Computing Taxes When Buying and Selling Properties

When it comes to buying and selling properties, agreeing on a price isn’t enough. You must consider the taxes and fees too.

First and foremost, it’s very important to perform due diligence on a property you’re eyeing. Buying properties from reputable companies such as Ayala Land, SMDC, DMCI, etc., is simple enough. With them, you’re sure that the properties you’re buying have the appropriate documentations and taxes paid. But what if you’re buying from an individual or from a corporation? What if you’re buying from a lesser known developer? What are the things you need to check?

Although not extensive, I do have some experience handling documents and processes related to real estate; mostly from my parents and relatives. That said, here are some things I usually look out for when it comes to properties.

Disclaimer: I’m not an expert when it comes to real estate transactions so please feel free to correct me if there are any mistakes. For things that you’re not sure of, it’s still best to consult with a lawyer.

Checking the Property’s Documents

a. Request for a Certified True Copy of the Title at the City’s or Municipality’s Registry of Deeds where the property is located. Although you can ask for a photocopy of the title, it’s best that you get one yourself to ensure that the details are complete and unmodified.

• • If the title owner is a person, ask for their valid ID/s and make sure it matches with the ones in the title. Also check whether the title owner/s is/are alive and capable of signing documents. If not, it would be best that you ask the selling party to “clean” the title first (remove the deceased, pass on to the heirs, etc.). If they are handicapped, you may need additional form of documentations (such as a picture or a video of the actual signing) in order to protect yourself and your transaction.

  • If the title owner is a corporation, ask for the latest GIS (General Information Sheet). It would also be a good idea to ask for a document stating that the corporation is indeed selling a property. For a faster transaction, the corporation may also just assign one signatory for all the papers going forward.

  • Check whether the details on the title match such as the location and the size of the property. If unsure, you can hire a geodetic engineer to survey the property.

  • Check the last page of the title for any encumbrances. If there are, it’s best to consult with a lawyer if it’s something that can affect you or the transaction. In real estate, an encumbrance is a claim, restriction, or liability on a property that may affect its use or transfer, like liens, easements, or deed restrictions. To know more about encumbrances, check this link. 

b. Request for a Certified True Copy of the Tax Declaration at the City Assessor where the property is located.

• • Check that the details on the tax declaration match the ones in the title such as the owner, CTC No., boundaries, etc.

  • Ask for the latest copy of the real property tax’s payment. Make sure to check that the tax declaration numbers match. If the taxes are paid and up to date, good. If not, ask the property owner to pay off their taxes first.

c. If buying from a developer, make sure they have a License To Sell issued by the DHSUD. You can check the list here.

Compute Possible Taxes and Fees

In addition to the buying/selling price, there will be taxes involved. Some buyers/sellers include the taxes in the final price while others would ask either the buyer or the seller to shoulder everything or they split the taxes between themselves. Make sure to clarify this early on.

There are a few articles on the list of taxes involved in real estate (such as here). Instead, here’s a link to a calculator I’ve made.

To access it:

1. Open the file through Google Drive.

2. Download or Make a Copy of the file on your PC or Google Drive. You can do this by going to “File” on the upper left corner of the page.

3. Edit the file as needed.

To use the calculator:

• Input the selling price per square meter AND the zonal value

• OR simply enter a selling price

The taxes and fees are based on the selling price derived from the zonal value or on the selling price in the Contract To Sell or Deed of Absolute Sale, whichever is higher. 

Other Tips and Things To Watch Out For

• One of the biggest mistakes I notice that people do, specially when buying condos, is that they only look at the monthly payment of the 20% down payment. This 20% down payment is usually stretched in a number of months making the monthly payment very low. Sales agents do this to make the property appear affordable, but in truth, it’s not. Instead, I prefer using price per square meter to gauge whether a property is affordable or not. Personally, anything above PHP 170,000.00 per square meter for condominium units within cities are expensive and doesn’t make sense to me.