24 Hidden Costs of Buying Real Estate


When saving up for a home, you have to put together an amount that’s greater than the property’s price. 

The reason behind this is that the price of the property itself isn’t the only cost you pay for. 

Purchasing a home requires various payments that are often seen as hidden costs because they’re often not mentioned until the transaction begins.

To give you an idea of what you should also prepare yourself for financially when you buy your home, like getting your dream property in La Zagaleta in Bromley Estates Marbella, here are some of the additional charges involved in real estate.

The real property tax is an annual levy imposed by the local government unit as stipulated in Republic Act (R.A.) no. 7160. The amount can differ depending on where the property is; Metro Manila property owners are required to pay 2% of the assessed value of the home as real property tax, while provincial properties are taxed 1%. For condo unit owners, the amount is subdivided among all the residents of the whole condo building. For idle lands, LGUs will also collect a maximum tax of 5% of the assessed value of the land.

Under R.A. No. 5447, an amount equivalent to 1% of the property’s value is also collected yearly from property owners. This payment is accrued to the Special Education Fund (SEF), which aims to finance the construction of schools, the purchase of instructional materials, and other academic costs of the local government.


Property TaxTransfer tax is required for changing the ownership or title of real property from the seller to the buyer. Maximum rates are usually 50% of 1% of property value, but Metro Manila cities and municipalities are charged 75% of 1%.

The registration fee is paid for the registration of the deed of sale. For a property with a selling price not exceeding Php1.7 million, the registration fee will be a maximum of Php 8,796. If the price exceeds Php1.7 million, an additional Php90 for every excess of Php 20,000 or fraction of Php 20,000 will be charged.

Because a residential property is considered a capital asset, the seller is required to pay a capital gains tax amounting to 6% of the property’s gross selling price or fair market value or zonal value, whichever is higher.

The documentary stamp tax is charged to the buyer, and is paid to serve as evidence of acceptance, assignment, sale or transfer of an obligation, right or property incident. The amount to be paid is 1.5% of the selling price or zonal value, whichever is higher.

For those who are buying a property to serve as an investment, they are required to pay value-added tax in the amount of 12% of the gross receipts for lessors, 10% of the gross selling price or zonal value (whichever is higher) for cash sale or deferred plan sales; and 10% of installments received or constructively received for installment plan sales.

Creditable withholding tax (CWT) is charged when the transaction involves the sale, transfer, or exchange of real property considered as ordinary assets, which are basically properties normally involved in the seller’s trade or business. Rates range from 1.5% to 6%, depending on the selling price of the property and if the seller is not habitually engaged in real estate. However, a seller is exempted from paying the CWT if the sale involves socialized or low-cost housing.

Condo owners are required to pay association fees, which cover maintenance and cleaning of, and electricity in common areas; and security services. It’s also likely that the selling price doesn’t already include the parking fee, which is something to consider.



As for the person who worked with you through the transaction, processing fees have to be paid as well, while the broker’s fee should be equal to 3–5% of gross selling price. For those who are leasing out the property with the help of a manager, the profit sharing between the manager and you would typically be 70–30.

Before deciding to purchase a property under the assumption that it’s affordable based on the unit’s price, be sure to ask for a computation of all the fees involved in the whole transaction. This will prevent any surprises when it’s time to pay for the property and the amount differs from what is advertised.

Sources: abs-cbnnews.com, nreaphilippines.com, foreclosurephilippines.com, doingbusiness.org

This is a sponsored post.
 

Lamudi started in 2014 and is already deemed as the biggest online real estate website in the Philippines, which quickly became the most visited online property platform and currently have more than 700,000 visitors per month. Lamudi is a part of the Rocket Internet Group who also founded Zalora, Lazada and Carmudi.

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