LAST week we discussed situations that make real estate buying difficult and common forms of professional advices we can avail of, the first involving "technical advice.”
In this last installment of our article on the above topic, we continue with professional advises and the extraordinary or add-on cost of home ownership.
2. Legal Advice. Transactions involving real estate require the preparation of legal documents.
In the case of a sale, a deed of absolute sale would have to be prepared to consummate the purchase undertaking between the seller and the buyer. After which the ownership of real property is evidenced by a title that is in itself a legal document.
The real estate process in itself requires legalities and documentation of which legal advice is indispensable. In many cases, the buyer would encounter many legal terms of which only those knowledgeable in legal matters could explain to the buyer. Therefore, you have to seek the services of a legal counsel in these matters.
3. Financial Advice. It cannot be denied that purchases made on real property are bought by funds that are borrowed. As such, we cannot simply dismiss the importance of a financial adviser. A real estate financial adviser would help out assess your capacity to pay for the property. Your capacity will be compared with the amount of property you are acquiring.
Any resulting mismatch could be signs of problems to come.
It is important that you lay out truthfully your financial standing with the financial adviser. This is a must to determining the possible sources of financing to be tapped, the reasonable terms and conditions available and the amount that you are earning so that accurate assessment can be made as a factor whether you can afford the purchase or make other purchase options.
4. Marketing/Management Advise. There are many instances when a property owner or buyer is at a quandary as to how a property has to be disposed of or the manner by which the property can be acquired. If the intention is for a property to be sold at a profit or to maximize the returns of the real estate investment, then marketing advice may be sought for.
If the property is to be rented out or a property needs to be administered to get the most out of it, then the assistance of a reliable property manager may be needed so that the income return from the investment can be adequately evaluated prior to proceeding with the investment.
5. Tax and Accounting/Valuation and Appraisal Advise. We have to admit that special advises are necessary in many real estate transactions especially as it pertains to taxes and accounting matters.
Different real estate transactions require the payment of different taxes. To get the right tax advice, the help of a tax advisor or accountant should be employed.
What most real estate property owner, buyer or investor do not know or are not made aware of is that property possesses intrinsic value. Yet, for most, this is taken lightly, thinking that it would not matter if the value they have in mind or that which was given to them is an acceptable fair valuation.
This is where the services of an Appraiser or Broker knowledgeable in appraisal would have to be tapped. There is no substitute for a property valuation which comes from a reliable and objective Appraiser.
Buying, selling and other real estate investment is no simple matter, a person must be cautious, prudent, careful and meticulous since one fatal mistake can be disastrous. There is no substitute for a professional advice from a reliable and knowledgeable expert. Real estate investing no matter what form and what state, needs the minds of many professionals. Seek advice from your real estate team to realize your dream. That added cost will save you a lot when pouring investments in real estate.
The Extraordinary or Add-on Cost Of Home Ownership
You might not know it, but there are "add-on cost" in owning a home. There are a lot of additional costs when buying a home and we do not only refer to the selling price. There are many hidden cost attendant to home ownership that the buyer will only come to know of it, once they have signed the commitment form in the purchase of the property.
To be fully informed, here are some of the extraordinary costs of real estate transaction:
1. Transfer Costs. In transferring ownership from one party to another, there are various taxes and fees that would have to be incurred: these include, Capital Gains Tax, Documentary Stamp Tax, Transfer Tax and Registration Fees.
Capital Gains Tax and Documentary Stamp Tax is paid to the Bureau of Internal Revenue (BIR) while the Transfer Tax and Registration Fees is paid to the Register of Deeds through the Provincial or City Treasurer's Office.
If the seller is a developer, they have to pay an Expanded Creditable Withholding Tax; while if it is a corporation, other additional taxes are necessary. Before consummating the purchase or transaction, make sure that the amount of transfer costs and who should pay them (whether the seller or buyer, or both) should have been agreed upon.
2. Legal Costs And Professional Fees. You have to allot a budget for legal advice, documentation services and other professional fees. Prior to any engagement, make sure that all professional and legal fees are clearly agreed upon to prevent any misunderstanding in the future. It is best that the scope of such services be agreed upon beforehand and the corresponding fees duly itemized for clarity.
3. Moving-in Costs. When moving from one place to another, the cost of bringing along your furniture and fixtures will cost money. This may include bulky furnishings such as refrigerators, airconditioning units, washing machines and the like. This situation cannot be avoided unless you opt to leave this furniture behind as part of the sale of the property. To get the most out of such transfers, make sure that these items are insured since some of these belongings may break or get destroyed during the shipping and transport process.
4. Furniture Purchase Costs. A house cannot be complete unless there are furniture and fixtures inside it. It had been a practice that houses are filled with the necessary furniture and the family take time in completing all furnishings and accessories. To determine the cost to be budgeted for these home accessories, the rule of the thumb is to allot about 15 percent of the house cost for the cost of furniture.
That means that if the house cost, say P4,000,000.00, the cost of furniture and fixtures to be budgeted is about P600,000.00. Of course, if the family is transferring from an old house to a new home, the net book value of owned furniture will be deducted from the budgeted furniture costs.
5. Financing Charges. Purchases of real property normally is financed through borrowings. As such, there are financing charges you have to take into account These include the mortgage registration fee, documentary stamp tax, notarial fees and processing fees. The bank or the financing company can give you the breakdown of the loan/borrowing costs that you will shoulder. Likewise include contingencies, you will never know what you will be up to.
6. Repairs And Maintenance. For old houses acquired, this will have to be well taken into account. It is a must for you to introduce some needed repairs and maintenance before you can make use of the property. Maintaining and repairing a home, costs money and more so your time. For a used home, which you had acquired, periodic minor repairs (or even major ones if necessary) may be required to make the property in good shape.
In the end, owning and finding the right home for you is not a matter of chance; it is a matter of making the good and correct choice. It is not something we hope or wish for; it is something that we have to work hard for.
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(The writer is a Certified Public Accountant and the president of the Baguio Realtors Board, Inc. Apart from being a Real Estate Practitioner as a Real Estate Broker and Educator, Lecturer and Resource Person; he is likewise a Business Management/NGO/Cooperative Consultant, Project Development Consultant and Financial Advisor/Loan Broker. For comments and more information on Real Estate Updates and Studies, you may get in touch with him at Unit 303, 3/F, Otek Square, Otek Street, Baguio City, Tel. Nos. 304-3371 or 442-1176, cellular 0909-404-8863 or email: bert_capili@yahoo.com or bertcapili65@hotmail.com)