Should You Invest In Pag-IBIG Acquired Properties?
Almost every Filipino dreams of owning a property that they could call home. As simple as it may seem, the cost of property ownership is prohibitive to many Filipinos. Whether it’s a posh condo or a simple house, it will still cost millions of pesos which is ten or twenty times more than what the average pinoy earns annually.
Fortunately, there are various ways to own a home without costing you an arm and a leg. With the aid of the Home Development Mutual Funds (HDMF), better known as Pag-IBIG Fund, it’s possible to buy a property without spending a fortune.
What is a Pag-IBIG acquired asset?
Pag-IBIG Fund is a government agency that was created to provide a savings program that could grant affordable home financing option for every Filipino. The savings program of Pag-IBIG is open to all Filipinos, including those that are employed (both locally and overseas), self-employed, and voluntary. One of its primary services is the provision of home financing programs – both new and repossessed housing properties developed by Pag-IBIG and real estate companies who acknowledge this Pag-IBIG program.
But what are the acquired assets?
When a property owner fails to pay their housing repayments through Pag-IBIG, the property will be foreclosed and auctioned off to recover the defaulted home loan.
In a nutshell, Pag-IBIG acquired assets are properties that are repossessed due to non-payment by the previous owners. These properties are auctioned to the public at a cheaper price.
For those who are unable to afford a brand new property or even a property from the secondary market, they can consider a Pag-IBIG acquired assets. Here are a few reasons why these properties on auction can be a good investment:
Why should you invest in Pag-IBIG acquired assets?
It is no secret that buying Pag-IBIG acquired assets comes with a lot of pros and some cons. Depending on your priorities, it will be helpful to weigh the good and the bad before jumping the gun.
1. It is lower than market value price
Real estate generally appreciates in value over time. This means over the years, the value of the property will typically increase, instead of decrease like a car.
The same concept should apply to a Pag-IBIG acquired asset. In theory, purchasing Pag-IBIG acquired assets at a lower than the average market price will translate into bigger returns when you sell it. On top of the lower price, these auction properties also come with additional discounts depending on how you plan to pay for your property purchase.
|Mode of payment||Discount rate||Payment term|
|Installment||20%||Up to 12 months only, with 12% interest rate per annum|
|Housing loan||10%||Up to 30 years, provided that borrower’s age shall not exceed 70 years old at date of loan maturity|
Foreclosed condo-unit in Flora Vista at Quezon CityAll these factors would likely improve your capital appreciation rate. Here’s an example:
|Floor area||30.32 sq/m|
You have 3 options to purchase the property.
Let’s assume that you win the auction at ₱900,000.
|Option 1: Cash|
(With 30% discount)
|Option 2: 1-year installment|
(With 20% discount)
|Option 3: Housing loan
(With 10% discount)
|Total payable: ₱630,000||Total payable: ₱720,000||Total loan amount: ₱810,000
Monthly repayment (8.80% p.a.): ₱5,571.89
Loan tenure: 20 years
Estimated total interest incurred: ₱527,252.93
If you decide to sell the property in 5 years, here’s how much you can potentially sell it for: ₱1,353,291.02. (Based on appreciation rate of 8.5%, inflation-adjusted rate for the year 2016.)
|Estimated returns for Cash purchase||Estimated returns for 1-year installment||Estimated returns for housing loan|
2. Prime locations
In locations where land is scarce or population is highly dense, it may be difficult to find properties that are strategic, accessible and convenient. As more developments mushroom in the central region, properties are being built further and further away from the heart of the city.
So, if you’re looking to buy properties that are located strategically, within your price range, Pag-IBIG acquired assets can be an option.
However, the thing with these properties is that they are in high demand, hence they may be out of your budget. So, if you see one that tick all your criteria, it makes sense to act quickly.
In you haste, you should still differentiate swift action from impulsive purchase, because acquired assets can open a different can of worms if you are not careful.
The drawbacks of a foreclosed property
As is, where is
In most cases, a foreclosed or repossessed home that has been deserted for a long time is just left deteriorating. Pag-IBIG just sell these homes, they don’t make any improvement on them before auction. This means, some of these properties may require more work than you can afford. So, it is important to conduct a thorough assessment of the property in person before coming up with a decision.
Previous home owner conflict
While Pag-IBIG provides foreclosure notices to the occupants of a foreclosed property, they don’t however assist in evacuating these occupants. Unlike banks who tap the assistance of authorities to make sure that the property that they repossess gets evacuated, Pag-IBIG on the other hand leaves it to the buyer to clear the property of its contents and occupants.
It is a common scenario in the Philippines to encounter occupants who refuse to leave their foreclosed property. And, that can be a very daunting, challenging, and stressful task to the buyers. Sometimes, it can lead to court hearings, burdening the buyers with more out-of-pocket legal expenses.
What to do before considering a property?
Impulse buying is definitely a no-no, especially when it comes to a real estate. Before purchasing a property, you should always do your homework first.
Uncover the reason of foreclosure
The problems that the previous owners face that lead to the property being repossessed are often not revealed before or during the auction. These problems may be related to the property or the management body of the property, which you won’t discover with just a single look at the property. Whenever possible, meet with the previous owner of the property or the neighbours to get as much information as you could about the property before you make a decision.
Do the math
Know how much the outstanding balance is and what will be the monthly repayment if you take up the property with a loan. When you are calculating the cost, it is important to also consider all the hidden costs and out-of-pocket expenses that you may incur in the process of purchasing the property. Also, consider the following expenses which will be shouldered by the buyer when purchasing a property in the Philippines:
- Down payment
- Notary Fee
- Local Transfer Tax
- Registration Fee
- Overall repair and maintenance cost
Take a look at the property
Photos and descriptions of a property can be misleading sometimes. Photography can be manipulated to show only the nicer parts of the property or even the size of the property. Purchasing a property is not just about the unit itself, but also its surrounding area.
If you are looking at a condominium, you need to check the condition of the common areas in the compound, such as the corridor, elevators, park or playground, parking area and lobby. All these will affect how well your property will appreciate in the future. This also means finding out who the management body of the property is, and how good a job they have been doing in maintaining the property.
Also, when determining the location of a property, it’s a completely different scenario when you look at it on a map versus in real life. Though it may be located in a central location, you need to find out the exit route, the traffic congestion and also the surrounding areas to deduce whether the property is worthy of your investment.
So, you better do some leg work to make sure you won’t have regrets in the long run.
Ask the experts
Don’t solely rely on what you know, unless you are an expert in real estate, construction, and the laws that surround it. Even then, it doesn’t hurt to get a second opinion.
Ask the opinion of an expert, better yet bring a real estate person with you. If you’re looking to purchase a commercial property, it’s best to have an engineer or an architect assess the place with you. Determine the extent of the work that needs to be done in order to turn the property into what you want it to be.
This involves calculating the estimated cost of the work that needs to be done. When you have the figures, you will be able to gauge whether you will still be able to make a profit after your actual investment.
How to purchase Pag-IBIG acquired assets
It’s relatively easier to purchase Pag-IBIG acquired assets compared to foreclosed properties from banks. Since these properties are now owned by Pag-IBIG, you are given a few flexible payment options to purchase these properties with the flexible payment. Here’s how:
- Reserve the property and pay the ₱1,000.00 reservation fee (non refundable/non-transferrable). Bring one valid ID and choose among the following modes of payment:
Cash – 30% discount;
Installment – 20% discount; or
Housing loan – 10% discount, for qualified members of Pag-IBIG Fund.
- For purchase through housing loan, submit the complete documentary requirements within 30 calendar days from payment of reservation fee and pay the processing fee of ₱2,000.00 and Documentary Stamp Tax ₱100.00.
- Housing Loan Application with recent ID photos of borrower
- Membership Status Verification Slip
- Proof of Income
- Photocopy (back-to-back) of one (1) valid ID of Principal Borrower and Spouse, Co-Borrower and Spouse, and Attorney-In-Fact, if applicable. The same ID must be presented during the conduct of borrower’s validation.
- Authorization to Conduct/Credit Background Investigation
- For OFW members, Special Power of Attorney notarized prior to date of departure or duly certified and authenticated by the Philippine Embassy or Consulate in the country where the member is staying, if abroad
- Insurance Coverage
- Marriage Contract (For all married borrower/s, co-borrower/s, spouse, family member/s included on the computation of aggregate income)
- Birth Certificate or any proof of relationship, if with co-borrower/s or family member/s included on the computation of aggregate income
- Receive the Notice of Approval of Loan and pay three-month worth of premium for your home insurance coverage one year in advance within 30 days.
- Execute and submit notarized Deed of Conditional Sale and other mortgage documents evidencing the loan in favor of the Fund.
To buy or not to buy?
With some sweat repairs, upgrades, equity, and a lot of paperwork, an old and rundown property can turn into a valuable real estate. Just make sure you put a lot of effort in assessing a property that you are eyeing. Pag-IBIG acquired assets can be a worthy investment if you avoid some of the red flags mentioned above. The only way to do that is to do your due diligence before you make the decision to purchase.