Buying property in the Philippines
Main things to Keep in Mind
- There are no rules for real estate transactions and realtors to follow
- There are many hidden taxes that can come up at the last minute
- There are no warranties
- Prices can vary based on the realtor
- You cannot own property in the Phillipines
- Never believe anything unless it can be proven
- Finding property takes patience, patience and more patience
Forget everything you knew about buying real estate
The Philippines is a very third world country in many ways of which buying and selling real estate is just one. There are almost no rules, no regulations, no standards and a host of potential issues completely new to westerners. Never assume you know anything is rule number one and never believe anything you hear or read until it is absolutely proven. Honesty comes in shades of gray and there are many wild and crazy things that are guaranteed to catch you by surprise. Just in case you don't know, it is illegal for foreigners to own land here so it has to be titled to a Philippino, something to keep in mind and covered in hilarious detail on our website listed below. There are sort of way around this, each with it's own risks so choose carefully.
This article will briefly cover the basics of what you may find out the hard way when buying property in the Philippines. It is based on actual experiences and knowledge gained when looking for lots and homes on Bohol and Panglao island. It is not designed to cover all aspects of real estate purchasing or its related financial risks. That would take a small book to properly review all the ins and outs of Philippine real estate idiosyncrasies. What we discuss is also broadly applicable for real estate purchasing throughout the Philippines as the laws are the same ( lack of laws to be exact). For more in depth information, please visit our website at www.boholrealestateadvice.com
The biggest and overall most important thing to remember is the total lack of rules and regulations covering real estate buying and selling. Of course there are realtors, sellers, buyers and government paperwork, but it is as different as white is to black when compared in the US. Realtors are often free lancers and tack on whatever amount they feel appropriate when selling a property. Sellers hate realtors and often consider then thieves and crooks with frequently good reason. There are some good realtors out there, but never believe anything until it is proven. The upshot to all this is a very difficult and opaque market place with the same property being sold for different amounts by different realtors, difficulty finding property, difficulty getting the real stories on the properties and no help in closing. Realtors here in Bohol rarely have any formal training and are are unfamiliar with even the local tax and property closing guidelines. Realtors also try to each have their own "stable" of exclusive properties that only they know about, making dealing with just one realtor a losing proposition. You may end up talking to 10 realtors to find something you like. If coming from the US, there is no MLS type of registry, no ForSaleByOwner sites and a scattering of real estate sale sites, but none very comprehensive. So what you end up with is owners selling their land by word of mouth or signs posted in the yards, hardly a good way to sell something! This is where that patience element comes in again and having to talk with multiple realtors, sellers and doing lots of driving around to find lots. You can always stop by the neighborhood Sari-Sari stores to ask too, they can be a treasure trove of help. Just be sure you have someone that speaks the local language. Most people here speak on a spattering of English so communicating can be a challenge.
Once you find a lot or home, the fun has just begun. Due to a totally antiquated taxation tracking system in the Philippines done mostly by paper and original deeds of sale, finding out who actually owns the land and if there are any back or inheritance taxes can take a while. Especially for vacant land that is passed down for generations and subdivided, it can become a nightmare figuring out what is really going on and getting all the scattered owners to sign off on the sale. On top of that, there are two types of land, title and tax declaration. The differences are substantial and already covered on our Buying Real Estate page in great detail. But in short, stay away from tax declaration land as it can be a very iffy buy.
Another important thing to remember is nothing happens quickly. It can and will take months to buy something. Even after a property is bought, it can take 9 months to a year to get it registered. And did I forget to mention there is also a 6% Capital Gains tax on all property sales? Be sure that is included in the negotiations or you will end up paying it at the very end out of frustration to get the deal closed. Of course there are also attorney fees ( attorneys are required), tax research fees, recording fees, and a host of other ones. Estimate around 10% of the sales price for closing costs and you will probably be safe. That is unless you find out there are 20 years of back taxes and penalties due. Hey, the local rock gut rum is cheap here at less than $2 a bottle, drink up and enjoy!
Buying a house is another situation. Again due to the lack of any inspection or regulatory guidelines, homes are built to varying levels of competency and quality, usually to the lowest price point and quality possible. They are often built on the "friends and family" plan so don't expect professional work. There is not such thing as a home warranty service for good reason and problems are to be expected. The salty air wreaks havoc on the metal roofs and gutters, the irrigation hoses often used for waterlines in the house are prone to leak and break, the electrical can be a nightmare, the concrete block walls are prone to cracking and the list goes on and on. Finding good contractors is an art in itself but at least most work is cheap and plumbers are experts at breaking open concrete walls to fix the leaks.
In conclusion, it is always possible to find great land, good homes or build a nice place in the Philippines, but just be extremely careful, patient and diligent or it will bite you very hard.