KALIWAAN

Client: I’m planning to buy a property on installment. Are there any risks I should be aware of?

Juan: I’ve always been cautious about installment contracts—especially when they’re offered by non-developers.

Seller’s Risks

Credit Risk – Many sellers underestimate the challenge of collecting payments. It’s a tedious process, which is why even banks outsource collections to third-party agencies. Real estate developers also sell their past-due receivables to mitigate this burden.

Legal Limbo – If the buyer defaults, the seller should, in theory, be able to reclaim the property based on the contract. However, buyers can file cases that get annotated on the title, effectively putting the property in legal limbo for years. Until the dispute is resolved, the seller won’t be able to sell the property again.

In a standard sale, where full payment is made upfront, the title is immediately transferred to the buyer. But in an installment sale, the title remains with the seller.

Double Sale Risk – There’s a possibility that the seller might resell the property to someone else. To prevent this, the Contract to Sell should be annotated on the title. However, many sellers refuse this annotation to avoid triggering tax liabilities.

This is why the practice of “kaliwaan” (simultaneous exchange) exists—the seller gets paid in full, and the buyer receives the title immediately. Seasoned real estate investors understand how complex the Philippine legal system can be, and they take precautions accordingly.