Connecting Buyers and Sellers of Philippine Real Estate
What are the potential risks of buying a "pre-selling" property?
What happens if the developer or builder failed to complete or deliver the property to the buyer?
Are there protective measures in place for consumers that are buying properties that are not even constructed yet? Perhaps there are some real estate attorneys here that can educate us.
Are there protective measures in place for consumers that are buying properties that are not even constructed yet? Perhaps there are some real estate attorneys here that can educate us.
Replies to This Discussion
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Permalink Reply by Beth Collingz on -
Buyers of real property from developers on 'pre-selling' or 'pre-construction' basis are protected under the provisons of the PD 957 and RA 6552 and other related laws and implementing guidelines issued by the Housing & Land Use Regulatory Board [HLURB]
The HLURB is tasked among other functions, to assist Local Government Units in the Preparation of CLUPs and Zoning Ordinances, issue Development Permits (DPs) & Licenses to Sell (LS) to Condominium Projects, register and issue License to Sell to Subdivision Projects, register and supervise Homeowners Associations and monitor Land Development Projects.
The HLURB is the proper venue for complaints by buyers against developers. The HLURB will conduct mediation proceedings, hear & decide cases
The general caveat emptor for buyers of real property from developers on a 'pre-selling' basis is to make sure the development they are buyer is in fact duly registered with the HLURB and that all the required Development Permits (DPs) & Licenses to Sell have been ISSUED not merely 'under process' before buying.
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Permalink Reply by Mike on -
Thanks Beth! Legal proceedings can tie up a buyer in court for years and incur big losses and too much stress.
How about using an escrow company of some sort (bonded and insured neutral 3rd party) instead of giving the funds to the developer? Put the buyer's funds in escrow (including down payment and all fees), if the builder or seller fails to deliver the property on time, the buyer's funds shall be immediately returned in full.
The buyer should not be punished in any way for the seller's fault.
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Permalink Reply by Beth Collingz on
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As I said before in an earlier post, there are no title insurers and no escrow companies operating in the Philippines. Moreover, most developers are against the idea of escrow because in general, they simply use the buyers payments to development the project. Not even all Philippine Banks will operate Escrow accounts due to the Bank's reluctance to become involved in commercial transactions between two parties to a real estate transaction.
One of the drawbacks to purchasing property in the Philippines is that most overseas buyers of the real estate including Filipino-Americans, have become accustomed to the normal US home buyers standards like putting their money in escrow (which protects them if the developer does not deliver on its commitments) whenever they buy real property.
Only one or two developers adopt escrow accounts with Banks in the Philippines.
Pacific Concord Properties Inc., sets that “International Standard’ in the Philippines with the “Buy Safe Payment Policy” of Escrow Trust Account Banking with Banco D'Oro Unicaptial, one the Philippines largest Banks, for the purchase of a condotel unit in either of their Lancaster Suites Manila, Lancaster Atrium Manila or Lancaster Cebu developments.
Buyers of Condotel units at the Lancaster Suites Manila, Lancaster Atrium Manila and Lancaster Cebu Resort Residences in Cebu, pay their Reservations, down payments and all monthly payments directly to the Escrow Trust Account with the Bank thereby ensuring that funds are maintained and ultimately used only for the purpose of direct contruction releated costs. This not only guarantees that the buyers money is safe, but more importantly the development will be completed on schedule and within projected time frames for the project.
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Permalink Reply by Mike on
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Having no escrow sounds very risky and one sided in favor of the seller. This is one area that the industry should address if we are really serious on uplifting the standards.
The buying public should be fully aware and educated about this issue especially when there are no disclosure laws and title insurance in the Philippines.
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Permalink Reply by Beth Collingz on
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We fully agree. As a developer, we can do no more than we have already done with our “Buy Safe Payment Policy” of Escrow Trust Account Banking with Banco D'Oro Unicaptial, for the purchase of a condotel unit in either of their Lancaster Suites Manila, Lancaster Atrium Manila or Lancaster Cebu developments.
Another problem to operating title insurance and escrow in the Philippines similar to that in the US is the fact that most developers do not even hold title to the properties they are 'developing' even if the property is titled in the first place....
But it is these basics that need to be addressed before anything can be improved.
The Government and its implementing agency, the HLURB, must stamp out the rampant selling of 'brochures' by developers of unlicensed projects.
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Permalink Reply by Mike on
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If the regulators and implementing agencies cannot do things right, the consumers can. Buyers should simply buy properties that are ready for occupancy and ignore "pre-selling" or "pre-construction" offers no matter who the developer is.
I know there is a misconception that if the developer is popular, branded, established and big enough, the property will be delivered on time. This is so untrue. I'm sure everyone knows what happens to the "too big too fail" thinking.
Like you said, BUYER BEWARE (Caveat Emptor)!
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Permalink Reply by Beth Collingz on
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There is always someone whom will buy developments in pre-construction because the prices are way less than completed or ready for occupancy developments. If you look at the history of developments that have failed in pre-selling operations, nearly ALL had NO PERMITS AND LICENSES.
It really depends upon the rationale for the purchase, the personal financial status of the buyer and the educated risks they are prepared to take when investing.
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Permalink Reply by Mike on
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I have nothing against it but there must be protective measures in place, not simply relying in the legal system (you know how it goes in PI) when the problem arises.
When you buy a car, will you give your money to the factory and wait for years before it's delivered? Some people will believe it or not because the seller's marketing pitch is so effective. It is as simple as that.
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Permalink Reply by Beth Collingz on
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There are protective measures in place. The problem is developers sell without licenses, realtors and brokers sell knowing the development has no license and buyers sometimes want to buy something on the cheap
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Permalink Reply by josefino flores on -
I agree with mike that all DP should be put to an escrow banks for protection of clients.The HLURB should look into this matter in the coming implementation of REAL ESTATE SERVICE ACT OF 2008.
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Permalink Reply by reysinena on -
I've been selling properties without license to sell, the buyers just fill up the "a letter of intent' plus the reservation fee. After that wait for the release of the license to sell and I just remind my client to prepare for their down payments.
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Permalink Reply by Beth Collingz on
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Preselling any real estate development without a HLURB License to Sell is illegal and is ground for suspension or revocation of a real estate brokers license. The general caveat emptor for buyers of real property from developers on a 'pre-selling' basis is to make sure the development they are buyer is in fact duly registered with the HLURB and that all the required Development Permits (DPs) & Licenses to Sell have been ISSUED not merely 'under process' before buying. Anything less is illegal and the buyer is not protected under the law as he buying an illegal development. It also means that the developer is simply selling brochures because they have not or can not comply with the stringent HLURB registration and application requirements. Violations of PD 957 etc and its amending laws, rules and regulations which include selling without a license can expose the seller to fines and up to 12 years imprisonment
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