Closing Cost Computations and Net Proceeds
Master the complete closing cost worksheet for Philippine real estate transactions. Compute seller net proceeds, buyer total cash-out, and properly allocate costs between parties.
Seller Closing Costs and Net Proceeds
“A final tax of six percent (6%) based on the gross selling price or current fair market value... is hereby imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property... There shall be collected a documentary stamp tax... at the rates herein below prescribed, based on the consideration contracted to be paid for such realty or on its fair market value... whichever is higher.”
What This Means
For a capital asset sale, the seller's standard costs are: (1) Capital Gains Tax. 6% of the higher of selling price or FMV, (2) Documentary Stamp Tax. 1.5% of the higher value, (3) Broker's commission. typically 3-5% of selling price, (4) Notarial fee. typically 1-2% of the selling price (negotiable), (5) Unpaid real property taxes. any delinquencies must be settled. Net Seller Proceeds = Selling Price - CGT - DST - Commission - Notarial - RPT Arrears. Always compute this for clients BEFORE they agree to a price so they know their actual take-home.
- CGT: 6% of selling price or FMV (whichever is HIGHER)
- DST: 1.5% of selling price or FMV (whichever is HIGHER)
- Commission: 3-5% of selling price (agreed rate)
- Notarial fee: 1-2% of selling price (or per notary schedule)
- Net proceeds = Selling Price - All Seller Costs
Real-World Scenario
A seller lists a residential lot at P10,000,000. The BIR zonal value is P12,000,000. Broker commission is 5%. Notarial fee is 1% of selling price. Real property tax is current (no arrears).
What is the seller's net proceeds if the lot sells at the listing price?
Buyer Closing Costs and Total Acquisition Cost
“The province may impose a tax on the transfer of real property ownership at a rate of not more than fifty percent (50%) of one percent (1%) of the total consideration involved in the acquisition of the property or of the fair market value... whichever is higher.”
What This Means
The buyer's standard costs are: (1) Transfer Tax. 0.5-0.75% of higher value (paid to LGU), (2) Registration Fee. per LRA sliding scale schedule, (3) Title transfer processing. documentary requirements and miscellaneous fees, (4) Loan processing fees. if financing (appraisal, loan origination, mortgage registration), (5) Fire and mortgage insurance. if bank-financed. Total Acquisition Cost = Selling Price + Transfer Tax + Registration + Loan Fees + Insurance. Buyers should budget 3-5% above the selling price for closing costs.
- Transfer tax: 0.5-0.75% of higher value (local government)
- Registration fee: per LRA schedule (approximately 0.5-1% of property value)
- Loan fees: 1-2% of loan amount (processing, appraisal, notarial)
- Insurance: fire + MRI (mortgage redemption insurance) if bank-financed
- Budget rule: add 3-5% of selling price for buyer closing costs
Real-World Scenario
A buyer purchases a P8,000,000 condo unit in Makati. She takes a bank loan of P6,400,000 (80% LTV). Transfer tax is 0.75%. Registration fee is P32,000. Loan processing fee is 1% of loan amount. Insurance is P25,000/year.
What is the buyer's total cash-out to complete this purchase?
Standard Cost Allocation Between Buyer and Seller
“The vendor shall be responsible for the warranty against eviction or hidden defects, unless it is stipulated that the vendor shall not be answerable for said warranty. The expenses for the execution and registration of the sale shall be borne by the vendor, unless there is a stipulation to the contrary.”
What This Means
While all costs are technically negotiable, Philippine market practice follows a standard allocation: SELLER pays: CGT (6%), DST (1.5%), broker commission, unpaid RPT, and notarial fee. BUYER pays: transfer tax, registration fees, title transfer processing, and loan-related costs. The Civil Code states that "expenses for execution and registration" are on the seller unless otherwise agreed. but market practice has shifted most registration costs to the buyer. Always clarify cost allocation in the Contract to Sell to avoid disputes at closing.
- Seller standard: CGT + DST + Commission + Notarial + RPT arrears
- Buyer standard: Transfer tax + Registration + Title transfer + Loan fees
- Civil Code default: seller pays registration. but practice differs
- Specify allocation clearly in the Contract to Sell
- Some deals use "net selling price" (seller gets exact amount, buyer pays ALL costs)
Real-World Scenario
A seller wants exactly P15,000,000 "net" from the sale. meaning the buyer pays ALL taxes and costs. The property's BIR zonal value is P16,000,000. Broker commission is 5%.
What gross selling price must the buyer pay to give the seller P15M net?
Frequently Asked Questions
What is the total cost of buying and selling real estate in the Philippines?
For a capital asset sale, combined buyer+seller costs typically total 12-15% of the property value: Seller side: CGT 6% + DST 1.5% + Commission 3-5% + Notarial 1% = 11.5-13.5%. Buyer side: Transfer tax 0.5-0.75% + Registration ~0.5% + Miscellaneous ~0.5% = 1.5-1.75%. Grand total: 13-15.25%. Add loan processing costs (1-2% of loan) if financing. These rates are among the highest in Southeast Asia.
Can the buyer deduct unpaid RPT from the selling price instead of the seller paying them?
Yes, this is a common arrangement. If the seller has RPT arrears of, say, P200,000, the buyer can: (1) Deduct P200,000 from the selling price and pay the RPT directly to the Treasurer's Office, or (2) Hold P200,000 in escrow until the seller provides a tax clearance. The buyer should insist on this because the RPT lien follows the property. if the seller promises to pay but doesn't, the buyer inherits the delinquency.
How do closing costs differ for developer purchases vs. secondary market?
Developer purchases (brand new): The developer typically absorbs or includes CGT-equivalent costs in the price. Buyer pays: VAT (if VATable, usually included in price), transfer tax, registration, and move-in fees. No broker commission (developer pays their own marketing). Secondary market (resale): Full CGT/DST on seller, transfer tax/registration on buyer, plus broker commission. Developer purchases often appear "cheaper" because costs are bundled into the selling price rather than itemized separately.