Property Hunting: Knowing the Difference between Contract to Sell vs Deed of Sale

24 May 2022
Knowing the Difference between Contract to Sell vs Deed of Sale

Have you ever fallen in love with a place, and you knew deep in your heart that you wanted that property to be yours? You're not the only one! Today, many people see the value of owning a property for various reasons. Some see it as a financial investment, and others may see it as the venue of their dream home. Still, no matter the reason behind wanting to own a property, it's not just a simple matter of pitching up a tent and erecting a flag to claim it as yours.


Before a property is declared legally yours, let us invite you to a real estate treasure hunt. Why liken real estate to treasure hunting, you ask? Because you need to follow a map, retrace the steps, and discover the X that marks the spot--the property you want.


First things, first. Let this article be your map in discovering the difference between a contract to sell vs. a deed of sale.


First Level: Contract of Sale

Your journey starts here. As a prospective buyer of a subject property begins the laborious task of looking for the property’s owner. Inquire, is this for sale? Once you manage to speak with the owner, you will now enter a series of real estate transactions designed to achieve your treasure chest at the end.


Your first real estate transaction involves the contract of sale. It entails the transfer ownership being processed. As the other party pay, the other delivers a determinate thing; therefore, a price certain in money or its equivalent.


Contract Prerequisites

According to Article 1318 of the Civil Code, a contract happens when three requisites are present:

  • Consent of the contracting parties- both seller and buyer agree to enter into an agreement to sell. Consent happens when there is a clear acceptance of the thing sold, for example, a property.

  • The subject matter of the contract is certain- define the property exclusively included in this agreement. It pays to mention the specifics, such as the zonal value and the total square meters of the subject property.

  • Cause of the obligation which is established-when, the entire amount of the purchase price has been fully paid by the buyer.


However, to expedite the processing of the document, you will need to go to the next step of the property hunt, for the sale requires payment of the purchase first. What will you encounter on the next step closer to your treasure chest? It's a legal document called a contract to sell.


Second Level: Contract to Sell

In this next step, both parties enter a bilateral contract to sell the real property. In discussing contracts, the terms, such as purchase price, when the buyer promises to complete the full payment, and other additional conditions of the two parties before the sale takes place, must be agreed upon by the two parties.


Mere consent should be communicated with one another, and then both contracting parties are obliged to start the process of transferring the seller's ownership upon the receipt of the payment of the purchase.


In case of non-fulfillment of either party, then the agreement of the sale serves null and void. This agreement of sale protects both sides in the event that there are problems that would hinder completing the sale of said property.


Title Ownership

When you talk about the document called Contract to Sell, the seller's title thereto real properties are still intact and are not automatically transferred from the seller to the buyer.


The seller delivers such contract action once the seller agrees that the full payment of the purchase price is the fulfillment of the suspensive condition.


Third Level: Deed of Sale

If you've reached this far, congratulations! You are very near to owning your dream real estate. You will not just be a prospective buyer, you will now be the owner of the property subject.


Once the sale becomes final, in terms of payment fulfilled, the property will now be transferred from the seller to the buyer, which includes the property’s title. If all suspensive conditions are fulfilled, then the property and its title will no longer belong to the seller and shall have no title to transfer to other interested parties.


When you have given the full payment as fulfillment of the contract to sell agreement, this is the part where the vendor loses ownership. The property subject will soon become yours, not just theoretically, but legally as the deed of sale will now be processed.


What is a Deed of Sale?

A document stating that one party is transferring his rights over a real estate property to another is called a deed. An "absolute sale" deed is defined as having no conditions attached to the sale except the buyer's payment of the purchase price.


When a deed of sale is issued, it means that both parties have satisfied the conditions of the contract to sell, and a transfer certificate will be issued from the seller to the buyer. For the safety of both sides, a notarized deed of sale must be secured. This is then submitted to the government for registration purposes.


What's the Difference Between Contract to Sell and Deed of Sale?

Do not get confused and lose sight of the treasure at the end of the hunt! As discussed above, we have defined the different documents you need in order to get your treasured property.

But as an added guide, we have determined three distinct differences between these two documents. They are: 



This just means the time when the said document is needed. In terms of when you will need these documents, just remember that a contract to sell must be present before the turnover of the property. Meanwhile, the deed of sale must be processed after the turnover of the property.


Who has the responsibility in terms of performing the Contract to Sell and the Deed of Sale? Simply put, both parties have their own responsibilities. It’s just that they have their own assignments.

As for the contract to sell, both sides must agree on the terms included in the document. The seller must initiate the processing of the contract to sell. However, it is the buyer’s responsibility to ensure that they have been fully paid and all financial responsibilities are fulfilled. It is when the absolute deed of sale must be filed to the government. Usually, it is the buyer (the new owner) who does this. Only up to this point that the capital gains tax will be shouldered by the previous owner or vendor. 



Who finally owns the dream property? Of course in the initial talking stages, it is the seller who has their name on the property’s title. But once all obligations are fully paid, then the process of transfer of ownership occurs. This is when the new owner will see his or her name in the property subject’s title. 


Shortcut to the Property Hunt: Lumina Homes  

Who else here wants an easy, hassle-free way to claim their property? Of course, everybody!


If you want to have a shortcut to get the dream property you want, why don’t you try to transact with our Admin Account Officers at Lumina Homes? You can think of them as the veteran treasure hunters that will make your home buying experience a breeze from the bank loan processing up to the title transfer. With Lumina Homes, let’s get ready for an incredible home hunting journey!

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