Bank Guarantee

[bonifacio]

Hi experts.  I hope somebody can help me.

We are selling a property for 6M.  The property is currently mortgaged with a bank, with roughly 2M balance.  There are interested buyers, but they will also have it bank financed.  A buyer offered to make 1.5M Down payment and balance financed by his bank.

We are not completely familiar with how this kind of arrangement works.  We heard that the buyer’s bank will issue a “Bank Guarantee” only after the Title has transferred to the buyer.

1.    Is this correct and can we trust this kind of arrangement?  If so, what “assurance” or fall-back do we have in case we transferred the title but the bank doesn’t issue a “bank Guarantee”?
2.   Do we need to transfer the title?  If we do transfer the Title, would that mean we need to settle our Mortgage with our bank, and pay the corresponding taxes (Capital gains & Doc Stamp)?  What if we don’t have enough cash to pay the Mortgage completely?
3.   What kind of contract do we execute if the buyer makes a 1.5M dp – a Contract to Sell, some Conditional sale contract where we retain title until we are fully paid, or a DOAS?
4.   Is a “Bank Guarantee” as good as cash?
5.   When do we pay brokers for their commission, upon receipt of Down Payment or upon receipt of full payment?

We are at a loss on how this works and would appreciate if anybody can enlighten us and show us the “step by step” in getting this kind of deal done.

[PinoyBroker]

Hi experts.  I hope somebody can help me.

We are selling a property for 6M.  The property is currently mortgaged with a bank, with roughly 2M balance.  There are interested buyers, but they will also have it bank financed.  A buyer offered to make 1.5M Down payment and balance financed by his bank.

We are not completely familiar with how this kind of arrangement works.  We heard that the buyer’s bank will issue a “Bank Guarantee” only after the Title has transferred to the buyer.

1.    Is this correct and can we trust this kind of arrangement?  If so, what “assurance” or fall-back do we have in case we transferred the title but the bank doesn’t issue a “bank Guarantee”?
2.   Do we need to transfer the title?  If we do transfer the Title, would that mean we need to settle our Mortgage with our bank, and pay the corresponding taxes (Capital gains & Doc Stamp)?  What if we don’t have enough cash to pay the Mortgage completely?
3.   What kind of contract do we execute if the buyer makes a 1.5M dp – a Contract to Sell, some Conditional sale contract where we retain title until we are fully paid, or a DOAS?
4.   Is a “Bank Guarantee” as good as cash?
5.   When do we pay brokers for their commission, upon receipt of Down Payment or upon receipt of full payment?

We are at a loss on how this works and would appreciate if anybody can enlighten us and show us the “step by step” in getting this kind of deal done.

Sorry for seeing this just now.

Best is to to talk with both banks on this arrangement and make sure they have the same expectations since the money will be transmitted between them.

The Contract to be used is a CTS and when all things are accomplished, a DAS is done.

A bank guarantee is only 90% assurance as it is time bound and depends on what are the conditions involved. Rest assured however that once a bank guarantee is issued, the bank is already ready and willing to pay

Broker's commission are usually paid after you have paid the Capital Gains Tax and got the CAR (since you are the seller)

Hope this answers your queries.

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It is still best to consult a Licensed Real Estate Broker and Real Estate Lawyer should you have doubts