Guide 4: The Sale Documents

Guide 4: The Sale Documents

Part of a series for Philippine property sellers

With your title verified, signers identified, and price set, you're ready for the paperwork that actually moves the sale forward. This stage trips up a surprising number of sellers—not because the documents are complicated, but because similar-sounding document names get confused, and using the wrong one at the wrong stage can cost you leverage or protection.

This guide covers the core documents, in the order they typically come into play.

1. The Reservation Agreement / Earnest Money Agreement

Before a full contract, many transactions start with a smaller, simpler agreement: the buyer puts down a reservation fee or earnest money to signal serious intent and take the property off the market while the bigger paperwork gets sorted out.

Key things this document should spell out clearly:

• The amount of the reservation/earnest money and whether it's credited toward the final purchase price

• The timeline for the buyer to secure financing or complete due diligence

• What happens to the money if the deal falls through—and whose fault it is. This is the single most disputed clause in these agreements, so don't leave it vague. Spell out separately what happens if the buyer backs out versus if you, the seller, do.

This isn't yet the contract that transfers ownership — it's a good-faith commitment while both sides prepare for the real one.

2. Contract to Sell vs. Deed of Absolute Sale — Know the Difference

This is where sellers most often mix up terminology, and the distinction matters legally:

Contract to Sell

• Used when payment will happen in installments, or when certain conditions still need to be met before ownership actually transfers

• Ownership does not transfer to the buyer upon signing — it transfers only once the buyer has fulfilled the agreed conditions, typically full payment

• Gives you, as seller, more protection if a buyer defaults partway through an installment plan, since you retain ownership until they've completed payment

Deed of Absolute Sale

• Used when the buyer pays in full at (or effectively at) the time of signing

• Ownership transfers immediately upon execution and notarization

• This is the document that gets presented to the BIR, and eventually to the Registry of Deeds, to transfer title into the buyer's name

Practical rule of thumb: if the buyer isn't paying everything upfront, you generally want a Contract to Sell first, with the Deed of Absolute Sale executed later once full payment is confirmed—not the other way around. Signing a Deed of Absolute Sale before you've actually received full payment gives up your strongest protection.

3. Why Notarization Isn't Optional

A Deed of Absolute Sale must be notarized to be valid for registration purposes. An unnotarized deed, even if signed by both parties, generally won't be accepted by the BIR or the Registry of Deeds to process the transfer.

A few practical notes:

• Both seller and buyer (or their authorized representatives with a valid SPA) typically need to appear before the notary

• Bring valid government-issued IDs — notaries are required to verify identities

• Once notarized, the deed becomes a public document, carrying more weight and admissibility should any dispute arise later

4. What the Deed of Absolute Sale Should Clearly State

Whoever drafts it — ideally a lawyer, though brokers sometimes provide templates — make sure it includes:

• Full legal names and civil status of both parties (and spousal consent language, if applicable — see Guide 2)

• Complete technical description of the property, matching the title exactly

• The agreed selling price, and how/when it was paid

• A statement that the property is being sold "free from all liens and encumbrances" (assuming that's true — this is your representation as seller)

• Who shoulders which taxes and fees, so there's no ambiguity later (see Guide 3 for the typical split)

A Note on Sequencing

The order that protects sellers best generally looks like this:

1. Reservation/Earnest Money Agreement signed, deposit received

2. Buyer completes financing, due diligence

3. If installment: Contract to Sell signed and notarized; buyer pays according to schedule

4. Once full payment is received: Deed of Absolute Sale signed and notarized

5. Deed proceeds to BIR for tax processing (covered in Guide 5)

Skipping straight to a Deed of Absolute Sale before payment is complete is the most common way sellers accidentally give up their leverage in a deal.

Your Documents Checklist

• Reservation/Earnest Money Agreement drafted, with clear default terms

• Confirmed whether this sale needs a Contract to Sell (installment) or goes straight to a Deed of Absolute Sale (full payment)

• Deed of Absolute Sale drafted with complete legal names, property description, price, and tax responsibilities

• Notarization scheduled, with valid IDs for all signers ready

• Confirmed full payment received before signing the Deed of Absolute Sale (if applicable)

This guide is for general informational purposes and isn't a substitute for advice from a licensed real estate lawyer, who should ideally draft or review your specific sale documents. Contract terms can significantly affect your protection in a dispute, so this is not the stage to rely solely on templates.

Previous in the series: Guide 3 — Pricing It Right Next in the series: Guide 5 — Taxes and Government Processing