Along with a property’s price are other expenses involved in its purchase, and perhaps the most important is the cost to transfer the land title
Arguably one of the largest transactions most buyers or sellers can make, the transfer of property is understandably a cumbersome process. Apart from the significant sums exchanged during a sale, there is also a myriad of paperwork and fees that need to be completed and paid for.
Among these fees is the cost to transfer of a land title, which is, of course, done when a property is bought, sold, inherited, or donated. If you are a buyer, an heir, or a donee, a new land title under your name is important as it serves as proof of your ownership of property.
In the absence of the important document, or its improper processing, your new ownership of the property can be disputed. Among the key aspects which you should make sure is covered to ensure correct processing, are the fees involved when transferring a land title.
Q: How Much Does It Cost to Transfer a Land Title?
A: Unlike in other purchases, buying real estate does not consist of “one big cost.” Apart from the price of the property, there are also fees and taxes that need to be covered to complete the transaction. Among these is the cost to transfer the land or property title, which itself is not one singular expense, but also a number of fees and taxes, the amounts of which are based by how much the property cost at the time of transaction or transfer.
- Capital Gains Tax: equivalent to 6 percent of the selling price on the Deed of Sale or the zonal value, whichever is higher
- Withholding Tax: applies only when the seller of the property is a corporation
- Unpaid real estate taxes due (if any)
- The commission of the agent or broker
- Documentary Stamp Tax: this is commonly set at 1.5 percent of the selling price, or its zonal value or fair market value, depending on which is higher
- Transfer Tax (Local Treasurer’s Office): this is tax is imposed on the sale, barter, or any other mode of transferring of ownership or title of real property, at the maximum rate of 50 percent of 1 percent (75 percent of 1 percent in the case of cities and municipalities within Metro Manila) of a property’s worth.
- Transfer Tax (BIR): Transfer taxes may also be owed to the Bureau of Internal Revenue. According to the BIR, if the property was/is donated, this is in the form of donor’s tax. If the property was transferred by way of inheritance, this is in the form of estate tax.
- Registration Fee: commonly set at 0.25 percent of the selling price, or zonal value or fair market value, depending on which is higher.
- Incidental and miscellaneous expenses incurred during the registration process, such as notary fees.
The total of these taxes and fees is the cost of transferring a land title which, as mentioned, depends on the overall value of the land or property being transferred.
Who Shoulders the Land Title Transfer Expenses?
Another aspect of paying for the cost of transferring a land title is agreeing on who between the buyer and seller covers which of the fees. The standard practice in the Philippines is that the seller covers the capital gains and withholding taxes, as well as any existing unpaid real estate taxes that are due, and the commission of the agent or broker assisting with the transaction. The buyer, on the other hand, covers the documentary stamp and transfer taxes, as well as the registration fees and other miscellaneous expenses incurred at the duration of the transfer.
The aforementioned arrangement for sharing expenses, while standard, can be different, where fees commonly covered by the seller is shouldered by the buyer, and vice versa. This is provided that the two parties mutually agree on other terms during the negotiation period, and have yet to sign the Deed of Sale. Also known as the Deed of Absolute Sale, this document shows legal transfer of real estate property ownership, and is what is taken to the Registry of Deeds to be officially recorded after a buyer pays the documentary stamp, transfer tax and registration fees for the said land title transfer.
A Separate Transaction from Home Purchase
According to Jake Loria, licensed real estate broker and founder of The Real Estate Group Philippines, all the aforementioned requirements indeed make the transferring of land titles one of the most burdensome processes in local real estate. While buyers and sellers can set agreements and embark on paying the taxes and fees and having the documents processed themselves, Loria suggests utilizing the services of companies who specialize in title transfers.
“There are title transfer companies that can help take the burden away. If buyers are willing to pay millions to buy the property, Php 30,000 or something within that price range should not be too big of an issue because what they really want to make sure of is the transfer is done right and complete.”
He also shares that more often than not, the transferring of a title for a buyer or the paying of the capital gains tax for the seller is a whole new transaction separate from the sale, so buyers can expect an expense outside of a broker’s commission, which is well worth the amount given that a “broker’s main job is only to close the sale and to make sure the buyer receives the title clean.”
Although a great deal of effort and research was put into the creation of this article, Lamudi Philippines always advises home buyers and future property owners to consult with professionals, such as licensed real estate brokers, attorneys, to ensure their real estate transactions are properly and promptly processed.
References: foreclosurephilippines.com, bir.gov.ph, myproperty.ph
Main image via Deposit Photos