Real Estate Limbo

In the Philippine RE setting, I call the period between the time of full payment and the time the title comes out "Real Estate Limbo." During this period, the Seller may NOT sell the property–thus the term "limbo."

When a buyer pays the final balance to a Developer for the purchase of a property, this is the only time the developer MAY begin transferring the title from their name to the Buyer's name. Developers do the title transfer in batches so that the process can take longer than three months (typically 6 to 12 months). I've seen title transfers take longer than ten years in dire cases. Once the title is transferred, this is the only time the Developer would transfer the Tax Declaration to the Buyer's name. This part of the process takes another three to six months. Good luck if you think you could pressure developers to expedite the title transfer process.

During this time, the owner is prevented from selling the property. Well, they could offer the "untitled" properties to prospective buyers. Still, chances are buyers would refuse to pay any substantial amount without the title/tax declaration in the seller's name.

Why not enter into a Contract to Sell (also known as a "Deed of Conditional Sale")?

Yes, you may execute this agreement with the buyer, and the terms will depend on the availability of the title and tax declaration in the Seller's name. The problem is that I have yet to meet a buyer willing to pay a significant amount for something the seller or buyer has no control over. As mentioned, title/tax declaration transfers can take anywhere between 6 months to over ten years.

This is also a common issue for buyers who wish to purchase a property through a bank loan. Banks would not accept properties–that have pending titles/tax declarations transfers–as collateral. They advise buyers to wait until the title and the tax declaration are in the seller's name before proceeding with the sale.

Why does this matter?

This is something to consider if you're considering selling a property near the turnover date. Also, it would be good for banks to develop a loan product that solves this issue.