What if I withdraw my real estate purchase, will I get my money back?

Nothing beats the feeling of starting to own your home. Feeling of excitement, satisfaction, gratifying, brood, anxious all at the same time. Purchasing your first home can give you all the emotions you could ever imagine. But what if everything turns out to be the least you expected? What must be your course of actions?

Sometimes the unexpected can happen to a prospective home buyer, who decides he or she cannot go through with the purchase of a home. What matters is that if you have to cancel a home purchase, announce your decision as soon as possible, in order to avoid losing money and causing the seller unnecessary hardship. Check through some inputs that could help you get through this situation.

1. Put everything into writing

It is very easy to go for cancellation if you have not signed any document that binds you into a contract or agreement between you as the buyer and the other party as the seller. All you need to do is to inform the seller about the said cancellation. In most cases, initial payments such as reservation fees are non transferable and non refundable. Therefore, you must ask details regarding with the initial payments or reservation fees from the other party just make you aware of this situation should you not proceed in the purchase. However, in the event that you are already in the middle of your term or has formally accepted the contract in writing. Experience can be more daunting. If your decision falls within what called contingency period, and attorney has already reviewed (commonly notarized) the written agreement. Cancellation request already requires formal and written document. You have to put everything into paper to submit a documented request. Most real estate developers prefer to have it written so that it will be in accord with their standard procedures.

Your attorney, broker or agent must draft a letter indicating contract cancellation agreement. This letter will contain a passage stating that all signatories to the contract agree to cancel any and all agreements made in the contract and the contract is thereby declared null and void. It is important to note in the letter obvious information, such as the address of the property, the date the contracts were accepted, the names of buyers, etc. Subsequently, the buyers and sellers who signed the original contract must sign the purchase contract cancellation.

2. Check Statutory Laws

Every country has different laws with regards to real estate acquisition and cancellation. In the Philippines, we are being govern with REPUBLIC ACT No. 6552 AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE ON INSTALLMENT PAYMENTS commonly known as "MACEDA LAW". You may click this link to read the entire provision stated on this act. What is this act all about in a nutshell? Well, allow me to dissect it in simple chunks:

Who are covered in this law? There are two (2) categories who are qualified within this act.

a.) Under Section 3 of RA 6552, a qualified buyer is one who has paid at least two years of installments in all transactions or contracts involving the sale or financing of real estate on installment payments. Properties covered include residential condominiums, apartments, houses, townhouses, and house and lots, among others, but exclude industrial lots, commercial buildings, and sales of properties to existing tenants.

b.) Under Section 4, on the other hand, a qualified buyer is also one who has purchased any of the properties enumerated above, but who has paid less than two years of installments.

Under Section 3 of RA 6552, buyers who default on their payments of installments are entitled to pay, without additional interest, the unpaid installments due within the total grace period they have earned. This total grace period has been fixed at the rate of one-month grace period for every one year of installment payments made. However, this right can only be exercised by the buyer once in every five years of the life of the contract and its extensions. If the contract is cancelled, the seller shall refund to the buyer the cash surrender value of the payments on the property, which is equivalent to 50 percent of the total payments made. After five years of installments, an additional five percent for every year of payments will be added, but not to exceed 90 percent of the total payments made.

For the above paragraph to apply, the actual cancellation of the contract must take place 30 days after receipt by the buyer of the notice of cancellation. This notice of cancellation, or a demand for rescission at that must be by a notarial act and upon the full payment of the aforementioned cash surrender value to the buyer.In a nutshell, buyers are entitled to a refund, as well as grace periods, so long as they have paid for at least two years.

In contrast with Section 3 , Section 4 of RA 6552 deals with cases where less than two years of installments have been paid by the buyer. In this case, the buyer is entitled to a grace period of not less than 60 days. This is counted from the date the installment became due.The seller, on the other hand, is entitled to the cancellation of the contract, if the buyer fails to pay the installments due at the end of the grace period. The seller, however, must first notify the buyer of the cancellation, or of the demand for rescission of the contract. This notice or demand must be by a notarial act, and shall only render the cancellation or rescission effective 30 days after such notice or demand has been made.

Can I sell or assign my rights to the property to another person?

Section 5 of RA 6552 stipulates that those buyers covered by Sections 3 and 4 have the right to sell or assign their rights over the property to another person. They may also reinstate the contract if they so choose by updating the account during the given grace period, as provided for in Section 4. This transaction, however, must be made prior to the actual cancellation of the contract. The corresponding deed of sale or assignment must be done by notarial act.

What if I won the lottery and decide that I want to pay off my balance ahead of the due date? Will I be allowed to do so without incurring the corresponding interests?

Section 6 of RA 6552 grants you the right to do so. It stipulates that buyers shall have the right to pay in advance any of the installments or the full unpaid balance of the property’s purchase price. This can be done any time without incurring interest. This full payment may also be annotated in the certificate of title over the property.

Does the Maceda Law apply when I pay through a bank?

Maceda Law does no longer apply when you are already paying through bank. Opting for the first option—that is, taking a housing loan from a bank—means that the balance that you have to pay the real estate developer has already been paid for in full by the bank through the loan. In other words, you, in essence, have already paid the purchase price in full by availing of the loan. The subsequent monthly payments you now make to the bank are not to pay for the balance of the purchase price, but for the loan itself, the interests accruing on the principal loan, and the charges that may be or may have been incurred. Hence, having been fully paid insofar as the purchase price is concerned, the only balance you are liable for is that of the loan, and since you are not exactly paying in installments anymore, considering that the property is technically fully paid for, RA 6552 or the Maceda Law would no longer apply.

Moving forward, in order to avoid such a painful financial loss, every prospective home buyer should retain an attorney, broker or agent before signing any contract. These professionals can negotiate necessary extensions of contingency periods with the seller (developer), which could protect your earnest money deposit in case you suddenly find yourself in one of the scenarios described above.

The decision to withdraw or cancels purchase can emotionally drain buyers and sellers alike. So if you decide to cancel, it’s a good idea to leave the official steps to your attorney broker or agent.

For inquiries and assistance, feel free to reach author indicated on the contact page.

You may also check around my site to explore real estate developments that may fit your preferences.

Credits:

https://d1k28af5t2gp7l.cloudfront.net/wp-content/uploads/2016/02/homebuyerconcerns.jpg

http://www.lawphil.net/statutes/repacts/ra1972/ra_6552_1972.html