Important Documents to Know About in Home Buying
When buying a home, there are certain documents that need to be secured before, during, and after the transaction. These documents matter in the protection of both the buyer of the property and its seller. Securing the right paperwork is a vital part of a buyer’s due diligence, and it will prove beneficial in the event that they are needed for legal purposes in the future.
Here are seven documents in home buying to know about and what each is for:
Letter of Intent
A non-binding document, the Letter of Intent (LOI) or Letter Offer to Buy enumerates the buyer’s intent to buy a property. Included in the LOI is a detailed description of the property, the price the buyer is offering to pay, the date of the offer, the cash down payment intended to be paid, and other modes of payment. The list of needed documents – from both buyer and seller – for the sale to push through is also enumerated in the LOI.
Special requests for the seller, such as asking the seller to sell certain pieces of furniture within the property for a certain price, can also be included in this document.
To ensure that the seller takes the property out of the market, the Reservation Agreement is submitted, stating the specific details of the property as well as the terms of payment agreed upon by both parties. It is submitted together with “earnest money,” which serves as a reservation fee or a deposit over the property and as an indication of the sincerity of the buyer to purchase the property.
Terms and conditions and specific fines in case the sale does no push through is also stated in the Reservation Agreement and will be agreed upon by the buyer and the seller.
Contract to Sell
Given after the down-payment has been made, the Contract to Sell binds the buyer and the seller, ensuring the sale of the property. However, until the full payment for the agreed price of the property has been made, the seller retains ownership over the property.
Letter of Guarantee
The Letter of Guarantee is provided by the bank or financial institution as written proof of the loan approval to cover the remaining balance of the property that is being purchased. It contains the specific amount that the bank or financial institution will lend. The Letter of Guarantee is given once the home buyer is approved for a home loan.
Deed of Absolute Sale
After the full payment of the property has been settled together with all the other necessary fees, a Deed of Absolute Sale is created, filed with the Register of Deeds, and issued to the buyer for the transfer of ownership. Either the buyer or seller can prepare the document, but it must be notarized by a Notary Public.
A Certificate Title is a document that proves ownership over a property. Home buyers must secure this as proof that the property has been successfully transferred to their name. Obtained from the Registry of Deeds, house and lot purchases must secure a Transfer Certificate Title, while condominium buyers must secure a Condominium of Certificate Title.
With the sale finalized, the new owner requests for a Tax Declaration from the Assessor’s Office with the new title and a photo of the property submitted for processing. Once the Tax Declaration is obtained, all tax obligations will now be under the new owner’s name.
Aside from these necessary documents, home buyers need to settle important taxes and fees to finalize the sale.