The Philippines? real estate sector has developed at a rapid pace in the past few years. In particular, Metro Manila is in the midst of a residential real estate boom. Between 1999 and 2010, for example, the average new condominium supply in Metro Manila was about 5,000 units. Between 2011 and 2015 that figure will increase fivefold to 26,000 units. However, despite the undoubted investment opportunities, there are a number of risks that foreigners looking to buy or rent in the Philippines must be aware of.
The Philippine Constitution states that foreigners are permitted to buy condominiums, but at present cannot purchase land titles unless married to a Filipino citizen. Foreigners are permitted to form a Philippine corporation and to purchase land, as long as the corporation is 60% Filipino-owned.
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Some of the most prevalent real estate crimes reported over the years include:
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Lack of Full Disclosure
Developers in the Philippines are often able to hide the actual cost of a property by simply advertising their properties at net price. These hidden charges sometimes only materialize when the buyer is in the process of purchasing the property. Net listings are normally associated with hidden charges such as tax delinquency, title history complication, encumbrances, and arrears. PSA recommends hiring the services of a licensed broker, one who has access to the Philippine National Listing System (PNLS), a database of all official properties for sale/rent in the Philippines, and the corresponding listed price. It is important to note that only licensed brokers have access to the PNLS.
Similarly, some less-than-reputable brokers have been known deliberately fail to inform buyers of potential issues associated with the property?s location, such as if it is located on an earthquake fault line (as are several properties in Bonifacio Global City), or an area that is prone to flooding. Likewise, condominium unit buyers are often not informed in advance of construction plans close to the building, that could create noise pollution and obstruct the view from the unit. Despite some pressure, there is no mandatory ?full-disclosure? agreement between buyers and brokers in the Philippines.
Below is the recommended procedure for buying/renting a property in the Philippines:
PSA also recommends that buyers only consider reputable property developers. Take the time to research property developers online. For example, BCI Asia, a leading Asia-focused construction media group, rated the top ten developers in the Philippines in 2012 as follows:
1. Ayala Land, Inc.
2. Century Properties Group, Inc.
3. DMCI Homes, Inc.
4. Eton Properties Philippines, Inc.
5. Federal Land, Inc.
6. Filinvest Land, Inc.
7. Megaworld Corporation
8. Robinsons Land Corporation
9. SM Development Corporation
10. Santa Lucia Land, Inc.
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?Colorum? Agents
Colorum agents are unlicensed and unregistered real estate agents often found illegally operating in the public domain. Colorum agents are responsible for the majority of real estate fraud scams and schemes in the Philippines. There are over 20,000 licensed real estate agents in the Philippines, but according to IPORESP, there are at least 100,000 active colorum agents, posing as property owners, dealers, appraisers, brokers, and even attorneys. Republic Act 9646, the ?Real Estate Service Act of the Philippines?, states that even those who distribute flyers, occupy real estate property booths, or act as sales agents without a license are considered colurum agents.
PSA advises to remain cautious when dealing with real estate agents. Always ask to see the broker?s license number, and accompanying documents. If in any doubt, seek verification from the Professional Regulation Commission (PRC), a government agency that keeps records of all licensed brokers in the Philippines. Performing due diligence on potential real estate agents is an effective way of determing whether or not an agent is licensed or not.
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Copy & Paste Property Advertising
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Some of the more unscrupulous real estate agents and brokers in the Philippines have been known to copy genuine advertisements from property owners, and simply edit the name and contact information as theirs, before reposting the advert in the same magazine or on the same website. Potential buyers responding to these adverts are often fooled into paying the broker fictitious fees for rent collection applications and credit checks.
Printed classified adverts ? found in magazines such as Buy & Sell Free Ads ? remain a popular medium for buyers and sellers in the Philippines. Real estate analysts have suggested that, in some editions, less than 50 percent of adverts in the real estate section are genuine. Similarly, websites such as Buyandsell.ph, Sulit.com, and Ayosdito.ph are littered with bogus real estate listings.
PSA advises to be wary of such advertisements, particularly the acute difference between advertising a property and advertising a lead. Advertising a property specifies several details about the property, including the exact address, while advertising a lead only states that a property is for sale at a ?cheap price? located in a certain city. A fake advert never specifies the address, to prevent potential buyers from being able to inspect the property for themselves.
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Bait for Buyers
PSA has received several reports of real estate agents posting adverts for properties that they are not authorized to sell. Furthermore, these properties are advertized at exceptionally low prices, to entice potential buyers. The agents will attempt to develop a close relationship with the buyer and earn their trust, before making up an excuse that the property in question had already been sold, or had been taken off the market by the owner. The agent will then suggest an alternative property, one that he/she is authorized to sell.
PSA advises to look for referrals and recommendations from the real estate agent to verify their intent to sell. This will confirm if the agent is authorised to rent or sell a particular property. Buyers are also advised to conduct research into property prices in locations of interest.
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Information Brokerage
Information brokerage occurs when agents collude to pass on details of listed propertiesto each other, each adding their own individual commission fee until the property is purchased. For example,one agent will directly deal with the seller, and another agent will represent the buyer. However,there will often be an additional two agents in-between. The superfluous agents? fees inflate and distort the true value of the property.
According to the IPORESP, commission for a full-time broker is approximately five percent per property. In deals that have been distorted by information brokerage, however, commission payments often total between 10 and 13 percent.
Information brokerage is a violation of the Code of Ethics and Responsibilities for Real Estate Service Practitioners. PSA recommends contacting the PNLS to verify that any property transactions that they are considering only involves three parties: the seller, the broker, and the buyer.
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Rental Fraud
Rental fraud is one of the most profilic scams in the Philippines? real estate sector. Scam artists will identify vacant or abandoned properties (usually for foreclosure or only used for vacation purposes), break into the property and change the locks. Posing as a real estate broker, they will advertise the property for rent at an exceptionally low price, to pique the interest of potential buyers. Buyers are then tricked into paying the ?broker? a security deposit and two months advance rent. By the time victim realizes that they have been the subject of a fraud scam, the scam artists have disappeared.
PSA advises to be wary of the possibility of rental fraud, especially when utility bills are found to be addressed to a different name (and not the seller). All payments should be prepared and accompanied by official receipts. If in doubt about the legitimicyof the business deal, seek assistance from other recognized agencies or brokers. Contracts between parties should always be reviewed and notarized by lawyers.
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Counterfeit Land Titles
Numerous unregistered real estate agents scour Metro Manila and other large cities in the Philippines searching for vacant lots, particularly those in gated communities or near commercial areas. Once a particular lot has been identified, the agents will research the property by obtaining copies of the land titles and other official documents from local government units, all of which are easily accessible in the Philippines.
The agents will then purchase a counterfeit land title, often from Quiapo Shopping District, a notorious market for counterfeit and pirated goods in Manila City. They will then advertise the vacant lot, targeting expatriates and middle class Filipinos. The victim will be lead to believe that the agent is authorized to sell/rent the lot. However, once the victimpays a deposit on the land, the agent will disappear.
PSA recommends conducting an appropriate level of due diligence and research on the land titles and the seller before considering a purchase. PSA is aware of several stories of victims losing significant amounts of money from fraudulent land titles.
The most effective precaution against real estate fraud is to deal with reputable developers and agents. According to the Republic Act 9646, all brokers must have a PRC license. If in doubt, clients are advised to call the PRC trunk line (02-314-0026) or fill out an IPORESP Anti-Colorum form (http://iporesp.org/anticolorumform.pdf) for official investigation.
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***The Code of Ethics and Responsibilities for Real Estate Service Practitioners under the Republic Act 9646 (Real Estate Service Act of the Philippines) and written by the Professional Regulatory Board for Real Estate Service (PRB-RES), is a set of rules and regulations to be strictly observed by those practicing real estate services with a license (consultants, appraisers, assessors, brokers, and salespersons).
In 2013, the Chamber of Real Estate and Builders? Association, Inc. (CREBA), the largest real estate organization in the
Philippines, partnered with the De La Salle- College of Saint Benilde, an arts university in Taft, Manila, to design a college program in Real Estate Management to support the PRB-RES and Republic Act 9646.
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Kindly contributed by?John Orenz Nito?of?Pacific Strategies and Assessments
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