Real Estate 101: Sample Computation Part 2

Posted by Property Diva Tuesday, March 9, 2010 9:05 PM

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Every first time real estate buyer has a lot of questions. And here at Property Pilipinas, we try to answer them one by one.

In the first part, I explained what some of the terms on the sample computation really mean. For part two, we will discuss the sample computation on the mathematical point of view. I know that for most people, Math suckz. But I'll try to make the explanation as 'human' as possible so that you will all be able to understand how it is computed.

First, let's review what we have discussed so far...

The moment that you decide on what property you would like to own, the real estate agent would provide you a computation similar to the sample computations given in their flyers. The computation would list the first three important things: the Lot area/sq.m, the price/sq.m. and the total contract price. (These three would also appear in any succeeding contracts/forms that you would sign with your real estate company, unless the form is for some other purpose.)

After the first three numbers in the sample computation, you will then see the payment terms that you can choose from. This includes details of how much you should pay for your initial downpayment, the reservation fee, any additional discounts, and the remaining balance that indicates how much you would have to pay within several number of years.

To make sure that you are not being scammed, you need to learn how to make the computations yourself, and to confront your real estate agent or the company he/she works for, if you see any discrepancies with your computations. Do not hesitate to ask since you are investing your hard earned money to it. But please don't be confrontational. Sometimes, the real estate agents themselves do not know why a certain fee is added, so try to understand if they would not be able to give you any clear explanations.

Let's use the data on the computation below:



The property above has a TCP of 230, 400.00. For this option, you are trying to get the net downpayment. To get it, you use the formula below:

NET DOWNPAYMENT = Downpayment - Reservation Fee - Discount Outright



The first thing you'll notice is the downpayment rate. In this case, it's 15%. As I said previously, the rates differ with the company and property. So 15% here isn't fixed to all properties.

To get the downpayment, the formula below is used:

DOWNPAYMENT = Total Contract Price x Downpayment Rate

therefore:

DP = 230, 400.00 x 15%

DP = 34,560.00

Next on the list is the Reservation Fee. Like with the rates, reservation fees differ with each company or property even if the value is "fixed" (does not change with the change in TCP, etc.).



After the Reservation Fee comes the Discount Outright. This is the discount that you can get if you pay the downpayment within a certain amount of time. Usually, this is given if payment is made within a week of signing the contract. If you are unable to make such payment, you miss the opportunity to enjoy this discount. It doesn't look much (as in the example, its only 7%), but it could turn out to be a big savings for you.

The discount outright is computed as below:

DISCOUNT OUTRIGHT = Downpayment x Discount Rate

therefore:

DO = 34,560.00 x 7%
DO = 2,419.20

Now that we have all three data, we can now compute for the Net Downpayment. Again, the formula is:

NET DOWNPAYMENT = Downpayment - Reservation Fee - Discount Outright

therefore:

ND = 34,560.00 - 5,000.00 - 2,419.20
ND = 27, 140.80

The Net Downpayment would now be the downpayment that you should be paying within the set number of days.

Now that you know how much downpayment you would be paying, let's now take a look on how you would be paying the remaining balance...

To be continued in Part 3...

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