Don't Skip This Crucial Step: Your Guide to Real Estate Due Diligence

Buying real estate – whether it's a residential lot, a house and lot, or a condo unit – is a significant investment. Yet, many common issues and even scams stem from buyers not doing their homework. On the flip side, those who practice due diligence are far more likely to navigate the real estate market successfully, avoiding costly pitfalls and fraudulent sales. Let's dive into this essential first step in your home-buying journey.

What Exactly is Due Diligence?

At its core, due diligence is your personal investigation into a property's physical, legal, and financial health before you commit to a purchase. While it requires a bit of time and effort, this vital step is your ultimate safeguard. Think of it as protecting your future self and ensuring a smooth, secure transaction.

By thoroughly examining a property, you gain invaluable peace of mind. You'll sleep better knowing your investment is secure, free from the stress and regret of unforeseen problems. Due diligence can uncover hidden issues, identify potential future headaches, and even reveal untapped opportunities or hidden assets.

In the Philippines, real estate sales generally fall into two categories: general brokerage and project selling. General brokerage involves buying directly from an individual seller, while project selling means purchasing from a developer of a subdivision or condominium. While both can be safe, performing due diligence is key, though buying from a reputable developer often presents fewer immediate red flags.

Due Diligence in General Brokerage:

Buying from an Individual Seller

When you're buying from an individual, your due diligence needs to be particularly thorough. Here's what you should focus on:

• Verify Property Ownership: Your very first question should be: "Who is the registered owner of this property?" If the seller isn't the owner on record, you need to find out why. Insist on meeting the registered owner, or if they're unavailable, ensure their representative has a Special Power of Attorney (SPA).

• Secure All Legal Documents: This is where you roll up your sleeves. Gather all necessary legal documents, including:

  • Tax maps and declarations (from the Assessor's Office)

  • Cadastral maps (Bureau of Land Management)

  • Subdivision plans (Land Registration Authority)

  • The original Certificate of Title (from the Register of Deeds)

  • Tax assessments (Treasurer's Office)

  • Additionally, dig into legal specifics like zoning regulations, land use restrictions, and any easements or road rights-of-way. Don't forget to get financial reports like appraisals and tax statements, and physical information such as survey reports and soil tests. It's also smart to get repair quotes for any work that might be needed.

• Visit the Property (In-Person!): There's no substitute for seeing the property yourself. Evaluate its location – proximity to schools, public transport, and shops. Inspect its current condition, noting any repairs or maintenance required. Be extremely cautious if there are occupants, lessees, or informal settlers; the owner must honor existing agreements, and eviction might require legal action. During your visit, pay attention to the property's accessibility, the overall neighborhood vibe, local developments, and the area's safety.

• Verify the Seller's Identity: Confirm the identity of the owner/seller, checking their IDs and, importantly, verifying they are still alive. Ask about any pending legal cases involving the property. Whenever possible, meet the owner in person. A friendly conversation can reveal invaluable insights about them and their reasons for selling – details you might not get anywhere else.

Due Diligence in Project Selling:

Buying from a Developer

When you buy from a developer, a significant portion of the initial due diligence is handled by the Housing and Land Use Regulatory Board (HLURB). They scrutinize four key aspects before a developer can even apply for registration and a license to sell a subdivision or condominium project. Only developers with proven legal and financial standing are granted a Certificate of Registration.

• The Developer's Registration Certificate: Under Presidential Decree No. 957 (the Subdivision and Condominium Buyers Protective Decree), a registered landowner wishing to develop a project must submit their plans to the HLURB. The HLURB will approve these plans only if they comply with all existing standards and regulations, including the National Building Code for condominium projects. This certificate confirms the developer's legitimacy.

• The Project's License to Sell (LTS): Once registered, a developer must apply for a License to Sell for each specific project. Without an LTS, a developer cannot legally sell any lot, house-and-lot, or condo unit. A crucial requirement for obtaining this license is that the property must be owned by the developer and free from any liens or encumbrances. If the property is mortgaged for development, the mortgage agreement must explicitly state that the mortgagee will release the mortgage on individual lots or units once the buyer has paid the full purchase price.

This is why buying from a registered developer with an active License to Sell for the specific subdivision or condominium project is generally safer. If you're looking at a unit in "Phase 2" of a development, always request the LTS specifically for Phase 2.

Beyond the legal documents, consider the developer's track record: Do they build quality homes? Do they deliver projects on time? Are property titles issued promptly? How well do they maintain their previous projects? A solid reputation is a significant advantage.

Your Final Checks for Complete Peace of Mind

Even with all the above, there's one critical step you should always take:

• Obtain Your Own Certified True Copy of the Title: Do not rely solely on the land title provided by the seller, regardless of whether it's a photocopy, an e-copy, a certified true copy from them, or even the original. For complete peace of mind, make the simple trip to the Registry of Deeds yourself and request a Certified True Copy of the property title. It's a straightforward process and typically costs less than P300.00.

The Land Registration Authority (LRA) maintains microfilms of land titles in the Philippines, also known as e-Titles, through their Computerized Registry of Deeds. The LRA's Land Titling

Computerization Project aims to:

1. Keep current, complete, and accurate online title information.

2. Ensure the security and integrity of records, preventing tampering or fraudulent insertions.

3. Provide a system for timely detection of fake land titles and identification of those responsible.

If, for any reason, the land title isn't yet included in the computerized system, you'll need to visit the specific Registry of Deeds where the land is located. The verification process there involves:

• Confirming property ownership based on the document.

• Checking for any liens or encumbrances, including pending court cases, issues with technical descriptions on the title, and adverse claimants.

THINK: By diligently performing these due diligence steps, you not only secure your investment but also gain the peace of mind that comes from making the most informed decision possible. You're not just buying a property; you're building a future.

_______

Do you have more questions or need personalized assistance with your property search in Cebu? We're here to guide you every step of the way! Feel free to contact us at 0920 207 5035 or email cebuhousefinder@yahoo.com for a smooth and confident buying experience. Disclaimer: This content is for educational purposes only. Consult a lawyer for your specific case.