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Philippine Real Estate Primer

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philippine real estate primerIt is the #1 Question of Foreigners

Can I own Land in the Philippines?

Philippine Real Estate, it is a prime topic of foreigner conversation. In this article, we will address the hottest topic out there in terms of foreigners living in the Philippines. The ownership of real estate here.

Let’s have a look at ownership of Philippine Real Estate.

What is a 13A Visa

In short, you cannot own land in the Philippines unless you are a natural-born Filipino Citizen. But, if you want more detail, read on, we will be covering this in detail.

Can you own a house in the Philippines?

A lot of readers write to me and ask about buying a house here in the Philippines. Be careful, though. If you are no a Filipino, you cannot own Philippine Real Estate. This is a provision in the Constitution of the Philippines. Unless you are a Philippine Citizen or a Former Philippine Citizen (already naturalized in another country) you cannot buy land here, PERIOD. A couple of points to consider on this, though. First, if your wife is a Citizen of the Philippines, she can own Philippine Real Estate here. However, it cannot ever be yours or even part yours. For example, if your wife dies, you cannot inherit the property, it will go to one of her other legal heirs (children, siblings, etc.). A second consideration… if you or your spouse are former citizens, your Philippine Real Estate ownership rights are limited to only a small parcel of land.

Do you like Condo life?

Here is another thing that you can consider. If you really want to own your home is that, as a foreigner, you can own a condominium. Condominium ownership is limited to 40% of a complex, though. In other words, if there are 10 condos in a development, only 4 can be owned by foreigners with a balance of 6 only saleable to Filipinos. So, the rules really limit foreigners from owning even condos.

One reason that I write about this is that you must be very careful about this. People here selling real estate will try to sell it to you, even though it is illegal. Then, if somebody files a complaint, you will lose everything. There are ways to monkey around with the system, but it always leaves the foreigner vulnerable. For example, dummy owners will be set up, where the foreigner puts up the money and some other name is put on the title. This is dangerous, don’t do it! If the lawyer or other people who set this up wants to, they can pull the Philippine Real Estate right out from under you. There is always a strong possibility that you will end up on the short end of the stick.

An Easy Way to buy Philippine Real Estate?

It’s pretty common knowledge. at least among the readers here of LiP (they do tend to be of well-established intelligence and awareness) that foreigners are NOT allowed to buy Philippine Real Estate (land) here in the Philippines.

This does tend to irritate many among the foreigner community, and of course, it’s easy to see why.  The laws in the two countries are completely different.  For example, a Filipino can come to the USA and buy any piece of property he or she desires … no issue at all.

Philippine Law

But the current law of the Philippines, the 1987 Philippine Constitution (also known as the “Cory” constitution specifically restricts any “non-natural born” Filipinos from own Philippine Real Estate (land).  Foreigners can buy property in the legal form of a condominium (that is where the land under a dwelling unit or units is owned by a Philippine corporation (at least 60% Filipino owned, but the foreigner can not own the land itself.

This little fact of life has probably caused as much whining. dissent, outright anger, and schemes to defy the law itself as any three aspects of living in the Philippines, bar none.

Do you want to defy the law?

Foreigners try to openly defy the law by any number of ill-advised schemes.  Most common that I have seen are:

  • Dummy Corporations:  That is the foreigner will pay Filipinos to set up a corporation (the foreigner can legally own up to 40% of that corporation), and the corporation will take title to the land, supposedly letting the foreigner occupy the land happily.  Of course, setting up a dummy corporation in itself is a serious breach of the law and even if that little detail can be overcome, the Filipino members of the corporation still own at least 60% … and last time I checked, 60% outvotes 40% every time.
  • Another really popular scheme is to get a girlfriend or other close acquaintance to secretly take the foreigner’s money and then buy the land in a regular real estate transaction, the foreigner’s name appearing nowhere in the documentation.  I really shouldn’t have to say how risky and unsound this seems to me, but a lot of foreigners line up, year after year to put their money into such schemes.  Not recommended.
  • The last “trick” I want to mention today is an old, old scam and troublesome area of the law here … the Open Title gambit.  Thousands and thousands of Filipino citizens themselves fall into variations of this film-flam themselves every year, so little wonder that many of us foreigners do as well.

Think you don’t have to follow the law of the Philippines?

I know in advance a lot of people won’t care for this article.  They have this idea that they, somehow, are not going to have to subject themselves to following the laws of the Philippines and they often get really annoyed when some “upstart foreigner” reminds them that the law is the law … or in more flowery language … dura lex sed lex … my free, non-legal practitioner’s definition of that is, “The law Is Hard But It Is The Law.”

I can sum up my personal opinion of the foreigners (and Filipinos as well) who fall into the “Open Title” scams in a way my daddy would have described it.

How do you learn?

There are basically three ways men learn how to get through life:

  1. Some men learn by reading and studying what others have written.
  2. Some men learn by carefully observing and copying what experts do.
  3. The rest?  Well, they just have to learn for themselves by pissing on the electric fence until they figure it out.

How Do “Open Title” Scams Work?

Basically, it’s quite simple. A person looking to make a fast buck notices some land .. often building lots in desirable subdivisions, prime units in retail areas and such.  The scam artist then makes the representation that he or she either owns the Philippine Real Estate or is a licensed real estate agent, offering the Philippine Real Estate up for sale.  Often the asking price is way lower than one would think the asking price should be … a real “steal of a deal” and who can miss out on that, eh?

Then, just as if you and the scam artist were ‘fated” to meet, you just happen to get together and then the story unfolds.

Philippine Real Estate Scenario

There’s sickness in the family, someone has to go off to college in the USA, something is happening in the owner’s life that puts the owner “over a barrel” so to speak.  There he or she is a great big fat tuna, in distress, just waiting for a foreigner “sushi chef” to come along and carve out the prime “belly” cuts really cheap.  A deal too good to pass up.

And then the scam artists springs the best part of the “velvet trap” scheme.

When you buy Philippine Real Estate there are a number of taxes and transfer fees that have to get paid.  Often this adds up to quite a bit, can easily come up to 12%, 15% or more of the purchase price.

But Guess What?

Your new-found friend has a great solution for you.  0% tax, zero paperwork at all, the transfer can take place as early as tomorrow, or next week, or whenever you the “mark” .. I mean new owner, can produce the cash.  It seems your friend already has the title in hand, and the name on the title is someone like that of his paternal grandfather, or his mother’s great-aunt Tillie or some such “voice from the past”.  You see these people, being smart, “tipid” Filipinos, never bothered with all those outrageous taxes and fees and paperwork.  They just passed the title, with the “sellers” information filled out and signed, and the “Buyer’s Information” left “open”.

It’s So Simple

It Almost Sounds Too Good To Be True

Ummm, maybe perhaps because it is?  Let’s review this procedure for a sanity check, shall we?

  1. Knowing that you are trying to do something illegal, you press on anyway, because you “want To”.
  2. Knowing that proper recording of the title is the only true, legal possibility of proving the title over the years, you choose to ignore the facts.
  3. You dig deep and pony up hundreds of thousands, even millions of Pesos in cash to someone whom you don’t really know.
  4. Knowing that buying a forgery of a title is ridiculously easy, you chose (apparently) that the one your new friend has found for you happens to be real.
  5. Knowing that under the law, the way you are proceeding, with no rights or recourse under the law is the right thing to do.
  6. With no true legal holding in the Philippine Real Estate, you perhaps even go out and spend millions on a building project which you can never actually own.
  7. And then you kind of hurt yourself, contorting your shoulder to enable yourself for being so much smarter than those “sheep” who actually follow the law.
  8. And, especially after a few drinks, you routinely tell how you are carrying this phony title around in your pocket, not even caring (or knowing) who else knows your secret.

Ridiculous Situation?

When this is all laid out in black and white, doesn’t this look like a ridiculous position to be in?  I think so.  Yet I see time and time again. The same people who are way too smart to, say, buy shaky looking stock, who would never play poker for high stakes, who won’t even drive recklessly or smoke cigarettes because that’s dangerous, will reach right into their bank accounts and hand over money for “Open Titles” and even brag about how they “beat the system”.

Don’t do it, folks.  Trust me, you can take my word for it.  Peeing on the electric fence will sting like you can’t believe.  You really don’t have to try it for yourself … unless you enjoy pain.

Philippine Real Estate  Purchase? Need a Mortgage?

In my years of living in the Philippines, I had never heard much about banks giving mortgages. So, I assumed that they were quite rare. If you go to local banks they have lists of houses that have been foreclosed on for sale. Because of this, I knew some mortgages were being issued.

Can I obtain a Mortgage?

Last week, I got an e-mail. The fellow who was asking if he could obtain a mortgage to buy a house for his girlfriend. Here is what he had to say (names have been deleted to maintain privacy):

Hi Bob. My Filipina girlfriend is pregnant for me and I want to buy a house her. I work in London. However, I am not rich and but would like to buy a three/ four bedroom bedroom house. Maybe I would need my girl friend to take out a mortgage. I want the house to be situated in a nice safe neighborhood. But a neighbor for foreigners or for the rich. My main requirement is that the area is safe and clean. Can you help with prices? Is it cheaper to build? Or is there a house now that I can already pay down on. I would really appreciate your help. Thanks

Difficulty ahead?

Well, my first reaction was that finding such an arrangement would be quite difficult! Like I said earlier, I thought that mortgages were quite rare here. However, since I was not sure, I sent an e-mail to Lea. Lea is a local Real Estate agent that I use to handle inquiries that I get through my website. I contacted a Philippine real-estate expert named Lea.

I asked a Philippine Real Estate expert

Lea’s response to my e-mail kind of surprised me! It turns out that mortgages on properties indeed can be obtained. Here is what Lea had to say:

Getting a bank loan in the Philippines is very difficult. But it can be done. We just have to lengthen our patience. 🙂 The fastest approval period is 5 days. But releasing of the money takes almost a month due to paperworks. Let me explain the procedure. After submission of the documents, the bank will appraise the Philippine Real Estate for a fee of Php3,000.00. Approval is 60-70% only of the appraisal. In most cases, that’s 50% of the total selling price. Hence, you have to prepare 30-50% as downpayment. That’s how conservative the banks are.

After approval, the bank will issue a bank guarantee to the owner of the Philippine Real Estate. Then, we start transferring of the title to your name. (We will do this after paying the owner the downpayment and giving them the bank guaranty which will serve as full payment. So the owner will sign the Deed of Absolute Sale and give us the title. ) Once the transfer of title is done, (usually takes a month) we will give the new title to the bank so the bank will deposit the approved amount to the owner’s account. As you can see, it’s very complicated and the process is real slow.

I would need the following documents:

* 2 valid id’s
* marriage certificate (since you’re not married, i’m afraid that she won’t be qualified.)
* financial documents ie:
bank statement for at least 3 to 6 months
income tax return (for 3 years)
* Certificate of Employment if working
* Business Permit (if in business)
* Latest payslip (if working) at least 3 months

Now we Know!

OK, with that information, we can see what the Philippine banks are looking for with a mortgage application.

With this information in hand, I still have some questions, though. Maybe Lea will stop in and leave a comment. Here is what is on my mind:

  1. What if your income is from abroad? Will the bank consider that, or is it a problem because it is harder to verify?
  2. What about foreigners, would we qualify for a mortgage? I understand that we are mostly married to ladies from the Philippines. However, what if our wives are naturalized in our home country?
  3. Can you tell me what kind of interest rates banks in the Philippines are getting these days?
  4. Do you know how long the mortgages are for?

Philippine Real Estate Follow-up

I did get a follow-up note from Lea with some very interesting information too. She said that if you don’t qualify for a mortgage from the bank, there may be another option. In many cases, the land developer in a Subdivision will self-finance the house for you. They are often much more flexible in accepting those who are refused by the bank. There is a catch, though…. expect to pay interest rates of 14% to 18% on the balance! OUCH!

Bob Martin

Bob Martin is the Publisher & Editor in Chief of the Live in the Philippines Web Magazine. Bob is an Internet Entrepreneur. Bob is an American who lived in Mindanao from 2000 until 2019. Bob has now relocated back to the USA.

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Patrice
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Patrice

Hello Bob,

My question is that you are in Internet cafe business right? So who own your business, is it under your wife? Thank you for this website…it's full of informations

Bob
Guest
Bob

Hi Patrice – actually, no I am not in the internet cafe business. I used to be years ago, but I have not been in that business for about 5 years now. I am in a business that is US based, but I can operate from here by using the internet. If you want to set up some kind of business that would be based here in the Philippines, yes, you would need it to be owned by your wife or some other Philippine citizen, since you would not be able to own it under Philippine law. Glad you are… Read more »

patrick
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patrick

Hello Bob I love all the comments here definitely learning a lot about the way it works in the Philippines concerning land ownership. The question that I do have has not been addressed and that is this if I own an American corporation here in the United States can I use that corporation to buy businesses or prerty in the Philippines and do itlegally. Just wanted to see if this was a possible avenue to take. and. I am. Am American

Joe
Guest
Joe

Hello Bob,GREAT JOB you're doing here! I'm Joe & am married to a Filipina. We've just had a beautiful baby girl this year! I've been to the Philippines five times already & love it ! We'll be going back this coming oct. or Nov.. My wife's family is in BayBay,Leyte (Beautiful country). I've tried to arrange a long term rental there,but can't seem to find anything on the Net. I'm retired & own a very nice place here in Maine(very cold right now!). I'm interested in staying the winters in the philippines & the summers here. The best of both… Read more »

Bob
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Bob

Hi Joe – thanks for visiting the blog and leaving your comment. I'm glad to know that you've found the site to be useful! Regarding rental property – don't go for anything you find on the net! When people here put properties up on the net, it is usually at about three times the price that they really expect to get. Wait until you are here, then do a little looking around for something. As a matter of fact, the best thing to do would let your wife or her family do the shopping, and don't let people know that… Read more »

Joe
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Joe

Thanks for the info.,Bob ! I'll take your advice & wait till I get there. After all,I do have the time. Keep up the great work! Joe

NEERAJ
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NEERAJ

I CAN'T STOP MYSELF PRAISING U .WHO WILL REQUIRE A BOOK OR SOME GUIDE FOR SUCH A VALUALE INFORMATION.U KNOW WHAT HAVING THIS INFORMATION IS REALLY A NEW PERSPECTIVE.I FEEL SAFE AFTER BEING AWARE OF THE REALITY.QUESTION IS NOT OF RIGHT OR WRONG .ITS JUTS IS..AS IT IS..I LIKE UR ATTITUDE AND HOENSTY OF SHARING THE BEST OF THE BEST FROM UR EXPERIENCE.ALL THE BEST BOB AND UR WIFE..SPECIALLY NOW TO UR WIFE FOR EING UR STRENGTH AS INSPIRATION FROM SUCH A LONG TIME..LOVE U BOTH AS WELL AS UR LIL KIDS..THNX

Damian
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Damian

Hi Bob.

A foreigner can not own a piece of land in phils. how about apartments or condos?

Bob
Guest
Bob

Hi Damian – yes, a foreigner can own a condo unit. There are, however, still laws that must be followed. One that I am aware of is that no condo building can consist of more than 40% foreign ownership. For example, if there are 10 units in the building (all of equal size), only 4 can be owned by foreigners.

Damian
Guest
Damian

Bob,

I truly appreciate your advice. I have read your blog very carefuly. If I only knew it about your website before. It took a lot of time, few visits in philippines and a lot of observation and internet research to get an idea about life in philippines and i can nothing but completely agree with you in all aspects. will come back anytime i need advice. your website is a great resource. it goes way beyond lonelyplanet.

thank you.

Bob
Guest
Bob

Hi Damian – Thank you for your compliments! I would be happy to assist you anytime, if you have some questions. Just e-mail me or leave a comment any time.

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