A guide to closing costs in the Philippines
BDO Money Matters | By Christine Dychiao for Yahoo! Southeast Asia -Sun, 04Nov2012
You’re moving on to your next dream home, and selling off your old house to someone who thinks it is a treasure. But before this story becomes a happily ever after, you’ve got closing costs to settle. Whether you are selling or buying a home, you need to be aware of the costs you will be incurring in transferring ownership that are over and above the price of your property.
While costs may differ based on the circumstances of the sale and how you are financing your home, here’s a general guide to help you price your property or negotiate your purchase. Hopefully, this will eliminate the element of surprise expenses when it comes to sealing the deal on your home.
Closing Costs for Home Sellers:
1. Broker’s Commission. This is the amount agreed upon with your real estate broker. This is usually a percentage of the total selling price of your property.
2. Capital Gains Tax (individual). This is a tax imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets. The real property tax rate is 6% of gross selling price, zonal value or fair market value, whichever is higher. If the seller is a corporation, this is referred to as a Creditable Withholding Tax.
3. Real estate taxes due if applicable. According to Glennis Nitafan, Managing Partner of Highstreet Manila Group, a property consulting firm, “There are instances when a seller would give a NET price excluding the above fees.” In cases like these, the broker includes the closing fees in the computation of the price of the property.
Closing Costs for Home Buyers:
The Buyer meanwhile shoulders all the transfer related charges including but not limited to:
1. Documentary Stamps Tax. This is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property. The tax rate for a deed of sale is 1.5% or P15 for every P1,000 of the selling price, zonal value or fair market value, whichever is higher.
2. Transfer Tax. This is a tax imposed on the sale, donation, barter, or any other mode of transferring ownership or title of real property. The computation varies from .5% to a high of .75% of zonal value or selling price whichever is higher, depending on the municipality. Refer to the City Treasurer for the rate applicable to your property.
3. Registration Fee. This is usually 0.25% of the selling price or fair market value, which ever is higher. However, according to Nitafan, computation by the Registry of Deeds is based on a table, and may also include other costs in order to arrive at the final Registration Fee amount.
4. Notarial Fee. The Deed of Absolute Sale should be notarized for a fee of about 0.1% of the selling price.
5. Loan fees. If the buyer takes out a home loan from a bank these are the extra costs tied to a home loan:
• Appraisal fee
• Handling fee
• Mortgage redemption insurance
• Fire Insurance
Mode of Payment: Note that all checks payments payable to Bureau of Internal Revenue, City Treasurer and Registry of Deeds have to be in a Manager’s Check.
According to Nitafan, most delays in the transfer of titles are caused by improper computation, or the amounts or payee names in the checks are erroneous. It is best to double check amounts and payee names before having the Manager’s Check issued.
Before closing that deal, check with your broker or real estate professional for good faith estimates of your closing costs. If you have the time, check with your local government agencies, bank officer, and real estate broker for the exact costs you will be incurring.