Already found your dream property? Now, what mode of payment is best suited for you?
According to the 2017 Lamudi Real Estate Market Report, the Philippines’ property market is booming as evidenced by a brisk demand for residential properties like condominiums, apartments, and townhouses. This is on top of the sustained growth in the country’s economy, as well as structural changes in housing and foreign direct investment policies. With the surge in consumer spending, future property owners are also in a trot to find the best way to cash out for their precious investment.
There are a number of payment options available in the real estate industry, whether it be reservation payments, down payments, or payments of balances. Anyone can pay easily in cash, use bank services, or judiciously rely on one’s debit or credit card. There are several mode of payments that a buyer can choose from. They include cash payment, check payment, bank deposit payment, wire-transfer payment, auto debit account payment, and credit card payment.
Paying cash is the most prevalent mode of payment in the industry, particularly with short- to medium-term payment schemes. Monthly down payments are best fulfilled via cash payment, and so are deferred cash payments. Although any form of payment, especially non-condominium properties, can be paid with little trouble using cash, with the advent of more efficient mode of payments, paying cash may become less desirable.
For the first three years, paying cash is not cumbersome. Paying a monthly visit to a developer’s office in such a short period would not post much of an inconvenience. Adding one year or so may still be acceptable especially for non-condominium properties, but ordinarily, cash payment beyond three years is not advisable. Apart from the growing monetary and logistic difficulties, most developers do not allow paying in cash beyond three years. This is often included in the requirements for a unit before it is turned over.
Paying by check is another common mode of payment that is easy to accomplish. Property hunters find it very convenient to bring dated checks when they check properties. This mode of payment is practical for reservation payments especially when one fancies a unit during viewing.
Paying by check is commonly required for paying stretched down payments and balance payables. Check clearing lasts for three banking days. The number of days may also depend on the number of buyers who also posted checks in a developer’s office. The more buyers there are, the longer it would take for the check to be cleared. To solve this issue, a buyer can also opt for electronic checks as one-day check clearing is now possible with the new electronic system. If one decides to pay by check, it is recommended that a probationary receipt or a signed transmittal form provided by the developer is at hand.
3. Bank Deposit
Paying via bank deposit is a mode of payment that is appropriate when an official computation is already available. Using bank deposits for reservations is not advisable. However, there are developers that allow for bank deposit payments especially if reservations do not interfere with payment verifications of previously reserved properties.
Bank deposit payments are used for stretched down payments, payments for balance payable, and advance payments. Bank receipts in this type of payment method are mailed to the account holder, so it is advisable to have clear and updated account information.
4. Wire Transfer
Paying via wire transfer is an increasingly popular payment mode especially with buyers who could not be physically available in paying for property dues. According to Investopedia, a wire transfer is an electronic transfer of funds across a network that is administered by banks all over the world. Transfer is individualized from individuals or entities to other individuals or entities.
An efficient way of payment, wire transfer works the same as a bank deposit payment. If one chooses wire transfer, an accredited payment center must be identified. Paying via wire transfer is suited for short-term payables. In the Philippines, overseas workers and even expats who could not pay in other payment modes often use this payment option.
Paying via auto debit is perfect for paying one’s monthly defrayal. This mode of payment is not advisable for paying reservations. Only stretched down payments and balance payables are suited for this method.
Before using this mode of payment, it is recommendable to ask the developer if they allow this form of payment. Normally, the developers will provide their preferred or accredited banks. Automatic debit payment is an electronic payment option that gives permission directly to an entity, such as a merchant or lender, to take payments from one’s bank account. With developers having partner banks, the payment is easily verified as coordination is easier between the developer, the bank, and the buyer.
Paying thru credit in the real estate industry is not as easy as it is in the consumer goods industry. While acceptable as a mode of payment for reservations, it is the least likely used due to the value of the property involved. Most developers would not be amenable to this payment method, but some major developers, partnering with specific banks or payment centers, allow for this method in most of their payment schemes.
Buyers can choose freely among the six aforementioned payment modes when buying a property. Each method is specific in terms of payment type (i.e., reservation, stretched payment, balance payable, amortization, etc.) and the convenience of making a payment transaction.
Finding the right fit demands full discretion of one’s situation. It is prudent that a buyer takes special care with the rules or provisions of a developer or requirements of a seller in terms of reservation fee payment, down payment, and monthly amortization. Usually, especially from condominium and subdivision developers, there are payment specifics outlined for Philippine-based buyers and overseas buyers. Other sellers, the non-developers, have more flexible requirements or provisions where buyers can still haggle with.
* This post is published in partnership with Lamudi Philippines.