?

§ Condominium Corporation is deemed to hold a power of attorney to sell all separate interests of stockholders/member; and

§ Full liquidation of the Corporation by sale of entire project, again subject to the right of the Corporation itself and individual creditors

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When and where was the condominium housing started?

§ Condominium housing had its beginning in the 1920s in South America and in some parts of Europe, particularly in Spain, Italy, France and Great Britain because of critical space shortage and high construction cost.

§ In the US, condominium became a trend only in the early 1960s as a forerunner of the cooperatives. Cooperative housing evolved through the information of corporation with the shareholders entitled to occupied a unit. The cooperative however suffered from a crucial disadvantage in that the financial liability of a member who failed to pay his obligation became also the liability of the other members. Hence, the condominium supplanted the cooperative as a housing concept.

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FAQ on Real Estate Brokerage - Part 1 of 3

[Basic Knowledge for Brokers Series]
A Real Estate Broker is a duly registered and licensed natural person who, for a professional fee, commission or other valuable consideration acts as an agent of a party in a real estate transaction to offer, advertise, solicit , list, promote, mediate, negotiate or effect the meeting of the minds on the sale, purchase, exchange, mortgage, lease or joint venture, or other similar transactions on real estate or any interest therein.

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What is Real Estate Broker? What is the difference between Real Estate Broker as an agent from an agent under the law on agency?

§ A Real Estate Broker, under M.O. No.39, is an agent of another person who, for and in consideration of a fee, commission or other compensation, negotiates, mediates or effects the meeting of the minds on the sale, purchase, exchange, mortgage, or lease of or joint venture or other transaction in real estate or in any interest therein.

§ On the other hand, an agent under the law on agency is a person who binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority or the latter.

In other words, a real estate broker is one who in behalf of others and for a commission or a fee negotiates contracts relative to real property and interest therein. He is the negotiator between parties, never acting in his own name, but in the name of those who employ him; he is strictly a middleman, and for some purposes, the agent of both parties. Indeed, he is one whose occupation it is to bring parties together or to bargain for them in matters of sale, purchase, lease, mortgage, or other transaction relating to real estate property.

Although a real estate broker is an agent, he is distinguished from a true agent, generally by reason of the fact that his authority is of special character, being limited only to the acts of negotiation or mediation for on behalf of his principal, while a true agent acts in representation or on behalf or in lieu of his principal, within the scope of his authority, and for which reason, when authorized under a special power of attorney as an attorney-in-fact, he is exempted from the licensing requirement of MO No.39, although performing any of the acts of a real estate broker.

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What is the difference between a real estate broker and a real estate dealer?

§ As to function:

§ A real estate broker performs his acts in behalf of another, while a real estate dealer perform the same acts in his own behalf.

§ As to income:

§ A real estate broker receives a fee or commission for his services, while a real estate dealer transacts his business with the object of making a profit.

§ As to license:

§ A real estate broker is required to secure a license from the Professional Regulation Commission (PRC), while a real estate dealer is only required to register with the Local Government Unit as a business entity and pay a privilege tax on a graduated scale under the Local Tax Code.

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What is the difference between a real estate broker and a real estate salesman?

§ For licensing purposes, a Real Estate Broker is required to pass a written examination, while a Real Estate Salesman is not so required, as he is licensed as such merely on the recommendation of his broker-employer

§ A Real Estate Broker is required to file a P20,000 bond, while a Real Estate Salesman is not, as he is covered by the bond of his broker-employer

§ A Real Estate Broker is an independent entity subject only to government regulations, while a Real Estate Salesman does not have such independence. A salesman has to work under a broker and acts only in behalf of his employer-broker.

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What is an agent?

An agent is the one who represents the interests of another (the principal, i.e. client or real estate broker).
What is a principal?

Principal is commonly known as the person who engages the agent for representation.

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What is a client?

Client is a person who empowers another to act as his or her representative or agent. Client relationship is equals to fiduciary relationship.
What is a customer?

Customer generally refers to person without representation involved in the transaction involved in the transaction. All agents have a duty to treat customers fairly.

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How the Agency Relationship is created?

§ Appointment means that the principal gives express authorization to the agent. Under both common and statutory law, this requires writing when the sale of real estate is involved.

§ Estoppel means that if the principal causes third persons to believe that someone is his agent and that third party deals with the agent, then the principal cannot deny the agency relationship even though it did not exist in fact.

§ Ratification means that if a person having no authority whatsoever, purports to act as an agent and the purported principal later adopts the acts of that agent, an agency relationship has retroactively been created.

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What are the powers of an agent?

An agent has the powers which are conferred upon him by the principal. In addition, the agent has all such powers as are necessary, proper, or usual to enable him to accomplish the purpose of the agency. The powers granted to an agent may be restricted by contract or by statute.

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What are the duties of an agent/broker to his principal?

§ The broker must be loyal to his or her principal. All relevant information within the knowledge of the broker should not be withheld from the owner. The broker should advise the principal on anything that concerns the principal’s interest.

§ The broker acts as a fiduciary. The broker should never hold any interest that is not beneficial to the principal. He is prohibited from buying for himself or for relatives the seller’s property without prior knowledge of the principal.

§ The broker must account for money deposits. In serving as an agency, the broker should immediately remit and account all monies in behalf of the principal such as deposit or earnest money.

§ The broker must obey the instructions of his or her principal. The broker should never deviate from the instruction of the principal most especially on the terms of payment. If the seller requires a cash down payment, the broker should accepting nothing but cash from the buyer. If he accepts a check then he violates the instructions of the buyer.

§ The broker must act in person. A seller employs a broker based on his confidence and reputation of the broker. He relies on the personal services of the broker thus a broker should never delegate his task to others.

§ The broker must not have a personal interest in the property for which he or she acts as broker without full disclosure to the principal.

§ The broker is prohibited from acting for both the buyer and the seller without full disclosure. On rare occasions, should the broker need to represent both the buyer and the seller and collect a commission from both parties, there should be full disclosure to both and should give their consent. Without disclosure, the broker is in violation of his or her agency if he or she accepts a commission both from the principal and some third persons.

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What are the liabilities of a principal?

The principal is liable for the actions of his agent under the doctrine of respondeat superior. The knowledge of an agent is imputed to the principal and the principal is deemed to know all facts known by the agent. The knowledge imputed to the principal includes relevant knowledge received prior to the commencement of the agency. Torts committed by the agents such as negligence and fraud are also attributed to the principal.

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What are the liabilities of an agent?

An agent is liable to his principal for any violation of his duties imposed upon him by virtue of the agency. An agent may also be liable to a third party for his acts that have been directed towards that third party.

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What are the brokers’ duties to the prospects?

Common observation of the role of real estate brokers suggests that the broker works diligently with the prospects in satisfying his or her needs. In this respect, the broker does not earn a commission unless the prospect is satisfied; a property must be found that suits the buyer and that may be financed within the limitations of the buyer’s income and cash reserves.

In pursuing this objective, the broker must not make any misinterpretations or false promises or commit any fraudulent act. Although the broker may promote the property by such statements as “price are going up,” or “this house is constructed of only the best quality materials,” he should not make promises or false statements which the buyer may rely on. If the broker states that “I can sell this land for P500 per square meter more next year,” this is a false promise; and it is in violation of his duties to the prospect.

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What are the principles or elements of agency applicable to a real estate broker as an agent?

§ There must be a meeting of the minds or mutual consent as to the establishment of the agency relationship
§ There must be a determine subject matter for which the agency is established
§ That the fee, commission, or compensation must be certain in money or its equivalents
§ That the agent must act within the scope of his authority
§ That the agent must act in behalf of his principal and not in his own name

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How is a contract of agency extinguished?

§ Expiration of the period for which the agency was constituted
§ Death, civil interdiction, insanity or insolvency of the principal or agent
§ Withdrawal of the agent
§ Accomplishment of the object or purpose of the agency
§ Revocation of the authority of the agent by the principal
§ Dissolution of the firm which entrusted or accepted the agency

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FAQ on Real Estate Brokerage - Part 2 of 3

[Basic Knowledge for Brokers Series]
A Real Estate Broker is a duly registered and licensed natural person who, for a professional fee, commission or other valuable consideration acts as an agent of a party in a real estate transaction to offer, advertise, solicit , list, promote, mediate, negotiate or effect the meeting of the minds on the sale, purchase, exchange, mortgage, lease or joint venture, or other similar transactions on real estate or any interest therein.

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What is a Real Estate Salesman?

A real estate salesman is a natural person who performs for and in behalf of a real estate broker under whom he is licensed, any of the functions of a real estate broker, for or in expectation of a share in the commission, fee, compensation or other valuable consideration.
What is a real estate brokerage?

Real estate brokerage is the profession, occupation, practice or calling regulated and/ or governed by MO No.39, Series of 1985; whereby a natural or juridical person acting as an agent of another person, and for and in expectation of a fee, commission or other valuable consideration, negotiates the sale, purchase, lease, mortgage or exchange of real estate or of any interest therein is real estate brokerage.

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What are the steps in real estate brokerage?

1. Securing Listings
2. Procuring Prospects
3. Presentation and Demonstration
4. Negotiation
5. Consumation

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What is Securing Listing as part of the steps in real estate brokerage?


§ Looking or searching for properties for sale, mortgage or exchange.


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What is Procuring Prospect as part of the steps in real estate brokerage?

§ Looking for persons who want to buy, sell, lease mortgage or exchange real estate;


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What is Presentation and Demonstration as part of the steps in real estate brokerage?

§ The process of showing the property to a prospective buyer, lessee or exchanger by underscoring its favorable physical qualities and such other benefits and advantages as to arouse the desire to buy, lease or exchange.

The process of presentation and demonstration generally involves the following procedures:

§ Preparation of sales or lease materials such as plans, price lists, brochures, maps, etc., and a check list of data about the property;

§ Organization of selling points;

§ Anticipation of possible objections;

§ Arrangement of appointment;

§ Selection of the best route to give the most favorable impression of the neighborhood

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What is Negotiation as part of the steps in real estate brokeragee?

§ The process of reconciling or bringing together the opposing views of the parties;
Closing

§ The process whereby through mediation of the broker, the minds of the parties meet on mutually acceptable price or consideration, terms and other conditions.

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What is Consummation as part of the steps in real estate brokerage?

§ The process whereby the consideration is paid, the proper document is executed, the commission is paid, the instrument is notarized, filed and registered with the register of deeds concerned.

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When is commission due?

In the absence of any stipulation, the commission is due and payable in full upon the consummation of the contract, even if the price is to be paid in installments only.

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What are the essential elements of real estate brokerage?

§ Employment of the broker as an agent – A real estate broker acts on behalf of his principal without acting on his own name and without entitled to the possession of the property which is the subject of the transaction

§ Function - a broker must perform only specific functions;

§ Service rendered – a broker must be the procuring cause of the sole instrumentality in effecting the meeting of the minds of the parties in the transaction during the period of agency.

§ Compensation – For services rendered, a real estate broker is paid a fee, commission or other value consideration.

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What is the difference between Real estate as a profession and real estate as business?

§ Real Estate as profession refers to the practice of real estate brokerage in which a duly licensed real estate broker acts as an agent of another person, and for a fee, commission, compensation or other valuable consideration, negotiates the sale, purchase, lease mortgage or exchange of real estate, and/ or renders appraisal reports or advise on real estate matters. The practitioner does not have any propriety interest on the real property involve, neither does he use his own funds in the process.

§ While real estate as a business refers to the activities of a real estate dealer engaged in the buying, selling, exchanging, leasing or renting, financing or developing real properties with use of his own funds, with the main purpose of delivering profit or gain from the processor or activities.

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What is a real estate listing?

§ Listing is a contract between a property owner and a real estate broker where the property owner authorizes the real estate broker to sell or lease or mortgage or exchange the former’s property, as the case maybe, wit in a certain period of time, at a certain price and terms, and a certain fee or commission.

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What are the contents of real estate listing?

§ Description of the property, i.e., Block No., Lot No., TCT No.

§ Lot area and technical description of lot

§ Description of improvement, if any

§ Mortgage, if any

§ Commission rate

§ Terms of authority

§ Hold-over clause, if any

§ Authority to receive earnest money

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What are the different kinds of real estate listing?

As to Form

§ Verbal – where the authority is orally given;

§ Written – where the authority is given in writing.

As to the Nature of Function of the Broker

§ Sales agency – where the owner or principal gives authority to a real estate broker to look for a buyer and negotiates the sale of his property;

§ Purchase agency – where a principal gives authority to a real estate broker to look for a certain property and negotiates the purchase thereof;

§ Lease agency – where a principal gives authority to a real estate broker to look for prospective tenant or lessees, or where a prospective tenant or lessee gives authority to a real estate broker to look for space to be rented or leased;

§ Exchange agency – where a principal gives authority to a real estate broker to negotiate the exchange of his property for another property;

§ Loan agency– where a principal gives authority to a real estate broker to look for a money lender and negotiates for a loan.

As to Exclusiveness

§ Non-Exclusive or Open Listing – where a principal gives authority to two or more real estate brokers to negotiate the sale of his property. The agents may act simultaneously but the principal is obligated to pay commission only to the broker who successfully procures a ready, willing and able buyer. If the principal himself sells the property without any aid or assistance from the authorized brokers, he is not obliged to pay any commission. However, should any one of the authorized be in any way a procuring cause in the transaction, the principal is obliged to pay the commission agreed upon.

§ Exclusive Listing - a listing wherein only one real estate broker is authorized to negotiate the sale of the property of the principal.

§ Exclusive Agency Listing – where only the broker is specifically authorized to act as exclusive agent of the principal. However, the principal retains the right to sell the property himself without obligation to pay commission to the exclusive agent if he makes the sale himself, unless another broker makes the sale, or that the exclusive agent acted as a procurement cause in the transaction, whereby he is entitled to the commission agreed upon.

§ Exclusive Right to Sell – this is a cooperative arrangement among members of a real estate board or organization, whereby each member brings his real estate listings to the attention of the other members so that if a sale is made, the commission is divided between the member who submitted the listing and the member who made the sale, with a small percentage previously agreed upon deducted from their respective commissions and paid to the multiple listing service of the real estate board or organization.
As to Basis of Commission

§ Percentage Listing - the commission of the broker is a pre-agreed percentage of the total compensation

§ Net Listing - the compensation of the broker depends on the “overprice”

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What are the steps for securing real estate listing?

§ Contracting owner-seller

§ Inspection of property for details necessary for selling (location, size, improvement utilities, etc.)

§ Determine reasonableness of seller’s asking price taking into consideration the following: (1) Character of the neighborhood where the property is located; (2) Favorable and unfavorable physical features of the property which may affect its price; and (3) Market data on nearby or comparable properties as obtained from registered sales, offering in the Multiple Listing Service, advertisement, etc.

§ Examination of titles and other documents as to liens, encumbrances, restrictions, and information which may affect salability and value of the property.

§ Formalizing of listing contract.

§ Prepare selling presentation which includes plans, pictures, maps, etc.

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What are the sources of real estate listings? Where can it be obtained from?

§ Personal contacts, such as friends, relatives, fellow brokers, associates, affiliates in civic clubs, professional or religious organizations;
§ “For Sale” signboards of owners;
§ Acquired assets and real estate departments of banks and other financial institutions;
§ Referrals;
§ Classified ads and newspaper advertisements;
§ Legal notices, such as foreclosure proceedings, extrajudicial and judicial partitions.

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What is a real estate listing contract?

Listing contract is an agreement between the broker and the owner of real property whereby the owner of authorizes the broker to negotiate for the sale, lease, joint venture, exchange, or mortgage of his or her real property for a commission or any valuable consideration.

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What are the contents of a real estate listing contract?

§ Date of the authority
§ Name and address of the broker, license number
§ Functions to be performed or service to be rendered by the broker
§ Type of listing
§ Description of the property; to include location, kind, title, area of land and improvement, if any; utilities included, if any; liens and encumbrances, if any.
§ Price and terms
§ Duration of the authority

Note: Hold over clause is a provision in the listing contract which entitles the broker to a commission even though if the sale is consummated after the period of his authority provided that the buyer has been registered by him with the owner/ seller during the period of his authority.

§ Commission or compensation of the broker and terms of payment
§ Name, address and signature of the owner/seller
§ Acceptance by the broker

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FAQ on Land Registration

[Basic Knowledge for Brokers Series]

This document carefully explains the coverage, limitation, process, complexities, and requirements of land registration.

What is Land Registration?

Land Registration is defined as the inscription or recording or annotation of acts and contracts relating to the ownership of and other rights over land. It is done in the office of the Register of Deeds of the city or province and one for each city.

Registration is a mere ministerial act by which an instrument is sought to be inscribed in the records of the office of the Register of Deeds and annotated at the back of the instrument. It is not a declaration by the state that such an instrument is valid and subsisting interest in the land. The effect and validity can only be determined in an ordinary case before the courts, not before a court acting merely as a registration court which has no jurisdiction over the same.

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What are the functions of the Register of Deeds?

§ It is the public repository of records affecting registered land

§ To register immediately all documents presented for registration as long as they comply with the requirements

§ To deny registration, if such document is not registrable, and inform presentor of such denial in writing, stating his reason for denial, and advising him of his right to appeal such decision


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What are the purposes of Registration?

§ To give notice of true status of real property and real rights thereto

§ To prejudice third persons

§ To record acts or contracts such as the acquisition of ownership and other real rights over real property

§ To prevent the commission of frauds, thus insuring the effectivity of real rights over real property

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What are the kinds of Registration?

§ Original Registration

§ Subsequent Registration

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What is Original Registration?

It is the first registration of the land whereby an Original Certificate of Title is entered in the Registry of Property and a duplicate owner’s copy is issued to the owner by the Register of Deeds

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What is Subsequent Registration?

It is the process where the Original Certificate of Title is cancelled and subsequently registered under a Transfer Certificate of Title in favor of the new in case of land conveyance such as sale, donation or assignment.

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What are the two (2) kinds of Registration Systems now used in the Philippines?

Registration under the Torrens System which covers both original and subsequent registration

§ Act 496—Land Registration Act, effective Feb. 1, 1903 is Torrens System. It is a system of registration named after Sir Robert Torrens who devise it as a member of the South Australia Parliament, from his experience as a Register of Deeds. A Torrens Title is the certificate of ownership issue under the Torrens System of registration by the government, through the Register of Deeds, free from all liens and encumbrances except such as expressly noted thereon or otherwise revised by law.

Registration under Sec.194 of the Revised Adm. Code

§ *This law deals with land not registered under Torrens System. Amended by Act 2837 and later by Act 3344 dated December 8, 1926.

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What are the requirements of Voluntary Transaction of Registration?
Voluntary Transactions

§ (Sale, Donation, Settlement, Adjudication, Partition, Mortgage, Exchange, Lease and Merger)

Common Requirements:

§ Original copy of the Deed/ Instrument

§ If the original copy cannot be produced, the duplicate original or certified true copy shall be presented accompanied with a sworn affidavit executed by the interested party starting why the original copy cannot be presented.

§ Owner and Co-owner’s copy of the certificate of title (if one had been issued), if the land is registered.

§ DAR clearance and Affidavit of Aggregate Land Holding of the transferee if the land is covered by CARP.

Specific Requirements:

§ Deeds of Transfer

§ BIR certificate authorizing registration, re: payment of capital gains tax, estate and donor’s tax, as case may be.

§ Revenue tax receipts evidencing payment of documentary stamp tax, if the amount paid is P10.00 and above. If the documentary stamp tax due is less than P10.00, the documentary stamp tax shall be attached to the document

§ Real property tax clearance indicating the tax declaration number

§ Proof of payment of transfer tax, except if the document was executed before July 1, 1973.

§ Tax Declaration


If the transferor or transferee is a corporation:

§ Secretary’s Certificate/ Board Resolution to sell/purchase

§ Articles of incorporation (transferee)

§ Certificate of the SEC that the article of incorporation had been registered.

§ If the land being transferred is covered by patent, the deed of sale is to be approved by the Regional Executive Director, DENR.


Additional Requirements:

§ For extra-judicial settlement/ adjudication:

§ Affidavit of publication of the publisher/ editor stating that the deed or instrument had been published for the 3 consecutive weeks. If the deed included personal property, a bond shall be filed.


Sale of subdivision lots:

§ License to sell and/or certificate of registration by HLURB (in case of subdivision projects)

§ Power of Attorneys or any deed, instrument executed abroad:

§ Certificate of authentication by the nearest Philippine Consulate


Judicial settlement of estate:

§ Order approving the project of partition

§ Certificate of finality of the order/termination of special proceeding

§ Letters of administration, if the property is encumbered or sold during the settlement proceedings


Mortgage and lease:

§ Certificate of non-delinquency in the payment of real estate tax

§ Documentary stamp tax


Extra-judicial foreclosure of mortgage:

§ Certificate of sale by the sheriff

§ Approval of the Executive judge, RTC (except where the sale was by the notary public)

§ Documentary stamp tax


Consolidation of ownership:

§ Affidavit of consolidation of the purchase/deed of sale of the mortgage


Judicial foreclosure of mortgage:

§ Court order directing the sale by public auction

§ Certificate of sale issued by the sheriff


Execution sale:

§ Notice of levy or attachment must first be annotated accompanied by a writ of execution

§ Certificate of Sale

§ Final Deed of Sale

§ For subdivision and/ or consolidation plan:


Without change of ownership:

§ Letter request

§ Tracing cloth of the plan duly approved by the Land Registration Authority or the Land Management Bureau

§ Blueprint copy of the plan

§ Original technical description


With change of ownership:

§ Agreement of partition

§ Real estate tax clearance


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What are the requirements of Involuntary Transaction of Registration?

Lis Pendens

§ Notice containing the date institution of the action and court where the action is pending

§ Copy of the complaint

§ Certificate of title number

Adverse Claim

Sworn statement stating the following:

§ Alleged claim against the registered owner of the property

§ Certificate of title number and reference to volume and page number

§ Description of the land

§ Address of adverse claimant

Sale at public auction for non-payment of taxes:

§ Certificate for sale executed by the city treasurer

§ Final bill of sale (if to be consolidated)

§ Common requirements (if not available, order of the court for the issuance of the new owner’s copy and annulment of previous owner’s copy)

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How is a Lis Pendens being cancelled?

§ Order of the court to cancel the notice

§ Certificate of the clerk of the court stating the manner of disposition

§ Sworn statement of the interested party who caused the filing of the notice

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How is an Adverse Claim being cancelled?

§ After a lapse of 30 days, by verified petition before the RD, by the party-in-interest

§ Before the lapse of 30 days, by order of the court or by sword petition filed before the RD by the claimant withdrawing his claim

Terminologies in Real Estate Service - Part 1 of 3

[Basic Knowledge for Brokers]

This is a collection of Terminologies widely used in the Real Estate Service. If there is something I missed, please inform me. Thank you.

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ABSTRACT OF TITLE – A condensed history of the title, consisting of the various links in the chain of title, together with a statement of all liens, charges or encumbrances affecting a particular property.

ACCELERATION CLAUSE – A clause in a contract stating that upon the happening of a certain event, like failure to pay any installment due shall make all the balance become immediately due and payable.

ACCEPTANCE - When the seller or agent's principal agrees to the terms of the contract of sale and approves the negotiation on the part of the agent and acknowledges receipt of the deposit in subscribing to the agreement of sale.

ACCRETION - An addition to land from natural causes as, for example, from gradual action of the ocean or the river waters.

ACKNOWLEDGEMENT - A formal declaration before a duly authorized officer by a person who has executed an instrument that such execution is his act and deed.

ACQUIRED ASSET - Usually refer to real estate properties that were previously mortgaged to the bank, by which because the owner failed to pay the mortgage, the ownership of the property transfered to the bank through a judicial foreclosure proceeding. Acquired Asset is called Foreclosed Properties.

ACQUISITION - The act or process by which a person procures property.

AD VALOREM - According to valuation.

ADMINISTRATOR - A person appointed by the probate court to administer the estate of a deceased person.

ADVERSE CLAIM – A claim of a person on property owned by another (Good only for 30 days no second adverse claim is allowed).

ADVERSE POSSESSION – Right of an occupant of land to acquire title against the real estate owner, where possession has been actual, continuous, hostile, visible, distinct and in the concept of owner for the statutory period. (Note: Statutory period is 30 years: adverse possession does not apply on lands titled under the Torrens System)

AFFIDAVIT - A statement or declaration reduced in writing sworn to or affirmed before some officer who has authority to administer an oath or affirmation.

AFFIRM - To confirm, to ratify, to verify.

AGENT – One who acts for and has the authority to represent another who is known as the principal

AGREEMENT OF SALE - A written agreement or contract between seller and purchaser which they reach a meeting of the minds on the terms and conditions of the sale.

AIR RIGHT - The right of the property owner to use, control, or occupy the air space over his property, subject to the requirements of air navigation and government regulation.

ALIENATION – The transferring of property to another; the transfer of property and possession of lands, or other things, from one person to another.

AMORTIZATION - staggered payment of the thing purchased. Also known as INSTALLMENT. It refers at the process of paying off a debt (often from a loan or mortgage) over time through regular payments. A portion of each payment is for interest while the remaining amount is applied towards the principal balance. An amortization could be in Equal Payments which has fix amounts throughout the loan period. It could also be a Balooning Payment wherein the monthly due increases through time. Given a number of pay-periods and interest rate, the amortization amount is calculated using Amortization Factor Table.

AMORTIZATION – The liquidation of a financial obligation on installment basis. (A periodic payment which includes interest and principal necessary to liquidate a financial obligation)

APPOINTMENT - Appointment is one way of how an agency relationship is created. It means that the principal gives express authorization to the agent. Under both common and statutory law, this requires writing when the sale of real estate is involved.

APPRAISER– A Real Estate Appraiser is a duly registered and licensed natural person who, for a fee, compensation or other valuable consideration, performs or renders, or offers to perform services in estimating and arriving at an opinion of or acts as an expert on real estate values, such services of which shall be finally rendered by the preparation of the report in acceptable written form. Also known as valuer, refers to a person who conducts valuation/appraisal; specifically, one who possesses the necessary qualifications, ability and experience to execute or direct the valuation/appraisal of real or personal property.

APPRECIATION – A rise in value or price due to such factors as inflation or market conditions.

APPURTENANCE – Something annexed to another thing which may be transferred incident to it. That which belongs to a thing as a barn, dwelling, garage, or orchard, is incident to the land to which it is attached.

ASSESSOR - refers to a government official who conducts appraisal and assessment of real properties for taxation purposes.

ASSIGNMENT – The transfer of property or right and obligations over it in favor of another. (The one who assigns or transfers a property is called ASSIGNOR while those to whom property is assigned are called ASSIGNS or ASSIGNEES)

AUTOMATIC REDEMPTION CLAUSE – A stipulation in a mortgage of several properties providing that when a buyer of one or more lots pays in full the purchase price, a portion of the payments shall be applied to the mortgage obligation and the mortgagee shall correspondingly release said lot or lots from the mortgage.

BALLOON PAYMENT – Where the final installment payment on a note is greater than the preceding installment payments and the payer pays the note in full, such a final installment is termed a balloon payment. (Payment in lump sum although not yet due)

BASE AND MERIDIAN – Imaginary lines used by surveyors to find and describe the location and boundaries of a real property

BINDER – A agreement to cover a down payment for the purchase of real as evidence of good faith of the part of the purchaser

BLANKET MORTGAGE – A mortgage that has two or more properties pledged as security for a debt

BREACH – The breaking of a law, or failure to perform a duty or obligation specified in a contract or agreement, or revelation of secret, either by omission or commission

BROKER – A Real Estate Broker is a duly registered and licensed natural person who, for a fee, commission or other valuable consideration acts as an agent of a party in a real estate transaction to offer, advertise, solicit , list, promote, mediate, negotiate, or effect the meeting of the minds on the sale, purchase, exchange, mortgage, lease or joint venture, or other similar transactions on real estate or any interest therein.

BUNDLE OF RIGHTS – The rights of ownership whereby the owner has the right to enjoy, dispose, exclude others and to recover

CAPITAL ASSET - Capital asset means property held by the taxpayer (whether or not connected with his trade or business), but does not include – (a) Stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year; or (b) Property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business; or (c) Property used in the trade or business of a character which is subject to the allowance for depreciation provided in subsection (F) of Sec. 34 of the Code; or (d) Real property used in trade or business of the taxpayer.

CAPITAL GAINS TAX - Capital Gains Tax is a tax imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines, including pacto de retro sales and other forms of conditional sale.

CAPITAL PROPERTY – Property you own that could give you a capital gain if you sold it. Can include investments, a property other than your home and money from a trust account. A property that is acquired for investment purposes, or use in a business, that will give rise to a capital gain, and not an income gain, if it is sold at a profit. Land, buildings, machinery, equipment, shares in a farm corporation and an interest in a farm partnership will usually be capital property to the farmer.

CAVEAT EMPTOR – Means “let the buyer beware” (The buyer is duty-bound to examine the property he is purchasing and he assumes conditions which are readily ascertainable on the face of the title)

CENRO -- Community Environment and Natural Resources Officer of the DENR

CLIENT – A client is a person who empowers another to act as his or her representative or agent. Client-Agent relationship is equal to fiduciary relationship.

CLOSED MORTGAGE – A mortgage which can be paid off on its maturity

CLOUD ON THE TITLE – Any conditions revealed by a title search which affect the title to property; usually relatively unimportant items but which cannot be removed without a quit claim deed or court action

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Terminologies in Real Estate Service - Part 2 of 3

[Basic Knowledge for Brokers]

This is a collection of Terminologies widely used in the Real Estate Service. If there is something I missed, please inform me. Thank you.

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Go to PART 1
Go to PART 2
Go to PART 3
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COMMISSION – An agent’s compensation for performing the duties of his agency; in real estate practice, a percentage of the selling price of property, percentage of rentals, etc.

CONDEMNATION – The taking of public property for public use with fair compensation to the owner. An exercise of the Right of Eminent Domain.

CONJUGAL PROPERTY – property owned in common by the husband and wife

CONSULTANT – A Real Estate Consultant is a duly registered and licensed natural person who, for a fee, compensation or other valuable consideration, offers or renders professional advice and judgment on: (i) the acquisition, enhancement, preservation, utilization or disposition of lands or improvements thereon; and (ii) the conception, planning, management and development of real estate projects.

CONTRACT OF SALE – An agreement between a buyer and a seller whereby there is transmission of ownership on the object of the contract

CONTRACT TO SELL - An agreement whereby the seller promises to sell a thing in consideration of the buyer’s compliance to the terms and conditions of the contract and that only after the buyer’s compliance will the seller be obligated to transfer or convey the ownership of the thing subject of the contract.

CONVEYANCE – The means by which title to real estate is transferred

CORNER INFLUENCE – The added desirability or utility of a property due to its frontage to two streets, which for residential use provides better ventilation and as to commercial or industrial use, it provides better access, display and transportation convenience.

COUNTER OFFER – It is a qualified or conditional acceptance

CUL DE SAC – A passageway with one outlet; a blind alley.

CUSTOMER – A customer generally refers to person without representation involved in the transaction involved in the transaction. All agents and brokers have a duty to treat customers fairly.

DACION EN PAGO – Payment in kind. Payment of the debt or obligation with a property

DEED – A written instrument which, when properly executed and delivered, conveys title.

DEFAULT – The failure to fulfill a duty or promise or to discharge an obligation; an omission or failure to perform any act.

DEFEASANCE CLAUSE – The clause in a mortgage that gives the mortgagor the right to redeem his property upon the payment of his obligations to the mortgagee

DEFICIENCY JUDGMENT – It is a judgment for the mortgagor to pay the balance of the obligation if the proceeds of the foreclosure sale is not sufficient to cover the principal obligation.

DEPRECIATION – Loss in value brought about by deterioration through ordinary wear and tear and action of the elements, functional or economic obsolescence.

EARNEST MONEY – A sum of money tendered by a buyer to the seller which if accepted by the seller shall form part of the purchase price and as proof of the perfection of the contract. It is a sign of good faith on the part of the buyer. Actually, it is a partial payment of the purchase and it must be deducted therefrom. (see also BINDER)

EASEMENT – he right, advantage or privilege which an individual has in land of another, such as a right of way

ECA – Environmentally Critical Area is an area that is environmentally sensitive.

ECC – Environmental Compliance Certificate is the document issued by the DENR Secretary or the Regional Executive Director certifying that based on the representation of the proponent and the preparers, as reviewed and validate by the EIARC, the proposed project or undertaking will not cause a significant negative environmental impacts; that the proponent has complied with all the requirements of the EIS System, and that the proponent is committed to implement its approved EMP in the EIS or mitigation measures in IEE.

ECONOMIC LIFE – The period over which a property will yield a return on the investment, over and above the economic or ground rent to land

ECONOMIC RENT – The potential rent which a property can command, considering rental of similar or comparable properties in the neighborhood.

ECP – Environmentally Critical Project is a project that has a high potential for significant negative environmental impact.

EIS –Environmental Impact Statement refers to the documents or studies on the environmental impacts of a project including the discussions on direct and indirect consequences upon human welfare and ecological and environmental integrity.

EMB - Environmental Management and Protected Areas Sector of the DENR

EMINENT DOMAIN – The right of the government to acquire property for necessary public or quasi-public use

EMP – Environmental Management Plan is a section of the EIS that details the prevention, mitigation, contingency and monitoring measures to enhance positive impacts and minimize negative impacts of a proposed project or undertaking.

ENCROACHMENT – A building, part of building, or obstruction which intrudes upon or invades a highway or sidewalk or trespasses upon property of another.

ENCUMBRANCE – Anything which affects or limits the fee simple title to property, such as mortgages, easements, or restrictions of any kind. Liens are money encumbrances which make the property security for the payment of a debt or obligations, such as mortgages and taxes.

ESCHEAT -- it is the reservation or automatic conveyance of real property to the State upon the owner’s death due to the absence of will heirs or other legal claimants, to the title, or when the owner fails to pay the real estate taxes.

ESTOPPEL -- Estoppel is one way of how an agency relationship is created. It means that if the principal makes third persons to believe that someone is his agent and that third party deals with the agent, then the principal cannot deny the agency relationship even though it did not exist in fact.

EQUITY OF REDEMPTION – Right of the original owner to reclaim property sold through judicial foreclosure proceedings by payment of debt, interests, and cost.

EQUITY –The interest or value which an owner has in real estate over and above the mortgage against it.

ESCALATION CLAUSE – A provision in a contract providing for periodic proportional upward or downward adjustment of price or consideration

ESCHEAT – Reversion of property to the state owing to lack of any heirs capable of inheriting; or due to other causes provided by law

ESCROW – An agreement entrusted to a third person to be held by him until the performance or fulfillment of some act or condition ETHICS – That branch of moral science, idealism, justness, and fairness, which treats of the duties that a member of a profession or craft owes to the public, to his clients or patron, and to his professional brethren or members.

FAIR MARKET VALUE – The price which a willing seller will sell and a willing buyer will buy, neither being under abnormal pressure.

FEE SIMPLE – Largest estate of ownership in real property in which the owner holds all rights not reserved by society. Absolute ownership.

FIDUCIARY – A person in a position of trust and confidence, as between a principal and a broker; the broker as fiduciary owes certain loyalty which cannot be breached under rules of agency.

FORECLOSURE – A procedure where by property pledged as security for a debt is sold to pay the debt in the event of default in payments or terms. It is a process instituted by a mortgagee by which the mortgaged property is sold at public auction to satisfy the principal obligation which the debtor failed to fulfill. The property that has been transfered to the bank through a foreclosure proceeding is called a Foreclosed Property, which is also known as Bank Acquired Asset.

FORFEITURE – The loss of money or anything of value, due to failure to perform, such as under an agreement to purchase

HIGHEST AND BEST USE PRINCIPLE – The use for a property which will bring the optimum or highest returns or advantage as of a certain time

HOLDOVER CLAUSE- A provision in a listing agreement which entitles the broker to commission even when the sale was closed after the period of the authority provided that the buyer was registered by him with the seller and with whom he has negotiated during the period of his authority. It may also be applied in lease contracts wherein this provision determines what happens when the tenant remains beyond the expiration of the lease; example: after the expiration of lease, the landlord serves an eviction notice to the tenant, but the tenant was given an option to remain upon payment of a P3000 per day additional rent, according to the holdover clause. More about Holdover Clause..

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