What Is A Contract to Sell?

A Contract to Sell is a formal agreement between the seller and the home buyer. The document signifies that both parties agree with all the terms and conditions (selling price, payment schedule, and other expenses) of the home purchase.

When should a homebuyer receive a Contract to Sell?

The execution of this legal document appears to be a standard when buying real estate in the Philippines. This document is usually issued by the broker or the developer after the homebuyer has paid a cash deposit and has agreed to pay the remaining balance to the seller through agreed financing terms in good faith.

A homebuyer can demand a contract to sell even if he has yet to sign a home financing agreement with a lender (e.g. Pag-IBIG Fund, bank, developer). This is because certain banks, including Pag-IBIG, require this document, among others, to process your home loan.

Why should you receive this document before making your monthly mortgage payments?

Since a real estate property is one of the biggest purchases in your life, you as a segurista homebuyer should secure all the documentation you will need as you go along in the homebuying process. Having proper documentation reduces your risk in getting scammed and ensures that the terms are met.

What’s the difference between the Contract to Sell, Deed of Absolute Sale, and the Condominium of Certificate Title?

The Contract to Sell is merely a prelude, but is the basis for, the actual Deed of Absolute Sale. The Deed of Absolute Sale is a separate legal document which signals that all conditions stated in the Contract to Sell has been met with properly. The document is also proof that the sale has really transpired between the homebuyer and the seller (via the broker/agent or directly through the developer).

The Condominium of Certificate Title is issued in the final stage of the homebuying process. For condo unit homebuyers, the legal document signifies that ownership, including rights (e.g. the right to vote in homeowner association meetings), have been transferred from the seller to you.

Parts of a Contract To Sell | ZipMatch

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1. Contract Title

All property purchase contracts are titled as “Contract to Sell.”

2. Effective Date

Usually, an effective date is set the moment the contract has been signed by all parties.

3. Type of Contract

This section first identifies the parties involved in the contract (homebuyer and the seller), and the general agreement terms (which is you agreeing to buy the property from the seller).

4. Assets

This is where a homebuyer can find the full details of the property being sold to you (e.g. technical description of the condo unit, exact location), including conditions if you intend to make any upgrades or modifications to the original property unit.

5. Financial Structure

This section discusses how the property will be paid as agreed in good faith. It usually includes payment terms, schedule of payment, miscellaneous costs associated with the purchase, and other monetary obligations.

6. Compliance

This section dictates the things the homebuyer and the seller should need to fulfill to avoid rendering the contract null and void. For example, you as the buyer needs to make sure that you pay the right amount on time until the balance has been fully paid. As for the seller, he needs to make sure that the he has the legal right to sell and transfer the property to you without restrictions except full payment.

7. Deed of Absolute Sale

This section indicates what legal documents will be turned over after the homebuyer has paid the balance, including the Deed of Absolute Sale.

8. Requirements

This section describes the obligations, warranties (guarantees or promises) or exceptions needed to be fulfilled by both parties.

9. Counterparties

The homebuyer and the seller (or an authorized representative of the seller) will need to affix their signatures in the section to signify agreement between two parties. As counterparties, you are both exposed to a financial risk if ever the contract has been terminated or cancelled for any reason (e.g. fraud).

Contract to Sell Legal Jargons | ZipMatch

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1. Witnesseth

The term means “to take notice of.” This section is basically a legal summary describing the agreement between the seller and homebuyer.

2. Possession

This section defines the seller’s accountability for the property upon completion of its construction. As such, inspecting the property using a punch list during turnover is essential to ensure that the homebuyer will not be handed over with a substandard property.

3. Restrictions

This section states that the homebuyer is subject to the terms stated in the deed plus the rules of the property management and homeowners’ association. The restrictions are usually pertaining to the use of the property other than its intended purpose.

4. Assignment

This section addresses a situation wherein you, as a new homeowner, need to sell the property to a different person. This provision normally requires you to pay a fee before the seller allows you to transfer the Contract or property rights and interests to another buyer.

5. Default on monthly payments

This section dictates what a seller would do in case the homebuyer fails to pay the mortgage payments on time. It also discusses the financial risks a homebuyer faces when making payments through a representative (real estate agent, broker), and what you should do to protect yourself from scams.

6. Other grounds on contract cancellation

This section lists the following reasons a court will relieve both the seller and the homebuyer of their obligations under the contract if it’s cancelled due to fraud or other grounds in compliance with Republic Act 6552 or the Maceda Law (as amended by Presidential Decree No. 957).

For homebuyers who have made two years of installments but choose to no longer proceed with the home purchase, they can either look for another buyer to sell their interest or get 50% of total payments made reimbursed from the seller.

7. Joint and Solidary Obligation

If there are more than one home buyer in the said contract, the buyers are either proportionally liable (joint) or fully and completely liable (solidary) for the payment of the property. The seller may either pursue one or both of the signees in the contract if ever there is default on payments.

8. Supervening Events

This section explains that the seller may choose to increase the purchase price of the property during the contract term in case of an economic event. It argues that a downturn in the economy would decrease the value of the said property. Since the purchase has yet to be completed, the seller would likely incur loss. This right does not exist in full, one-time home purchases. This section will have the homebuyer agree to pay the price adjustment in full or in accelerated payments.

9. Remedies

Remedies are the manner on how a seller should be given relief or compensation if the homebuyer breaks the terms of the agreement. It can either come in a form of a penalty, or a court order to enforce a homebuyer to comply to the contract terms.

10. Mortgages

This section protects the money a homebuyer will loan from the bank for the property purchase. The section will insist that no loan will be released unless you have been notified and that the Condominium of Certificate Title should be issued once you have paid the loan in full.

11. Assignment of Contract

This section protects the homebuyer’s rights in case the seller transfer his rights and obligations under the contract to another person. This stipulation will have the new seller bound to honor the terms in the contract.

12. Condominium Corporation

This section details your rights as a unit owner under a condominium corporation. Buyers who have fully paid for their condo units or have been authorized to occupy the units (and pay the respective association fees) are considered members of the condo corporation, and will have interest equal to the respective share.

13. Indemnity and Attorney’s Fees

This section dictates the kind of compensation the seller receives if his rights are violated by the homebuyer. In some cases, the homebuyer is obligated to shoulder legal costs, including the seller’s attorney’s fees.

14. Venue

This section dictates where and which courts to bring any legal action to if you or the seller need to interpret or implement a term in the contract.

15. Entire Contract and Alterations

This section insists that both the seller and homebuyer will not be bound by any agreement that is not in the Contract to Sell. If there are any changes or alterations made in the original agreement:

  • Changes should be in writing;
  • These written changes should be added in the contract as a supplement or postscript, and;
  • The amended contract should also be signed by both parties.

This section also covers guarantees or promises (called warranties) made by the real estate agent or representative of the seller. Unless it is specified in the contract, the seller is not bound to the warranty made by the agent to the homebuyer.

16. Separability Clause

This section states that you will agree that any clause in the contract that would be invalidated by a governing party (ex. legal court, Housing and Land Use Regulatory Board) in the future will not affect the validity of the remainder of the contract.

Still got questions about your obligations as a homeowner? Don’t sign that contract yet and ask your condo management these questions first.

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  • ches

    Hi miss Rizza. I have already paid the reservation fee and currently on my 5th monthly equity. However, my developer has yet to issue the Contract to Sell. I’m expecting two CTS’s. One for the housing (subdivision) and another for the lot (owned by the bank). According to the developer, the reason for the delay is that, there was a previous buyer before me and that they cannot yet issue the CTS for the lot since the bank is waiting for a “back-out letter” from the previous buyer. Is this justified? What legal actions can I do? Can I demand full reimbursement of my payments including reservation fee? Thanks in advance.

    • Rizza Estoconing Sta Ana

      Hi ches . I’m sorry to hear that. Your next course of action should be referring to what was agreed on your previous signed legal document with your developer. This can either be your Reservation Agreement or Letter of Intent. The legal docs should either have warranties, or a promise/assurance by your developer with regards to you buying the property. If this instance falls under violation of the warranty that is indicated on your Reservation Agreement or Letter of Intent, then you can compel your developer to honor the agreement by either offering you a replacement unit or via a refund.

      Zipporah Antonio wrote an article about legal docs when buying a home in the Philippines. You can check it out to know more about them, if you like: http://www.zipmatch.com/blog/legal-documents-home-buying-philippines

      On the other hand, I would like to recommend that you approach a lawyer so he can check the legal documents you have co-signed with your developer and see what the best course of action that you can pursue that is favorable to you. Good luck!

  • famousa

    Hi — We acquired a townhouse in Las Pinas and currently we are paying the remaining 80% via in-house 10 yrs financing w/the developer since hindi pa din ma-approve sa bank for loan. I have paid the 20% DP and currently on my 2nd year paying the monthly amortization. Now, due to monetary issue, we are looking at a possibility of no longer proceeding with the purchase.

    I have paid them a total of P1,602,300.00 to date. I was young that time so I didn’t even bother to read the stipulations of the Contract to Sell that I signed. My question is that, may habol pa ba ako to reimburse at least 50% of my payments? As you mentioned in item # 6. Is this a legal standard when purchasing a house and lot from a developer with installment payment terms? I will review my contract tonight when I get home.

    • Rizza Estoconing Sta Ana

      Hi @disqus_2BgnEcYzPM:disqus! It really depends on the terms that was agreed and signed on sa inyong contract to sell. Mas maigi rin po na idiscuss ninyo sa inyong broker or agent or representative ng developer nyo kung ano yung options nyo po if you are unable to continue paying the mortgage.

      Kung temporary lang po ang inyong loss of income, pwede po kayong magtanong sa bangko kung meron silang home equity loan. Kung hindi po tlga kaya ng lifestyle, you can always your ownership rights to someone who is willing to shoulder the rest of the payments. Please check #4 and #11.

      Good luck!

  • MAE

    Hi ms riza! My family is planning to buy a resale or preowned condo unit pero di pa po tapos yung amortization ng seller sa bank, may 23months pa po. And the only document the seller have is the contract to sell from the developer, wala pa pong condominium certificate of title. What steps are we going to take to acquire the condo unit? Thank you.

    P.S.First time condo buyer po kami so our knowledge in condo buying is limited.

  • Rizza Estoconing Sta Ana

    Hi MAE! Before buying a resale or preowned condo, you would need to understand ano po yung iaassume nyong mga responsibilities as dictated sa contract to sell before actually committing to buy the property. This will include the fees and other costs you will be shelling out upon purchase of the property, and costs that will incur upon transfer of the property. Examples of these are utility ownership rights transfer fees, assignment fees (see #4), and dues that the previous owner may not have cleared with property management (parking/security charges, homeowners’ association fees).

    Moreover, you need to ask the seller whether he can secure a document from his bank saying that the latter agrees to give the ownership documents (including the condominium certificate of title) to you upon full payment of the mortgage. Pag settle nyo na po yung full payment ng home loan ni seller sa bangko, ituturn over ni bangko yung ownership documents, including one saying na cleared po kayo from the bank.

    Good luck!

    • MAE

      Hi ms rizza! Thank you very much for replying. Sabi po ng seller wala pa pong condominium certificate of title bale contract to sell pa lang po ang hawak niya na nasa bangko. Ang sabi niya pwede daw naming bayaran yung balance niya sa bank at ibibigay na lang yung sukli sa kanya at ang mangyayari daw po parang direct na na ipangalan sa amin yung condo, from developer to our name na po. Okay lang po ba yun? Or i’ll just ask her to settle her balance sa bank and magbigay lang ako ng earnest money as show of faith na bibilhin ko ung unit niya tapos para malinis na yung condo at sa office ng developer nalang namin iconclude ung purchase ng unit? Ano po ang magandang gagawin namin?

      • Rizza Estoconing Sta Ana

        HI MAE This is a tricky situation, so it’s best to consult with a lawyer regarding sale of preowned properties. Technically, yung seller does not own the property yet dahil hindi pa nya fully paid yung condo. The terms in his contract to sell allows him to sell the property and ownership rights at a specific point in his agreement with the developer. So ang mangyayari nyan, dapat may documentation na agree si developer na ipangalan sa iyo yung condo since you will be assuming the remaining amortizations from the seller.

        To protect your rights as the new homebuyer din po, it would also be best to ask the seller to secure documentation from the developer that the latter will agree to turn over the ownership documents to you. I don’t know ano po yung terms regarding transfer of ownership sa contract to sell, but meron po talagang fees involved when the intended seller sells the property to another person (which is you).

        • MAE

          Thank you very much ms rizza!

          • Rizza Estoconing Sta Ana

            No worries @disqus_z7g0YOYvcQ:disqus! Glad I was able to help out :D

  • Darcee Legayada

    Hi Pepper! CTC is a mandatory requirement pag mag-aaply po kayo ng pag-ibig loan or mag-refinance kayo. CTC binibigay pag fully paid na yung remaining balance. When it comes to parking lot, dapat po included siya sa total selling price ng property na bibilhin ninyo para isang payment lang if you will apply for a loan. I suggest po it would be better to stick with the in house loan but if you want you can try to check bank finance.

    ZipMatch may help you with as they have partnership with Security Bank.

    Sana po makatulong sa inyo.


    • Pepper

      Hi Darcee! Bakit po better sa in house? Magkaka problema po ba if ever lipat ko po yung loan sa pagibig? First time ko lang din po kasi gagamitin yung pag-ibig. Mahirap po ba? I’m considering other banks as well, naisip ko lng po na sayang lang din kasi si pag-ibig dahil Hindi napapakinabangan.. Un po..
      Please give me suggestions or feedbacks dahil I am just researching on my own regarding po dito sa real estate etc..processes,,etc..
      Thank you po!

      (mataas po ang rate ng interest ng in-house kya ko rin po gusto ilipat sa iba)

  • Rizza Estoconing Sta Ana

    Hi @robotixx:disqus! Good question! Medyo complicated nga po yung proceso kase technically hindi nyo pa po pagmamay-ari yung property na kinuha nyo po through in-house financing, or with any other lender unless mabayaran nyo po yung loan in full. Kaya rin po humihingi ng additional gastos or compromiso si developer dahil gusto po rin nila maisiguro na masesettle nyo po yung obligation ninyo sa kanila.

    • Pepper

      Hi rizza! Thank you for replying. Pero gusto ko lng din po sana itanung kung yun po bang hinihingi ni developer na additional gastos for security, usually ano maximum amount? Or reasonable? Kc pag pagibig, twice nung amount gusto nila for security since di sila ”tie up”. Irerefund naman dw po once na maayos na yung sa pag-ibig. Pero ano po ba talaga ang silbi nun? Pano po security? I mean, do they see pag-ibig as not credible or secured?

      Sa part ko lang din po kasi, mahirap po ang malakihang cash. Gaya po nito, personal loan ko pa po ito kukunin. Alam nyo naman po na sakto2 lang din po talaga tayo sa monthly expenses natin.. :(

      • Rizza Estoconing Sta Ana

        Hi Pepper! I understand din po, and I am sure the developer understands your predicament. As binanggit ko po kanina, yung mangyayari po if magpapalit kayo ng home financing is that si Pag-IBIG Fund will technically assume the loan na kinuha nyo po earlier with the developer. For any lender po, hindi po nila gustong magassume debt, kahit na willing enough po kayo magbayad until macomplete yung payment. I mean, beneficial po yun kay developer ko iaassume ni Pag-IBIG yung loan kase yung risk na kasama sa pagpaloan ng malaking pera sa inyo sa pagbili ng bahay ay maipapasa kay Pag-IBIG Fund.

        Kaya rin po humihingi ng additional expenses si developer is because these are some sort of guarantee na yung financial risk loaning the money to you will be paid in full in the end.

        Also, I noticed po na you mentioned to Darcee Legayada na mahal yung interest ni developer sa loan. This is because #1, they are not in the business of lending money, but have to in order for you to purchase your home, and #2 they need to recoup the costs of selling the property to you as oppose to selling the property to another buyer who can pay in full or pay the property at a shorter time. Iexplain ko po ito dito sa article, maybe you can take time reading it to understand how home loans work :D:


        Eventually naman po, once you pay off the interests, mas maliit na po yung babayaran nyo in the future.

        Let me know if you have any other questions.

  • yoyo

    Hi! Just to clarify when can a buyer demand receive the Contract to Sell. How much cash deposit must the buyer had paid? And, if it is necessary that the buyer has already paid the downpayment in full before he is entitled for a CTS? thank you!

  • Divine Buhain

    Hello! i hope this account is still active.
    We are currently making a Contract to Sell. However we found out in the CCT that the condominium is now mortgaged to BDO under a real estate mortgage. As much as we want to protect our interests in the property that we are about to buy, can we stipulate that the earnest money deposit shall be used to release the property from the mortgage and any or all of its encumbrances and that the CCT be kept in a safety deposit box for safekeeping until the total consideration price is fully paid?

  • Ellen Suniega

    Hi! I hope someone from here will answer my question. Pwede po bang magkaiba ang amount sa CTS or Contract to Sell sa DOAS Deed of Absolute Sale? Sinasabi po kasi ng developer, kesyo mas mababang amount dineclare nila sa BIR for tax reason kaysa sa amount na binayaran namin sa kanila.

    • zipmatch

      Hi Ellen, it’s best to review the Contract to Sell and see if there was a provision wherein the seller elects the right to increase the property price or change physical specifications of your property.

  • karla

    Hi hope you can help me with, i would like to ask, i have a property in cainta a condo unit, but i want to sell it na. i mean ipa assume balance. is it okay to pass it to another seller with the contract to sell lang since wala pa si deed of sale and hows the process. thanks and more power!