Pre-selling is the real estate practice of selling properties, typically condominiums or house-and-lot units in a subdivision, to buyers before their construction is completed or even before it begins. Essentially, you are buying a property based on the developer’s plans, blueprints, and promises, often at a discounted introductory price. For a first-time Filipino homebuyer, pre-selling offers a more affordable entry point into the property market, allowing you to acquire a brand-new home through a stretched and manageable payment scheme.
Why is Pre-selling Properties Important for Your Property Investment?
Pre-selling is a vital concept in the property market because it presents a significant opportunity for capital appreciation and affordability. The most compelling advantage is the lower introductory price. Developers offer pre-selling units at a considerable discount compared to the price of a finished unit. This is because your purchase helps fund the construction, and they pass some of these savings on to you. As the construction progresses and the development nears completion, the market value of the property naturally increases. This means that by the time your unit is turned over to you, it could already be worth significantly more than what you agreed to pay, giving you instant equity.
Another key benefit is the flexible and stretched payment terms. Pre-selling schemes usually involve paying a down payment in monthly installments over the construction period, which can last from two to four years. For a typical down payment of 20%, instead of paying a large lump sum upfront, you can spread it out over 24, 36, or even 48 months, interest-free. This makes acquiring a property much more manageable for first-time buyers who are still saving up.
Finally, pre-selling gives you the advantage of choice. By buying early, you get to pick the best units—those with a better view, a more desirable location within the building, or a more favorable orientation away from the afternoon sun—before they are all taken.
How Does Pre-selling Work in Practice?
The pre-selling process is a structured journey from reservation to turnover.
- Project Launch: A developer announces a new project and opens it up for sale, presenting architectural plans, floor plans, and artist’s renderings of the final product.
- Reservation: You choose a unit and pay a reservation fee (e.g., ₱20,000 to ₱50,000) to take it off the market. This fee is usually valid for 30 days.
- Signing of Contract to Sell (CTS): Within the reservation period, you will sign the Contract to Sell. This legal document outlines the terms of your purchase, including the total price, the down payment schedule, and the estimated completion date.
- Down Payment Period: You will begin paying the monthly installments for your down payment, typically spread over the construction timeline. During this phase, you are an installment buyer protected by the Maceda Law.
- Construction Phase: The developer builds the project. You can usually monitor the progress through construction updates from the developer.
- Turnover and Financing: Once the unit is ready for turnover, you will settle the remaining balance. Most buyers finance this lump sum through a housing loan from a bank or the Pag-IBIG Fund. Upon full payment, the developer executes a Deed of Absolute Sale, and the title transfer process begins.
Pre-selling in the Philippines: A Local Perspective
The pre-selling industry in the Philippines is strictly regulated to protect buyers from fraudulent schemes and non-performing developers. The primary government agency in charge is the Department of Human Settlements and Urban Development (DHSUD), formerly known as the HLURB.
Under Presidential Decree No. 957 (The Subdivision and Condominium Buyers’ Protective Decree), a developer is legally required to secure two crucial documents from the DHSUD before they can start pre-selling any unit:
- Certificate of Registration (CR): This proves the project itself is registered with the government.
- License to Sell (LS): This is the most critical document. It is the official permit that grants the developer the authority to collect payments from buyers for a specific project.
Before buying any pre-selling property, it is your absolute right and a crucial part of your due diligence to ask the developer or agent for a copy of their License to Sell for that particular project. This is your primary protection and assurance that the project is legitimate and compliant with government regulations.
Common Misconceptions About Pre-selling
The biggest misconception is underestimating the risk of delays. The turnover date provided in a pre-selling contract is an estimated date. Construction can be delayed by many factors, including weather, labor issues, or financial problems on the developer’s side. Buyers must be prepared for the possibility that they may have to wait longer than initially expected.
Another myth is that the model unit is an exact replica of what you will get. Model units are professionally designed and often include upgrades and furnishings not part of the standard turnover unit. Buyers must carefully read the “Turnover Specifications” in their contract to know exactly what is included (e.g., type of flooring, paint finish, kitchen fixtures) and what is not.
Finally, some people think they can easily “flip” a pre-selling unit for a huge profit before turnover. While this is possible, it is not guaranteed. The market can fluctuate, and there are costs involved in selling your rights to the unit, including taxes and transfer fees. It requires careful calculation and a bit of luck.
Practical Tip from an Expert
As a real estate professional in Bulacan for 15 years, I always tell my clients to do a background check on the developer, not just the project. Look at their track record. Have they successfully completed other projects in the area? Visit one of their finished developments. Talk to the residents there. Ask them about the quality of the construction and if the developer delivered on their promised turnover date. A developer’s history is the best predictor of their future performance.
Real-World Example
The Reyes couple, young professionals in Bulacan, want to buy their first home. A newly launched condominium project in Balagtas is pre-selling 1-bedroom units for ₱3,000,000.
- The developer’s payment scheme is a 20% down payment payable over 36 months, with the 80% balance due upon turnover.
- Down Payment Calculation: 20% of ₱3,000,000 = ₱600,000.
- Monthly Installment: ₱600,000 / 36 months = ₱16,667 per month.
- They pay this affordable monthly amount for three years while the building is being constructed. By the time the unit is turned over, its market value has risen to ₱3,500,000. They have already gained ₱500,000 in equity on paper.
Related Terms
- Contract to Sell (CTS): The primary legal document you sign when buying a pre-selling property on installment.
- License to Sell (LS): The mandatory government permit from DHSUD that a developer must have to legally pre-sell a project.
- Turnover: The official date when the developer hands over the finished unit to the buyer.
- Maceda Law (R.A. 6552): The law that protects buyers of pre-selling residential properties during their installment payment period.
- Down Payment: The initial portion of the purchase price, which in pre-selling is often paid in monthly installments.
Internal Links:
Link “Pag-IBIG Fund” to an article about housing loan financing.
