On Buying Your First Home

Source: Freedigitalphotos.net

By Benedict F. Baluyut, RMT, REB, RFP

Have you dreamed of acquiring your very own home? Have you imagined, seating on your porch, sipping your morning coffee and reading your newspaper. Seeing your neighbors in the street mowing their lawns or cleaning the front yard? Or just getting ready for morning rush of going to work.

Buying your first real estate residential property requires tedious and multiprocessing tasks of properly planning and making wise but crucial decisions. Buying a house doesn’t involve you as a breadwinner but involves your wife as a co-maker and a borrower and the whole family as beneficiary in securing your very own home and in the right neighborhood where you can live and flourish.

In my current experiences a real estate professional (PRC licensed real estate broker) it points to these important questions I raise for my clients before buying their prospective home?

Where is the location and accessibility of the house? – For first time buyers, real property must be located in a very accessible to main thorough fares and public transport, proximity such as schools, markets, church, business establishments, work place / office and others.  The golden rule in location is that it the home should be close within range of the conveniences on your planned homestead;

Do you have a working budget – For most licensed real estate broker / real estate salesman will ask you these questions if they have a ballpark figure of the property the prospective client wants to buy. These should be disclosed in order for them to find a property with their listings and would lessen the time in searching for a right listing;

Are your finances in order? – For most first time buyer, they should be financial ready, sound and capable in putting on the down payment for their dream home. A down payment of a home may vary from the standard 20% to 30% but with most developers can offer lesser at 10% during promotions by the marketing strategists of these property developers. Usually, a real estate professional would provide explain the intricacies of the property and give you a sample computation in order to have an idea on how much a property will cost in the long run. With the increase trend of socialized housing in recent years, the “Rent-to-own” payments schemes had been paved by socialized housing developer to attract prospective clients on such properties; 

Are you prepared to take mortgage or loans? – There are payment options available in borrowing money from a financial institutions or agencies such as a bank, private lending firms, and even the Home Development Mutual Fund (PAG-IBIG Fund). A credit investigation and background check is done by their credit investigators. If a prospective qualifies on the standards of the credit investigator of the lending institution. He or she is given an approval on lending their money needed to pay the property to the property developers. Financial documents, your Net Disposable Income (NDI) or daily to monthly expenses of cost of living and other pertinent details should be in order in getting your loans approved. Putting everything in order is crucial to fast track your acquisition of your dream home.  Currently, there are available real estate financing schemes in the market and most of their interest rates per annum may vary starting at 4% to 18% per annum on the years of the property will be settled from a minimum of one year to maximum of 30 years, fixed rates and adjustable mortgage rates are also available;   

Security, amenities and other facilities of the house where it is located? – Most buyers will not settle for less on the safety and security of their loved ones. Safety and security has become a top priority for prospective clients. Some would prefer to live in secure and good neighborhoods such as a private subdivision, townhouses and clients may prefer in non-subdivision residences.

Other things to remember: Are you prepared to add extra cost on these? Homeowners Association 

Fee for those living in private subdivisions, real estate taxes, Property Insurance and Deeds of Restriction on the subdivision you intend to acquire your property etc.  

With the growing consumer confidence of most Filipinos going high, many people have dream of owning a property but are hindered with the facts that it involves higher understanding on finances that an average Juan do not understand but the pride of ownership is somewhat an achievement for those who have acquired and already paid the mortgages and liens it reflects on their resiliency of saving for their future as it adds to your financial net worth in financial report card.

Coming soon...A college course in Real Estate Services / Management

There have been debates on whether the Bachelor of Science / Arts major in Real Estate Management or Real Estate Services will push through. With the news coming from Dr. Eduardo G. Ong, Chairman of Professional Regulatory Board on Real Estate Services (PRBRES) of the Professional Regulation Commission (PRC) during the 32nd Annual Real Estate Brokers Association of the Philippines - National Convention held at  Holiday Inn , Mimosa, Clark Freeport, Pampanga last November 25 to 27, 2010.

As he mentioned, it will be a four year course and will offered first by major state colleges and universities nationwide in the next year or two as a proving ground on this new curriculum. While private colleges and universities will be offering the course by 2012 or 2013 after the implementation of this.
 

Currently, the real estate professional is undergoing major transition from DTI to PRC with the start of acceptance in the application and registration to the Professional Regulation Commission  (under the Grandfather clause) since August of this year and will end on 30 of July 2011. The first batch of real estate professionals taking their first oath-taking at the Manila Hotel was held on November 30, 2010 presiding over was Chairman Eduardo G. Ong and others.

For many who took the "Panunumpa ng Professional or Oath Taking Ceremonies". It was a exhilirating and wonderful moment for them as they are now included in the rosters of true professionals under the professional regulatory board a government agency that is truly respected by most.

It is in my deep thoughts and hope that the real estate industry would  look into the potential of graduates of this new college course in the real estate profession and phasing out or removing the unscrupulous entities tarnishing this growing market in the future.

PS: Real Estate Brokers Licensure Examination under Professional Regulations Commission will be on March 2011. I make more further announcements and queries for those who would like to join with us.

MERRY CHRISTMAS AND A HAPPY NEW YEAR TO ALL!


Related Post:

The Passing of Republic Act 9646: Real Estate Service Act of the Philippines  
Real Estate Professionals: New Changes will be happening soon!





Copyright 2009-2010. Pampanga Real Estate Guide, Trend and Review TV. All Rights Reserved.

PRC Appoints New Chairman and Board Members for Professional Regulatory Board of Real Estate Services

Dr. Eduardo G. Ong

Last March 26, the Professional Regulation Commission (PRC) announced the appoinment for the Professional Regulatory Board of Real Estate Services at the PRC Compound in P. Paredes Street, Manila. One of the most prominent among them was Dr. Eduardo G. Ong as the new chairman for this newly formed board which will oversee the implementation and policing of ranks on the real estate professionals and the real estate industry in accordance with the Republic Act 9646: The Philippine Real Estate Service Act of 2009 Dr. Ong was made an honorary member of the Real Estate Brokers Association of the Philippines. Other members of the Board include:

Bansan Choa (Broker)

Ramon Cuervo (Broker/Appraiser/Consultant)

Rafael M. Fajardo (Broker/Appraiser/Consultant)

Florencio Dino (Regional Director –Assessor)

Copyright 2009-2010. Pampanga Real Estate Guide, Trend and Review TV. All Rights Reserved.

Passing of the Republic Act 9646: Real Estate Service Act of the Philippines

In the past 20 years, professional real estate organization and some lawmakers have been trying to pass this bill in its conception in the early 1980s. This bill has come to many version and many of these were not improved or let it die in the process without the recognition needed from the legislative and executive bodies of the congress and senate. However, on June 29, 2009, joint cooperation between congress and senate which was led by Senators Panfilo Lacson, Rodolfo Biazon and Antonio Trillanes with and other congressmen have recently given the much law professionalizing the realty trade which is necessarily needed in the real estate industry.

NEWS: Bank urged to be vigilant in verification of titles

The Consumer Union of the Philippines (CUP) has expressed dismay over the reported P 389 million peso loan fiasco involving titles which victimized the Development Bank of the Philippines (DBP) and urged banks to reform their title verification and loan releasing processes.

In an earlier reports, a savings bank using allegedly spurious documents and highly questionable titles, obtained in a P 389 million pesos in loans from the DBP sourced from the Industrial Guarantee and Loan Fund (IGLF) jointly funded by the USAID, World Bank and Asian Development Bank. The suspicious nature of these documents was apparently discovered only much later after the loan had already been released and the Bangko Sentral conducted an examination of the bank's loan portfolio.

The CUP chairman Ambassador Raul Goco, a former solicitor-general, said this deplorable incident and many other similar cases over the years highlight the dangerous inadequacies of banks in filtering out dubious titles submitted as collateral for loans.

In view of these incidents and banking system's abnormally high inventory of non-performing loans (NPL) at some P 150 million peso, and other Real and Other Properties Acquired (ROPAs) currently amounting to more than P 250 billion pesos Goco said banks should immediately reform their lending procedures, as loans collateralized by dubious titles are never meant to be repaid in the first place.

The banks' disclaimers in the sale of their ROPOAs, which is practically disavow title authenticity, Goco said, amount to an admission of their failure to comply with the Supreme Court's rule requiring banks to have a much higher degree of diligence in verifying titles, beyond the standard "due diligence" practiced by ordinary dealers in the real property.

"From the many cases we have reviewed, it is only after the borrower has already absconded or failed to pay the loan that the banks discover the fake or fraudulent titles they have accepted as collateral", Goco said.

CUP President Quirino Marquinez, a practicing lawyer, said that for as long as banks continue with their present cursory title verification process conducted by their in-house appraisers or credit investigators, they will remain the principal target of fake titles syndicates.

Marquinez said these will preclude collusion between fake title syndicates and bank insiders, even as the use if independent, government-recognized title verifiers will ensure objective, non-self-serving, influence-free and transparent findings about the title, upon which any party - not just the lender, borrower or buyer - may rely.

The CUP urged banks to immediately subject titles covering their NPLs to a thorough verification process by third party independent verifiers so that should fake titles be discovered, appropriate action may be taken while they still can against the parties responsible, and immediately subject all ROPAs to the same process so that appropriate adjustments may be made in the bank's financial statement to reflect the factual values of said ROPAs for the general public to know.

Source: Manila Bulletin (February 24, 2008)

STEPS IN MAKING CASHFLOWS THROUGH REAL ESTATE RENTALS

Are you happy with the pay you receive?

Earning extra-income is one of our foremost priority in making both ends meets. There are times that we as workers have to settle for a measly sum heavily deducted our overtime pay with tax when we are toiling for hours in a dead end job that doesn't pay and compensate you much. It is a good thing if you have extra cash on hand then why not make money work for you through passive income. Better yet to "Work Smarter, Not work harder".

There are certainly many potential streams of passive income where you can sit tight and let it grow. Example of these are investments through stock, mutual funds, time deposits, money market and bank deposit but these streams cannot compensate much in terms of Return of Investment. However these are also ideal and advisable for those who are building up their assets (wealth in general), diversifying through as additional cash flow and live a fruitful retirement during our old age.

Real Estate is still the king wherein it has become advantageous for most people nowadays as the construction of residential and commercial building are sprouting in the skyline of Metro Manila. Thanks to the influx of foreign investment brought about by the strong peso, Business Process Outsource (contact centers) and remittance of our Overseas Filipino Workers (OFW) who have been the lifeline in the Philippines. Demand for properties especially in Makati for BPO is high including residences for foreign expatriates who want to retire as well.

As a real estate professional, I too have mixed feeling of the tall skyscrapers blocking the view of the blue sky of the Metro Manila plus the progress we are experiencing. Hopefully, we are not affected with the U.S. subprime crunch wherein there are too many foreclosures in America. A piece of advise, much better to buy a property now in the U.S. It also becomes a happy notion for me that I can sell a residential condominium and give a satisfied client with a smile on his face on moving-in and living in his own condo unit or house.

Real estate rentals have become a lucrative business for most people. An example of this is Lito, he inherited a property from his parents a 365 square meter bungalow home located in corner street in Cubao, Quezon City built in 1960s. The property is accessible to Aurora Boulevard which is few minutes away and is inside a busy street of Public Utility Jeepneys. Although it is old, he did rehabilitate it a little just to make it presentable to possible clients. In two months time, it attracted a couple working nearby a call center in Libis at a agreed price of PhP 7,000.00 per month on the rent for this three bedroom bungalow property. The place is a bit busy but for the couple it is conveniently close to their workplace so they decided to get it.

Cash came flowing from the start and at the same Lito received the one month deposit and two months advance for the house. Let say, the house is earning PhP 7,000.00 per month multiplied by 12 months it will be earning at net of PhP 84,000.00 annually. Other expenses like taxes, repairs and other unforseen circumtances like unpaid dues etc are not yet included in the computation. Just be ready for anything.

Another example is Ren, he is involved lease-hold and sublease properties wherein he is using another man properties and subleasing it to other people. Here is how it works. Ren finds a property close to a university in the U-Belt. It is a few minutes away from UST and FEU and close to Espana. Let say he finds a property, an old two storey wooden house. Somehow it was rehab by the real owner and is renting it at PhP 6,000 per month. Ren sees an opportunity on this and focused its hind sight on this income earning potential. He grabbed it and asked the owners if he can sublease the property

Better to insure your property with non-life insurance like fire and others if ever you want to recuperate your investment from disasters.

Read the new laws on rental control. I believe the Senate have passed recently a law updating the old rental control law which expired last 2005. Right now, the laws governing the rent control was extended till December 31, 2008.

Residential condominiums are also excellent investment as real estate rentals. You can buy one at a low price during its pre-development stage and when it is ready for occupancy. You can but in the "FOR RENT" sign on the homeowners bulleting board. Right now, the best location to invest are those close to the university and schools wherein parent of students coming from the province need to find a place to live close to school and which is convenient at the same time than living in a dormitory. A colleague of mine owns a condo close to De La Salle University in Taft Ave, Manila. He leases at PhP 18,000 per month and is earning at least PhP 216,000.00 net. It is a cash cow indeed. You'll just have to worry paying the monthly dues for the maintenance. Other utilities will be shouldered by the lessee.

In Rental properties, you see to it that you make an monthly inspection or sometime quarterly inspection on the property. Check for leaks, termites and other problem that your tenants might call your attention to. Always establish rapport with them and even better if you talk to them from time to time.

So if you intend to be a landlord, you therefore will have sufficient passive income for your wealth or asset to grow in terms of money without much exerting physical effort in working for a company.

NEWS: BSP okays low-cost housing loan scheme

BSP okays low-cost housing loan scheme
By Des Ferriols
Monday, February 18, 2008

The Bangko Sentral ng Pilipinas (BSP) has approved a housing loan scheme that would allow low-income borrowers access to micro-financing to build low-cost houses.

The scheme, which also provided incentives for banks and micro-finance institutions, would allow for small loans that borrowers could be paid in frequent but small amounts.

BSP Deputy Governor Nestor Espenilla Jr. told reporters over the weekend that the micro-loan model has been tried and tested among low-income borrowers already used to schemes such as the traditional paluwagan and hulugan models.

“To start with, housing loans already have a very high repayment rate,” Espenilla said. “It’s in the culture of the Filipino to want to own a home and not to lose it.”

According to Espenilla, the scheme approved by the BSP would allow low-income borrowers to access financing from formal financing institutions that they otherwise would not be able to access.

The Housing Microfinance product, Espenilla said, would address the shelter needs of the economically active poor that were currently not being served by financial institutions.

Espenilla explained that the Housing Microfinance product involved the application of microfinance principles and best practices to the provision of housing finance for home improvements, house construction as well as house/lot acquisition.

Espenilla said the home improvement loans have a maximum of P150,000, similar to microfinance loans, while house construction and acquisition may be up to P300,000.

As an incentive to participating financial institutions, Espenilla said the product would be classified as a type of microfinance loan which would enjoy the incentives granted to regular microfinance loans such as no collateral requirements or the acceptance of collateral substitutes, as well as simpler documentary requirements.

“This addresses the usual barriers that the poor face in accessing housing finance,” he said.

Espenilla said the BSP’s Monetary Board has also agreed to allow housing microfinance loans to be considered as alternative compliance to the mandatory credit allocation to agrarian reform and agriculture activities as required by PD 717.

To implement the program, Espenilla said the BSP would enter into a Memorandum of Agreement with the Housing and Urban Development Coordinating Council (HUDCC). He said they would agree on the accreditation criteria and standards that would be applied to the banks offering this product.

According to Espenilla, the specific risk management features have been embedded in the product design. Some of these features include using a cash flow analysis to determine the client’s ability to pay, requiring a good track record as a microfinance client as well as collecting savings.

In addition, due to some features that were slightly different from regular microfinance loans, Espenilla said additional risk mitigants were required for banks that would offer this product.

“One distinct feature is the possible use of secure tenure instruments as collateral substitutes,” he said. ”In the absence of a land title, these legal instruments effectively provide proof of legal use, possession or ownership of a property.”

Although large commercial banks are not expected to be able to engage in housing micro-financing, Espenilla said the BSP expected significant take-up among rural and cooperative banks as well as micro-finance institutions that already exist.

“These institutions already have the capability and expertise in giving out small loans and undertaking the close supervision that it would require,” he said.

“The idea is for low-income but economically active borrowers to be able to secure the loan that they could pay back in small amounts with higher-than-usual frequency,” he said.

Source: Philippine Star - February 18, 2008

NEWS: Proposed Increase in Real Estate Tax in City of San Fernando opposed

San Fernando real property tax hike opposed

By Albert B. Lacanlale

CITY OF SAN FERNANDO -- The proposal to increase the fair market values (FMV) of real properties in the city encountered minimal opposition on its way to becoming a local ordinance.
Councilor Alex Patio, chairman of the Provincial Board committee on ways and means, heaved a sigh of relief moments after a public hearing he called to pulse stakeholders on his sponsored ordinance revising the FMV of lands in the city wrapped with negligible opposition among those who attended the affair.
"It is encouraging for officials that our constituency recognizes the benefits of such ordinance for the majority of Fernandinos," he said.

He admitted that his concern prior to the hearing was that stakeholders might take the proposed ordinance negatively against the Provincial Board members.

He has a basis to feel nervous. The ordinance, if implemented, would raise by about 70 percent the FMV of agricultural lands in the city and by 35 percent that of residential lots.

Since FMVs are used to compute real property tax (RPT), bills for RPT of lands within the territories of the component city would also increase.

Due to the City Government's thrust to remain "business-friendly" FMVs of industrial and commercial lands would remain the same.

"There would always be resistance to changes, but the Provincial Board thought it's about time we update the land valuation to enable the City Government to collect additional revenues and deliver the much needed basic services," Patio said.

Jose de Leon, city assessor, said the last time FMV in the city was increased was in 1996 when Provincial Board Ordinance 17, which was approved in 1994, took effect.

The succeeding revision of FMVs, if approved this year, would still be considered a long wait since the Local Government Code of 1991 allows local government units (LGUs) to update the land valuation in their respective jurisdictions once every three years.

The 1996 valuations were retained in 1999 to help the municipality bounce back from lahar devastation.

Three years later in 2001, the town was converted into a component city and a six-year moratorium on any tax increase was implemented.

In July 2007, however, the city officials in Legislative-Executive Development Advisory Council (Ledac) passed a resolution, which includes among other plans, the conduct of a general revision of real property assessments and classifications in 2008.

De Leon said the revision of FMVs is timely considering the following factors: present economic conditions; the needs of the city government to maintain its continuous progress; valuations being used by the different banks in the city and as well as licensed real estate brokers in the locality; the recommended zonal values as agreed by the different stakeholders of the city; and the Bureau of Internal Revenue (BIR) zonal valuation.

At a maximum of 70 percent increase in the land valuation, the proposal is still lower compared to the recent zonal valuations proposed by the BIR, which were adamantly opposed businessmen in Pampanga and values proposed by realtors.

Under the proposed valuation, residential lots in first class subdivisions will have an FMV of P950 per square-meter from the present value of P710 per square meter.

This will still be much lower compared to the BIR unit valuation of P1,500 and realtors' proposal of P1,200 per square meter.

To get the tax base or RPT due for a residential lot without building, the total area of the land is multiplied by the FMV, then by the assessment level of 20 percent, then again by one percent.

The final amount will be multiplied by two. Half of which will go to the General Fund, and the other half to the Special Education Fund (SEF).

Thus, a 400 square meter lot in a first class subdivision will be charged P1,136 as its RPT bill for the year.

Myrna Tapnio, vice president of the Federation of Homeowners Association (Fedhoa), said subdivision property owners are supporting the proposed ordinance.

She believed that the taxes being generated from the RPT are coursed back to the residents via services like infrastructures and other assistance.

Records obtained from the City Treasurer's Office here revealed that of the total income of P526 million the city had in 2007, more than P41 million was from net share -- after the deduction for the share of source barangays and SEF -- of the city from RPT taxes collected from the whole year.

(January 12, 2008 issue) – Sun Star Pampanga

The Realty Installment Buyer Protection Laws

The Realty Installment Buyer Protection Act or Republic Act 6552 is also known as the Maceda Law. This law provides protection to installment buyers against onerous and oppressive conditions. In case of non-payment of installment, the contract will not be outrightly cancelled but the buyer will be given a grace period equivalent to one month per year of installment payment made, without additional interest. If the buyer cannot pay within the grace period and the contract is cancelled, the buyer does not lose everything as he is entitled to a refund of 50 percent of the total payments made.

The buyer should not forget his responsibilities, however. He should keep in mind that he is duty-bound to examine the property he is purchasing and that he assumes the conditions which are clear, apparent and readily ascertainable on the page of the title.

Senator Rodolfo B. Biazon authored this bill called Senate Bill No. 185 - REALTY INSTALLMENT BUYER PROTECTION ACT in the 14th Congress filed last 23rd of July 2007 wherein its legislative status is still on pending process. The scope and nature of this senate bill is national and provide additional protection of property buyers which needed amendments in order to adapt to current times and on plug the loopholes of Republic Act 6552 once this bill is passed in support of R.A. 6552. The latter was enacted and authored back in 26th of August 1972 by former Senator Ernesto Maceda.

Senate Bill 185's long title is AN ACT TO PROVIDE ADDITIONAL PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT PAYMENTS BY REQUIRING SUBDIVISION OR REAL ESTATE OWNERS TO HAVE AN INDIVIDUAL TITLE ON EVERY LOT AVAILABLE FIRST BEFORE OFFERING THE SAME FOR SALE, PROHIBITING ANY MORTGAGE, LIEN OR ENCUMBRANCE ON THE SAME, MAKING THE ANOTATION ON THE TITLE OF THE CONTRACT TO SELL OR SALE MANDATORY, MAKING IT COMPULSORY FOR THE EXECUTION OF A DEED OF ABSOLUTE SALE AND THE DELIVERY OF THE TITLE TO THE BUYER UPON COMPLETION OF INSTALLMENT PAYMENTS, AND PROVIDING OTHER PROTECTIVE MEASURES, INCLUDING THE IMPOSITION OF PENALTY FOR VIOLATION THEREOF.

NEWS: BIR issues new rules concerning one-time real estate transaction

I have read on this article published last 26th November 2007 which was written by Ms. Iris Gonzales of the Philippine Star Revenue Memorandum Circular No. 76-2007 issued by Bureau of Internal Revenue last 25th of October 2007.

Fraudulent Tax evaders of real estate transactions days are numbered. The Bureau of Internal Revenue sharpening its teeth in collecting the revenues on the real estate industry which is on the upswing on current times.

BIR has set additional required documents which are mandatory for one-time real estate transaction. The needed documents include photocopy of official receipts issued by the seller, for purpose of determining whether of real property is on cash basis, a deferred payment sale or installment. Also acknowlegement receipt or proof of payment must be presented if the seller is not engage in business.

While the Contract to Sell and official receipts of payments are among the documents required for installment sales in Annex A2 of Revenue Memorandum Order No. 15-2003, the taxpayer presents only the Deed of Absolute Sale which is, oftentimes, executed upon full payment. The purpose of requiring the submission of a photocopy of the official receipts is for the Revenue District Office to have a means of validating if the transaction is on cash basis, deferred payment or installment plan. BIR Chief Lilian Hefti issued this memoranda in order to ensure transparent dealings and that taxes are appropiately paid and remitted to the government.

It seems that real estate transactions before do not have transparency in making deals with the Bureau of Internal Revenue. Awkwardly saying that there are some cases when taxes are filed incorrectly and some unscrupoulous individuals (sellers, buyers, etc.) engage in this type sale issued by the previous owner/seller to the buyer.

Here is the link for more information and better understanding of this subject. Revenue Memorandum Circular No. 76-2007