Philippines Real Estate – Agency Laws

When searching for real estate in the Philippines, there are many places you can begin searching, like online, for your dream property. If you have real estate brokerage firms located in your area, this is a good place to begin. A good source for real estate can also be banks or mortgage companies that have inventories of repossessed properties. Many others can simply be locate by For Sale signs or through friends, relatives or neighbors. Of course, there always seems to be that self-appointed “barangay agent” that shows up as soon as the thought of buying any real estate enters your head. As “unofficial” as they may be, they can be a good source of identifying potential properties for sale. However, Proceed with Caution! When using these so-called agents, this should not preclude you from using a more competent authority to transact the sale.

Duplex for sale

Whether you are looking to find a duplex or a simple Bahay Kubo, or that perfect parcel of land to build your dream home, it is ALWAYS a good idea to use a competent agency to transact your purchase, from beginning to end. If you happened to find your property through someone who says they are a real estate agent, you should always verify their credentials to determine if that “professional” agent is legal, i.e., “licensed or certified.” This small cautionary step can make all the difference between achieving a successful real estate transaction or a complete disaster. There are many steps, and potential pitfalls, in acquiring real property in the Philippines and you should always ensure the process is completed in a timely, legal, and due-diligent fashion. I suggest in the absence of a bona-fide real estate agency in your area, you should always seek the help of a qualified attorney. By qualified I mean an attorney who has some experience in real estate law. The reason for using these “qualified” individuals is simple – it affords you the protections administered by virtue of TITLE X, Chapter 1, Agency Laws of the Philippines.

Understanding Agency Law

Simplicity of Agency Law

Just like in the U.S., agency laws in the Philippines govern professional relationships. Real estate agents and brokers must strictly abide by agency rules that dictate their fiduciary duties to clients. The term fiduciary is defined as: a relationship in which one person has a responsibility of care for the assets or rights of another person. A fiduciary is an individual who has this responsibility. The term “fiduciary” is derived from the Latin term for “faith” or “trust.” 

Agency laws and regulations in the Philippines tend to share some basic principles: Agents are obligated to act in the best interest of the client (due diligence), adhere to certain confidentiality clauses, and reveal all known material facts (honesty and full disclosure) relevant to the transaction.

First I will explain sub-agency. In the Philippines, a Sub-Agent is someone who is under the supervision and operational control of a Real Estate Broker. The Sub-Agent is not an agent of the buyer or seller per se. It is the Broker who is the agent of the buyer or seller. The Sub-Agent is a direct representative of the Broker and represents the Brokers interests. The formal position of a Sub-Agent in the hierarchy of real estate practitioners, as defined under Philippine law, is a “Salesperson.”

Agency is further broken down into three basic categories of client representation: Sellers Agents, Buyers Agents, and Dual Agency.

The Sellers Agent works only for the seller (client) and has no fiduciary duty to the buyer. The Sellers Agent works on behalf of their client to obtain the highest sale price and best sale terms possible.

The Buyers Agent works only for the buyer (client) and has no fiduciary responsibility to the seller, even if the Buyers Agent is compensated with a percentage of the commission paid by the seller. The Buyers Agent works on behalf of their client to obtain the lowest sale price and the best purchase terms possible.

In Dual Agency, the agent represents both the buyer and the seller so long as both parties consent to this arrangement. An example of dual agency would be if you called the listing agent on a “For Sale Sign” and you use that same agent in the transaction. In this case, and by law, the buyer and seller must sign a dual agency disclosure statement that documents their consent. The dual agent may not disclose any confidential information, advocate or negotiate on behalf of either of the two parties. I strongly discourage the use of dual agency. My feelings are that one fiduciary cannot fully represent two parties in a single transaction. This would be like using the same attorney to represent the plaintiff and defendant in a lawsuit. There would be no winner! Either use another agent or better yet, use a different or outside agency. (Dual Agency is outlawed in several states in the U.S. due to the inherent problems of equal representation.)

For more detailed information concerning the Nature, Form, and Kinds of Agency, you can review Title X Chapter 1 of the Philippine Law on Agency.  (Caution, you may fall asleep here so set your alarm to continue!)

No Brokerage Firms – No Problem

If you are actively looking for homes or property in an area that has no brokerage services available, seek out a competent and reputable attorney whom either practices real estate or has experience in real estate law. As licensed professionals, they too must abide by the Law of Agency set forth under Philippine Law. Just make sure the attorney you choose does not represent any conflict of interest by having a relationship with the seller!

Happy House Hunting!