BREAK - Basic Real Estate - A Knowledge

What information you need to know when starting selling Real Estate Properties?

BASIC REAL ESTATE -A KNOWLEDGE

(BREAK)

A Seller of a product must have a basic knowledge of the product he /

she has to sell.

INTRODUCTION

BREAK away to the traditional way of just referring a client to close

your deals.

INTRODUCTION

BREAK away to the notion that you can be rich just by referring and not knowing anything about the product

you are selling.

INTRODUCTION

Explaining the intricacies of Real Estate Financing

FINANCING 101

UNDERSTANDING HOME LOANS

Equity/DP

Balance / LA

TCP= TSP + MF

TSP Stands for Total Selling Price Selling Price of the Property only

MF Stands for Miscellaneous Fees Included are:

Title Transfer Fees and Taxes Notarial Fees Documentation

TCP Stands for Total Contract Price Price of the Property plus Miscellaneous fees


Remember the formula:


Equity / DP Initial amount the client should pay the Developer as proof of his ownership of the unit.

DP stands for Down Payment Balance / LA

Amount to be loaned to the financing institutions for the Developer to receive the whole amount.

LA stands for Loanable Amount


QUESTION: How do you compute for MA?


MA Stands for Monthly Amortization

LA Stands for Loanable Amount

FR Stands for Factor Rate You can find Factor Rates table online Factor Rates are dependent on interest rate so it is essential to determine the possible interest rate of financing institutions




QUESTION: Is there a better way of computing for the MA?


Yes there is another easier way.

If you have a mobile device such as a mobile phone with android or iOS operating system, just download and install “Financial Calculator”


Just input the following information: Loanable Amount Interest Rate Term (How many years the client intend to pay)

Hit CALCULATE


QUESTION: Can the Equity / DP be divided for easier terms?


- Yes, it can be divided to terms.- The terms will be dictated by Developers.


QUESTION: Why do we have to divide the Total Contract Price to

two (2), Equity and Loanable Amount? Why not approve the whole

Total Contract Price?


- Financing Institutions should know if a client is CAPABLE of getting a loan.


- Down payment or equity serves as a proof of their CAPABILITY to get a loan.


- Equity also serves as security payment to Developers.


QUESTION: What are the instances that you will be disapproved by

banks?


1. If the client have previous credit card / loan problems not solved.


2. Incorrect document information like residency, birthdate, civil status or other info that is critical to national security.


3. Fake and illegal requirements and documents submitted.


4. Client Income is below the required Income of the bank.


QUESTION: How much salary do the banks require for home loans?




MA Stands for Monthly Amortization The amount the client is willing to pay monthly to the bank

0.3 Or 30% in numerical terms 0.3 is the percentage of the income where amortization will fit


Required Gross Income This is the whole income of the individual or family, including all taxes and monthly contributions to other organizations


QUESTION: How much salary do PagIBIG / HDMF require for home

loans?




MA Stands for Monthly Amortization The amount the client is willing to pay monthly to PagIBIG financing institution.

0.4 Or 40% in numerical terms 0.4 is the percentage of the income where amortization will fit


HDMF Stands for Home Development Mutual Fund

PagIBIG Stands for Pagtutulungan sa Kinabukasan, Ikaw, Bangko, Industriya at Gobyerno

Remember these terminologies as it sometimes being used as contest questions and being asked by clients unwittingly.


Required Net Income This is the take home income of the individual or family, less all taxes and monthly contributions to other organizations.


QUESTION: What are the usual Home Loan

Financing Institutions?


1. PagIBIG / HDMF2. Bank3. In-House


PagIBIG Stands for Pagtutulungan sa

Kaunlaran, Ikaw, Bangko, Industriya at Gobyerno

HDMF Stands for Home Development Mutual

Fund In-House Financing Institution of the Developer


QUESTION: What are the differences between this Financing Institutions?


They differ in the following: Approval time of Home Loan Interest Rates Requirements needed to complete

Home Loan Available length of the term of Home

Loan


QUESTION: What do they mean if they said 20-80? Or 10-90? Or 5-15-

80?


- It means the percentage of Down Payment as against to the Loanable Amount


- In Real Estate jargon, 20-80 means 20% DP, 80% LA.

- 10-90 means 10% DP, 90% LA.- 5-15-80 means 5% Spot DP, 15% Staggered DP, 80% LA


- There are different financing terms the Developer offers.

- Just study them and ask.


QUESTION: Are there really hidden charges as other people often ask?


- Hidden Charges are usually the Miscellaneous Fees (MF) which the Developers do not include in the marketing computations for persuasion purposes.


- Just remember that Move-In Fees are really not included in TCP. The client is the one to register this including the payment but it is very minimal compared to MF.


Know the words used in Real Estate

TERMINOLOGIES

Leasehold Ownership Lot owner/s are

DIFFERENT as the Developer.

There may be a chance that the client/s (or children) will use the unit/s until the lease term expires.

Perpetual Ownership Lot owner/s are the

SAME as the Developer. There is no expiration

for the usage of the unit/s.

Homeowners Association as a whole will vote what they want to do about the structure.

WORDS TO REMEMBER

QUESTION: Is it really true that a building is only for 50 years?

WORDS TO REMEMBER

- According to a Civil engineering colleague, structures often go beyond 50 years. It is just a myth that Buildings will be destroyed after 50 years.

WORDS TO REMEMBER

- What ends after 50 years is the Homeowners Association because companies and organizations lasts only until 50 years but renewable after.

WORDS TO REMEMBER

- Homeowners Association just have to check the structural integrity from time to time for the safety of all the residents.

WORDS TO REMEMBER

QUESTION: What is the difference between finished / fitted and

furnished?

WORDS TO REMEMBER

Finished / Fitted Finished or Fitted

unit/s mean that the unit/s have: Wall Paint Ceiling Tiles Cabinets

Furnished Already finished or

fitted plus the added furniture are included in the turnover.

WORDS TO REMEMBER

QUESTION: What is Rent-to-Own?

WORDS TO REMEMBER

It is a program of Developers wherein a unit/s can be yours just by paying on a monthly basis

WORDS TO REMEMBER

Rent = Monthly Amortization Own = Down Payment + Financing Approval

WORDS TO REMEMBER

QUESTION: How do I determine the edges of the property especially in lots?

WORDS TO REMEMBER

Cornerstone / Muhon is used in determining the edges enclosed by the property or lot.

WORDS TO REMEMBER

QUESTION: What is the difference between Preselling and RFO?

WORDS TO REMEMBER

NRFO / Preselling NRFO stands for

Not Ready For Occupancy

Unit/s that are not yet constructed and turned over

RFO RFO stands for

Ready For Occupancy

Unit/s that are already constructed

WORDS TO REMEMBER

QUESTION: Can NRFO / Preselling units be also under Rent-to-Own

program?

WORDS TO REMEMBER

Yes, the difference is that Preselling is not yet constructed so clients will not be able to move-in and use the unit/s yet.

WORDS TO REMEMBER

Rent will mean payment of monthly down payment and amortization while Own will mean the finishing of construction, paying the down payment in full and approval of financing institution to the home loan.

WORDS TO REMEMBER

QUESTION: What is the difference between a low-rise, mid-rise and

high-rise building?

WORDS TO REMEMBER

Low-rise buildings are structures of up to three (3) floors / storeys high.

WORDS TO REMEMBER

Mid-rise buildings are structures from four (4) storeys to twelve (12) storeys high.

WORDS TO REMEMBER

High-rise buildings are structures from thirteen (13) storeys and above.

WORDS TO REMEMBER

Know the requirements in every transaction

DOCUMENTS

QUESTION: If you’re in the shoes of the client, what should you look for

to know that the project safe?

REQUIREMENTS

Look for the LTS of the project. Look for the company’s track record

online.

REQUIREMENTS

QUESTION: What is LTS?

REQUIREMENTS

LTS Stands for License to Sell This is a license issued by HLURB to Developers before they can start selling Real Estate Properties to the public as protection to buyers.

REQUIREMENTS

QUESTION: What is HLURB? What do they do and their mandate?

REQUIREMENTS

HLURB Stands for Housing and Land Use Regulatory Board

The lead agency in the provision of technical assistance to local government units in the preparation of comprehensive land use plans;

REQUIREMENTS


Regulation of housing, land development and homeowners association;

REQUIREMENTS


Adjudications of disputes related thereto, is committed to deliver its services with competence and integrity in order to satisfy its stakeholder.

REQUIREMENTS

Remember the 3 requirement categories in home loans: Proof of Identification Proof of Billing Proof of Income

REQUIREMENTS

QUESTION: What are the Proof of Identification?

REQUIREMENTS

Usually, these are 2 valid Government Id’s

Government issued Id’s are: Driver’s license PRC license SSS Id Tax Identification Number Id Voter’s Id Passport Company provided Id

REQUIREMENTS

QUESTION: What if the client is working abroad?

REQUIREMENTS

Process OFWs will look for a representative here in the Philippines to look after their documents.

REQUIREMENTS

OFW Stands for Overseas Filipino Workers

Principal The person who is working abroad

AIF Stands for Attorney-In-Fact The person who shall be the representative by the OFWs.

SPA Stands for Special Power of Attorney Document made to make AIF the legal representative of the Principal abroad.

REQUIREMENTS

QUESTION: What are the Proof of Billing?

REQUIREMENTS

These are billing documents sent to clients on a monthly or regular basis.

These billing documents may be as follows: Electric billing Water billing Landline billing Post-paid Line billing

Credit card billing document may not be accepted by Developers or financing institutions so ask first if applicable

REQUIREMENTS

QUESTION: What if the client is just renting in their present address,

what would be their proof of billing?

REQUIREMENTS

Their proof of billing will be the landlord’s billing documents plus the authorization of the landlord that he / she approves of using his / her billing document as proof of billing.

REQUIREMENTS

Another way is to secure Barangay Certificate that you really are living in the said address if the landlord is not present to provide for signature of authorization.

REQUIREMENTS

QUESTION: What are the Proof of Income?

REQUIREMENTS

These are income documents needed by the Developers and financing institutions to know the capability of clients.

REQUIREMENTS

These income documents may be as follows: 3 months latest payslips COEC ITR

COEC Stands for Certificate of Employment with Compensation

ITR Stands for Income Tax Return Client may show ITR of the previous year if the latest ITR is not yet present

REQUIREMENTS

QUESTION: What if client is an OFW, ITR is not applicable to them?

REQUIREMENTS

Just present what is applicable, like 3 months latest payslip and COEC.

REQUIREMENTS

There are countries that provide ITR but of the country. They can be used as proof of income with COEC.

REQUIREMENTS

QUESTION: I heard that PDCs are also required. How can I get them?

REQUIREMENTS

Opening of a checking account usually requires the client to have at least a savings account that has at least 6 months of continuous credit and debit. Banks also requires a certain amount maintained to the savings account before opening.

REQUIREMENTS

PDC Stands for Post Dated Checks

Developers usually give referral letters so that you can open a checking account in a bank

The requirement will be disregarded if a referral letter is presented.

REQUIREMENTS

QUESTION: What are some documents the client will sign upon

reservation of a unit?

REQUIREMENTS

Client Registration Form (CRF) or Buyer’s Information Sheet (BIS)

Reservation Agreement (RA) Contract to Sell (CTS) Deed of Absolute Sale (DOAS)

REQUIREMENTS

Client Registration Form (CRF) or Buyer’s Information Sheet (BIS) is a form or set of forms where the client will fill up for the purpose of reference and information for the Developer.

REQUIREMENTS

Reservation Agreement (RA) is an agreement signed by both parties that they agreed that the unit is already reserved to the client.

REQUIREMENTS

Contract to Sell (CTS) is a contract wherein the seller retains the title and ownership of the property until the full payment of the purchase price by the buyer.

REQUIREMENTS

Deed of Absolute Sale (DOAS) is a deed that states that one party is transferring his real estate property rights to another without any conditions attached to the sale except the buyer’s payment of the purchase price.

Usually given after paying the full amount in the financing institution or paid in cash.

REQUIREMENTS

QUESTION: What is the process to move-in in a unit?

REQUIREMENTS

Reservation of Unit

Submission of Requirements

Notice of Approval

Notice of Acceptance

Move-in

REQUIREMENTS

QUESTION: What is Notice of Approval?

REQUIREMENTS

Notice of Approval (NOA) synonymous to Letter of Guarantee

NOA is a letter which contains the approval of client’s home loan. Cash or check is not yet included

REQUIREMENTS

QUESTION: What is Notice of Acceptance?

REQUIREMENTS

Notice of Acceptance (NOA) is a letter which contains the cash / check equivalent of the home loan.

REQUIREMENTS

QUESTION: I heard once the “Negative List”. What is it?

REQUIREMENTS

Negative List is a list of specific industries of work of people involved at high risk of death.

It may also include a specific countries or places that are war-torn or dangerous to live in.

REQUIREMENTS

This list is used by different financing institutions if they are allowing for the approval of home loans of such persons.

REQUIREMENTS

Sample of High risk Industries Police / Military Lawyers

NOTE: the following are examples by the author and not necessarily followed by financing institutions.

REQUIREMENTS

Sample of High risk Countries Iraq Iran Syria Afghanistan

NOTE: the following are examples by the author and not necessarily followed by financing institutions.

REQUIREMENTS

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REQUIREMENTS

“Think BIG about what you want to achieve.

Think SMALL about how to achieve it.”

- SUN TZU, Strategies for Marketing

END