If the year 2020 has taught us only one thing, it is the wisdom behind expecting the unexpected. As the economy continues to struggle and job security becomes a question more than an answer for a growing number of Filipinos, expecting the unexpected has called to the fore the importance of one’s investments – and in particular, investments in real estate.

The coronavirus “COVID-19” pandemic has presented its own forms of struggles for the real estate sector, specifically with respect to acquisition of residential properties. Because of the nature of the market for residential properties, which is primarily built on in-person viewing conducted by sellers and agents in closely confined spaces, social distancing measures have all but prevented potential investors from seeing properties up close, which ordinarily plays a significant factor in the decision-making process (indeed, a brochure or online listing can really only do so much). Assuming that you were lucky enough to have found a property that you may be interested in despite COVID-19 restrictions, processing of documentation with government agencies – which is a crucial and absolutely necessary step for the property acquisition process – presents its own challenges in view of stringent regulations on social distancing and skeletal workforce schedules in government agencies. To add to the situation, the recent wave of COVID-19 cases in Metro Manila, among other areas, has made it increasingly difficult and unpredictable to scout properties in view of ever-changing government restrictions on interzonal movement, in the absence of an efficient and orderly vaccination program as compared to our regional neighbors.

Nonetheless, with technological advances and a slew of property databases available with a few clicks, it is not impossible to locate the right investment even during these uncertain times. If you are currently thinking of investing in a residential property to live or invest in – which may indeed be one of the wisest decisions in the face of an uncertain economy – here is a step-by-step overview of the property acquisition process, as well as the typical transaction taxes that you will need to consider in making your decision to help each of you make the proper and informed decision:

1. Finalization of Transaction Documents

Assuming that you have found a residential property to invest in and have successfully negotiated with the seller on a purchase price that works for both sides, congratulations are in order because the hardest part is officially done with. At this point, it will be helpful to contact a lawyer, agent, or broker to assist in the finalization of transaction documents, which will usually involve, among others, a standard Deed of Absolute Sale, as well as the necessary authorizations in the event that the parties involved are corporate entities. 

Finalization of the Deed and transaction documents, of course, will be subject to an examination of documents in relation to the property being acquired, including the Transfer Certificate of Title or Condominium Certificate of Title. If the titles show encumbrances, such encumbrances must be either taken on by the buyer or cancelled by the seller after discussions. Cancellation of encumbrances, meanwhile, must be processed with the relevant Registry of Deeds and will entail separate procedures, depending on the kinds of encumbrances involved.

Likewise, it would be ideal to expressly specify in the Deed the parties’ respective obligations for payment of taxes with the BIR and City Treasurer, as well as registration fees with the Registry of Deeds. The parties should then secure notarization of the DOAS and ensure that proper board authorities have been issued, should any of the parties be a corporate entity.

2. Payment of Taxes With the BIR and Transfer Tax with the City Treasurer

An essential element of the property transfer process is the payment of proper taxes with the BIR, without proof of which the Registry of Deeds will refuse to issue a new title in the name of the buyer. Once the transfer documents have been finalized, an application for Tax Clearance must be filed with the BIR RDO having jurisdiction over the location of the property. The BIR, in turn, will assess the transaction for applicable taxes, including Capital Gains Tax or Value-Added Tax, as well as Documentary Stamp Tax. Applicable taxes will be paid subject to the specific stipulations of the parties in the Deed, and once paid, will be evidenced by the relevant tax returns. The tax returns shall then be used to secure a tax clearance and Certificate Authorizing Registration, both of which will serve as the BIR’s approval for the transaction.

Upon securing of the Certificate Authorizing Registration, you may then bring the same to the Office of the City Treasurer of the relevant local government unit for assessment of transfer taxes, which must likewise be paid prior to processing title transfer with the Land Registration Authority through the relevant Registry of Deeds.

3. Processing of Title Transfer With the Registry of Deeds

Once the proper tax liabilities have been settled, you may now bring your application to the Registry of Deeds in order to process the title transfer in your name. Subject to payment of registration fees, the Registry of Deeds will examine the transaction documents and tax returns, and if sufficient, will proceed with the cancellation of the previous TCT/CCT in the seller’s name and issuance of a new title in your name. The new title may then be used to secure the accompanying tax declaration from the local assessor.

Once all these are done and subject to the specific provisions of the Deed, you may now move into your new home, or alternatively keep it in your back pocket and monitor the market value of your brand new investment.