Buying Property? "Condo Pasalo," Explained

PHOTO BY Shutterstock ILLUSTRATION War Espejo

If you've been looking for property online, chances are, you've stumbled upon social media groups talking about "condo pasalo," where property owners drop their terms for interested buyers. But what exactly is "condo pasalo," and is it a safe, fool-proof way to buy your own space? 

Real Living got in touch with licensed real estate consultant, appraiser, broker, and accredited lecturer Prof. Eden Dayrit, REC REA REB, to get the 101 on how this system works so that you can make an educated decision about your own property investment.

Also read:
Your Guide to How Much You Should Have Saved Before Buying Your First Home
10 Millennial-Friendly Condos in Metro Manila
Virtual Tours Are Changing the Way We Buy Homes

All About "Condo Pasalo"

"Condo pasalo" is a colloquial term describing the process of acquiring a condominium unit from its original buyer. According to Dayrit, this happens "in the staggered downpayment (about 20 to 30% of total contract price) stage prior [to] its turnover, usually within one to three years of payment prior [to] unit turnover. The original buyer tries to find a new buyer who can shell out the original amount already paid and continue their amortization payment, usually at the original acquisition price to attract buyers." Dayrit also notes that this includes peripherals like parking, drying cage, among others.

This arrangement is "usually advantageous to both parties due to the lesser amount of taxes and expenses involved," added Dayrit, depending on the developer involved and the percentage already paid by original owner. "Most developers would only charge an admin fee without the need for payment of the first round of the usual taxes (6% CGT for seller, 1.5% DST, Transfer Tax, Registration Fee for buyer), if the amount paid is still less than what the law prescribed."

According to Dayrit, this has become a preferred method of real estate investing for people who rely on the developer's track record of real estate appreciation. This allows them to cash in their investment without the need to pay for the first round of taxes. "Some developers try to curb this type of transaction by raising the transfer of ownership fee (which is sometimes called admin fee) from tens of thousands to hundreds of thousands of pesos, because it is an administrative internal documentation nightmare for the developer. For the buyers, it is an opportunity to purchase the same condominium unit at an amount less than current developer prices, and still enjoy first ownership of the unit."

Dayrit lists down some cons in "condo pasalo":

1. Title and tax declaration are usually not yet available, so buyer must rely on other proof of ownership documents;
2. It is more challenging to find a buyer willing to risk undergoing a pasalo process, specially if there are still available developer inventory. It is human nature to choose the path of less resistance (buying straight from developer, who can still offer payment terms that cannot be afforded by an individual seller);
3. As much as seller would like to recoup all amounts already paid, expect hard negotiation down to the point of just trying to just clear their record with the developer without any payment. Getting represented by a good real estate broker is the seller's best option to get the most of the transaction.

Things to Watch Out For in a "Condo Pasalo" Arrangement

It is best to ask for copies of all documents before making an offer, said Dayrit, especially since you're dealing with an individual seller (sometimes represented by a real estate broker) and not the developer.

This includes the following documents:

• Signed contract to sell
• Updated statement of account
• Proof of seller's identification
• Title and tax declaration if already available (most likely, not yet)

Dayrit also advises to ask for a direct line to the developer, usually by asking for authority from the original seller to transact directly with the developer.

This way, you can get proof of ownership directly and not have to rely on documents provided. You will also be able to ask the developer directly for all taxes and expenses that are due, which you will include in your negotiation with the original offer.

If you're planning on getting into "condo pasalo," it's best to seek a good real estate broker to help you with your documents and in making a decision. "Remember that the original seller may be as clueless as you are in terms of developer documentation," Dayrit added. The broker's professional fee is well worth the ease of transaction and best value for both parties that it affords.

This story originally appeared on Realliving.com.ph. Minor edits have been made by the SPOT.ph editors.

[ArticleReco:{"articles":["86597","86592","86588","86595"], "widget":"Hot Stories You Might Have Missed"}]

Hey, Spotters! Check us out on Viber to join our Community and subscribe to our Chatbot.

Source: Spot PH