SELLING TO A BANK-FINANCED BUYER?HERE'S HOW IT WORKS

I made this short explainer for whenever someone asks me how a bank-financed property purchase works in the Philippines.

Given the current real estate market, sellers may want to be more open to bank-financed buyers. It takes longer to get fully paid, but accepting bank financing can significantly widen the pool of potential buyers.

The main problem with Bank-Financed purchases is this:

The property is transferred to the buyer BEFORE the seller receives the bank-financed balance (typically 80% of the contract price).

Why?

Because the property being purchased will also be the collateral for the loan. For the bank to register a mortgage over it, the title HAS to be in the name of the buyer.

Once the loan is approved, the seller signs the Deed of Absolute Sale and releases the title for transfer. In return, the seller receives the buyer’s equity/downpayment, often around 20%, plus a Letter of Guarantee from the bank stating that it will pay the remaining balance once the title is transferred to the buyer.

The title is then transferred to the buyer, and the new Title and other documents are submitted to the bank. The bank then releases the balance to the seller, through a Manager’s Check.

Is this safe for the seller?

This is a common process, but the seller still needs to be careful.

Verify the LOG directly with the issuing bank and carefully check its conditions and deadline. Make sure there are no title, tax, estate, or documentary issues that could delay the transfer, such as difficulty securing a required Certificate of Non-Tenancy.

Why does it take months for the seller to get paid?

Because the documents have to go through the BIR, LGU, Registry of Deeds, and then back to the bank.

A smooth transaction can be faster, but 3 months is a conservative expectation. Complicated transactions can take longer.

In short: With bank financing, the seller normally receives the downpayment first and the bank-financed balance only after the title transfer and the bank’s requirements are completed.