Like many Filipino young couples (who got married financially unprepared), my husband and I first lived with our parents and did not move out until our eldest child was ready for school. We thought it was the perfect time that we started planting our own roots, even if we were still struggling financially. Despite my mother’s insistence that we stay with her and Papa much longer, or at least find a place that is much nearer to them, I knew we just had to move out and mature. (Too bad we couldn’t find a decent place to rent near them.)
We rented a house somewhere in Laguna. I wasn’t exactly happy with this decision, especially that we were going to live across my in-laws, and that does not really count as leaving and cleaving, does it? Anyway, I still tried to be optimistic and chose to see it as a new adventure, if not something that I had to do for my husband and daughters. I never visualized my family and me staying there for a long time anyway; I had always wanted to live in a brand new house.
We had been renting the place then for nearly a year when we received a letter from the housing agency, GSIS (Government Service Insurance System). It turned out that it was a Notice of Foreclosure/Invitation to Buy and that means the place we were renting was a foreclosed property, which we were not aware of until that day. We showed the letter then to our landlady, who had no plans of buying the property, so we made our own offer to GSIS, with my parents-in-law guiding us on what to do.
So now we have our own house and lot. What’s next?
If you ask me, the huge and probably the only benefit of buying a foreclosed property is being able to purchase it at a much lower price. For instance, our 180 square meters lot with a 2-bedroom bungalow house of 120 square meters floor area, cost us around PHP1.1M only. We were required to pay 10% downpayment upfront, while the monthly amortization of about PHP 5,500 only is payable in 30 years.
If you would go house hunting now, you’ll find that a property of that size at a gated subdivision would easily cost you around PHP5M at more or less PHP30,000 monthly amortization, depending on the number of years to pay, but usually no more than 15 years. So, ours was a good buy if you think of it that way, right? Yes, of course, but don’t be so quick to get online and start scouring for foreclosed properties on banks and government housing agencies’ websites yet. Do consider first our own experience from buying a foreclosed property and the things we learned.
1. Total amount of unpaid real estate taxes
You already know that properties are foreclosed because the original awardee (or owner) was not able to pay the required monthly amortization for a certain number of years. Given that fact, you may safely assume that the annual real estate tax also goes unpaid. Whereas GSIS maintains verbally that we were starting on a clean slate or a new record, our local city government apparently declares that we cannot start on a clean slate unless all unpaid real estate taxes from past to present have been settled. And, guess who’s going to pay them?
We were required to pay around PHP40,000 for more than 20 years of unpaid real estate taxes (both for land and building) before we could pay our own real estate tax (i.e., from the time we owned the property). Imagine how surprised I was that instead of paying only a year’s worth of real estate tax, which should be no more than PHP1,000, I was told to pay 40 times that amount! Anyway, the following are the things that you could also do if you’re faced with the same situation:
a) Get a certificate from the housing agency and politely ask the City Treasurer for a discount. Your certificate should state that it was a foreclosed property along with the date you have acquired it. This is basically just a way for you to prove your innocence, that you would not allow such thing to happen if you were the original awardee, and encourage them to cut you some slack. Depending on how nice and helpful the City Treasurer is (and how courteous or maybe desperate you are), he/she should be able to deduct three or more years of unpaid real estate tax from your total balance;
b) Wait for tax amnesty, which could give you up to 50% discount. However, remember that the interest is added every year. Hence, if you just waited for it and it took years for the city government to offer a tax amnesty, you would find yourself in bigger debt and risk having your property foreclosed by the city government itself even if you’re paying the housing agency the monthly amortization. In our case, we waited for three or more years to no avail;
c) Pay in installment. This would seem like a really good choice, but understand that the interest continues to accumulate for the unpaid portion of the total debt, which is pretty much like having a credit card; or
d) Just make a full payment. After doing all of the above, we realized that it wouldn’t hurt to just pay everything, since we had the money to spare and we didn’t like losing more money to interest. However, we did not do so until we acquired a recommendation from a respected government employee, who was also working at the City Hall. We were hoping that with our padrino, the City Treasurer would be more disposed to give us a discount, especially that we were paying in cash.
The City Treasurer became much nicer to us then and gave us a huge discount, deducting the accumulated interest from the total amount, so we ended up paying only the principal, which was around PHP20,000. In short, we received a tax amnesty, and little did we know that the City Government would also offer it to other taxpayers soon after that.
2) Simple house repairs vs. partial/full renovation
There’s always the possibility that the house may no longer be in great shape if it’s foreclosed. Hence, have an expert, such as an architect, civil engineer, or at least a well-experienced carpenter that you can trust check out the property and assess the damages before buying it. Be prepared to have a budget dedicated to house repairs or renovation. See whether the cost of house renovation (including the stress it could entail) plus the actual price you are paying for the property is all worth it.
In our case, we spent around PHP200,000 for a partial house renovation, which took place years later. And we still need to do more.
3) Property history and previous owner’s background
The property we bought was actually shrouded with ghost stories. We learned that it was abandoned for a long time before the original awardee (owner) sold the rights to our former landlady. We weren’t bothered by those stories or any ghost for that matter, but it was apparently the reason no one stayed in it for a long time. Anyway, we had different issues to contend with.
For one, Meralco had to invert the electric meter several times due to previous tenants’ unpaid electric bills. Although it always got restored before the arrival of new tenants, by the time we moved in for good, we discovered that the meter was not working well, causing us higher electric bills. Thankfully, Meralco replaced the meter for free, though we had to pay a certain amount for having the account transferred to our name.
Second, since the property was abandoned and the original awardee apparently did not think of erecting concrete fences and/or firewalls before he left, the owners of those properties adjacent to ours had each taken a portion of our land, according to the geodetic engineers we hired to resurvey the land.
Worse, the new owner to one of these properties (also foreclosed), decided to extend their house vertically by simply adding hollow blocks to the existing wall separating our properties, which also serves as the wall to one of their bedrooms (an extension the former owner illegally erected and one they seem to be duplicating). Absolutely foolish, right?
We voiced out our concern for safety, of course, especially that the existing wall is already about nine feet high and must be standing for 20–30 years now. But the foolish woman only dragged us into ugly confrontations, forcing us to sue her and her relatives (accomplices) for both criminal and civil charges.
4) The neighbors and the neighborhood in general
They say that you may choose the house you’ll live in, but not your neighbors. Sadly, there is truth in it and the situation I have just shared above is but just one proof, although our neighborhood in general is fairly quiet and safe. Maybe that’s one of the reasons I wanted to live in a brand new house at a newly developed subdivision. Being in some place new just makes you feel more hopeful of things to come, doesn’t it?
On the other hand, because ours isn’t a gated subdivision, beggars and vendors selling all kinds of wares are free to roam in the neighborhood, which could present some risks, if not nuisances, to a certain extent. At one point, when there were still a lot of illegal settlers near the railroad tracks, which were a few blocks away from us, robbery was also common. Thankfully, our area is more peaceful now, save for my vexatious next-door neighbors.
5) Location, location, location
They say that location is everything, both when you’re trying to put up a business and building a house. When we first considered buying a foreclosed property, we looked up the listings on GSIS, SSS, and Pag-ibig websites. We realized that GSIS offers them at a lower cost, plus many of the properties they were selling were already near us. Some were even sold at a ridiculously low price and we discovered that it was because they were near the fault line. In fact, one of the houses we visited was just several feet away from falling into a ravine that was formed during an earthquake.
If you could, try visiting the property too just after the rain, if not during the rain. You would want to make sure that the area has a good drainage system and the house does not get flooded when it rains, won’t you?
We are blessed to have found a house in the suburb that’s also near supermarkets, schools, hospitals, salons, police stations, veterinary clinics, swimming pools, and even cafés. If you ask me, these are the only things I truly appreciate about our place. We’re rather far from the malls, but there are transport terminals near us that could easily bring us to nearby cities with huge shopping malls.
6) Modes of payment
I have heard of horror stories in which certain homeowners would excitedly go to the housing agency to claim their original copy of land titles after apparently completing the payment, only to find out that they still owe the latter several months, if not years, of amortization. It normally happens when payment is remitted through third parties, including banks, and money is either not remitted right away or the agency has failed to record the payments.
To avoid such situation, GSIS no longer allows payments through banks. It’s rather inconvenient, but at least it’s safer for us. I could not stress further though the need to keep the official receipt for every payment made. Even if you are already paying directly to the housing agency, it is still possible for them to miss posting your payment. It happened to us, and it’s a good thing that I had the receipts. Be sure to get an updated statement of account annually to keep track of your remaining balance, too.
Indeed, buying a foreclosed property may present you with more things to consider than buying a brand new house and lot. It may be more affordable, but certainly not easier. Nevertheless, it could be just as exciting–or even more–as owning a brand new house if you want it to be.