Pre-selling is a real estate transaction model where property developers offer subdivision lots or condominium units for sale before project completion, allowing buyers to purchase at lower prices through staged payment schedules during the construction phase.
Definition
In the Philippines, pre-selling enables developers to generate capital for construction while offering buyers entry-level pricing. This model is regulated under Presidential Decree No. 957 (Subdivision and Condominium Buyers' Protective Decree), which requires developers to secure a License to Sell (LTS) from DHSUD before offering any units to the public.
Key Components
- Reservation Fee — Non-refundable payment that secures your chosen unit (typically PHP 10,000–50,000)
- Equity Period — The time when you pay the down payment in monthly installments before bank take-out or turnover
- Total Contract Price — The full purchase price used as basis for payment computations
- Amortization Schedule — The breakdown of monthly payments over the loan term
- Turnover Date — The projected date when the developer hands over your unit
How it Works
- Choose a unit from the developer's inventory and pay the reservation fee
- Sign the Reservation Agreement which locks in the price and unit details
- Pay equity in monthly installments during the construction period (typically 10–30% of TCP spread over 12–36 months)
- Sign the Contract-to-Sell after completing required documents and initial payments
- Secure bank financing or continue in-house financing for the balance upon turnover
- Receive turnover once the project is completed and the unit passes inspection
Pros & Cons
Advantages:
- Lower purchase price compared to Ready-for-Occupancy (RFO) units
- Flexible equity payment terms during construction
- Potential property value appreciation by turnover
- First pick of prime units and floors
Disadvantages:
- Risk of construction delays beyond projected turnover
- No immediate occupancy or rental income
- Developer bankruptcy risk (mitigated by performance bonds under PD 957)
- Unit may differ from showroom samples
Real-World Application
Pre-selling creates complex payment tracking requirements for real estate brokers and developers. You need to monitor multiple buyers at different stages—some paying reservation fees, others completing equity, and some awaiting turnover.
Real estate management platforms automate this by:
- Generating payment schedules automatically upon sales booking
- Tracking collection status across the entire portfolio
- Sending payment reminders to buyers before due dates
- Computing commissions tied to payment milestones
The Maceda Law (RA 6552) protects pre-selling buyers who default on payments, granting grace periods and refund rights depending on the total installments paid.
Related Terms
References
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