Money Matters

What is Condo Pasalo? The Pros and Cons You Need to Know

Thinking of getting property through condo pasalo? Read this first!

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If you've been looking for property online, then chances are, you've stumbled upon social media groups about condo pasalo, where property owners drop their terms for interested buyers. But what exactly is condo pasalo, and is it a safe, fool-proof way to buy your own space? 

We got in touch with licensed real estate consultant, appraiser, broker, and accredited lecturer Prof. Eden Dayrit, REC REA REB, to get the 101 on how this system works so that you can make an educated decision about your own property investment.

Real Living: What is condo pasalo and how does it work?

Prof. Eden: Condo pasalo is a colloquial term describing the process of acquiring a condominium unit (and peripherals like parking, drying cage, etc) from its original buyer. This happens in the staggered downpayment (about 20-30% of total contract price) stage prior its turnover, usually within 1-3 years of payment prior unit turnover. The original buyer tries to find a new buyer who can shell out the original amount already paid and continue their amortization payment, usually at the original acquisition price to attract buyers.


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RL: What are the pros and cons of engaging in these kinds of transactions?

Prof. Eden: Depending on the developer involved and the percentage already paid by original owner, this is usually advantageous to both parties due to the lesser amount of taxes and expenses involved. Most developers would only charge an admin fee without the need for payment of the first round of the usual taxes (6% CGT for seller, 1.5% DST, Transfer Tax, Registration Fee for buyer), if the amount paid is still less than what the law prescribed. This became a preferred method of real estate investing for some who relies on the developer track record of real estate appreciation, to cash in their investment without need to pay for the 1st round of taxes. Some developers try to curb this type of transaction by raising the "transfer of ownership fee (some called admin fee)" from tens of thousands to hundreds of thousands of pesos (one developer charges 500k), because it is an administrative internal documentation nightmare for the developer. For the buyers, it is an opportunity to purchase the same condominium unit at an amount less than current developer prices, and still enjoy first ownership of the unit.


Some "cons" include the following:

(1) Title and tax declaration are usually not yet available, so buyer must rely on other proof of ownership documents;

(2) It is more challenging to find a buyer willing to risk undergoing a pasalo process, specially if there are still available developer inventory. It is human nature to choose the path of less resistance (buying straight from developer, who can still offer payment terms that cannot be afforded by an individual seller);

(3) As much as seller would like to recoup all amounts already paid, expect hard negotiation down to the point of just trying to just clear their record with the developer without any payment. Getting represented by a good real estate broker is the seller's best option to get the most of the transaction.


RL: If one is to do condo pasalo, what should he or she expect or be careful of?

Prof. Eden: Since you're dealing with an individual seller (sometimes represented by a real estate broker), and not the developer, it is paramount to ask for copies of all pertinent documents prior making an offer. This includes the signed contract to sell, updated statement of account, proof of seller's identification, title and tax declaration if already available (most likely. not yet). It is also important to ask for a direct line to the developer, usually by asking for authority from the original seller to transact directly with the developer. In this way, you can get proof of ownership direct and not rely on documents provided. You will also be able to ask the developer directly for all taxes and expenses due, that you will include in your negotiation with the original offer.


RL: Would you have any advice for those looking to try condo pasalo?

Prof. Eden: Seek for professional help when doing condo pasalo, for your protection. A good real estate broker can help ensure all documents are in order, and all information required for you to make an objective decision to purchase are made available. Remember that the original seller may be as clueless as you are in terms of developer documentation. The broker's professional fee is well worth the ease of transaction and best value for both parties, it affords.

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