No Comments

What’s the Difference Between an RFO and Preselling House?

I’m very excited to announce to you that we have a new video series segment called #askmyhouseph where we answer all of your real estate questions in Cebu and the Philippines.

First question that we have with one of our clients.

She said;

What’s the difference between RFO and Pre-selling house?

RFO house means ‘Ready For Occupancy’ which means the house or your condominium is already constructed and ready for you to move in.

Advantages & Disadvantages for RFO units

Advantages

  • You can view your unit since it’s already constructed.
  • You know where it is.
  • You can move in right away, you can move in from 2 weeks – 3 months.
  • You can start to have your unit rented. If you’re purchasing your unit for investment purposes you can have rental income right away instead of waiting for 2-4 years for pre-selling units.

Disadvantages

  • It’s more expensive than pre-selling. RFO units tend to be 20-30% more than pre-selling houses
  • Less flexible payment terms – You have to pay the 20% equity within 1-12 months only.

For a 2 million peso townhouse you have to pay 20% as equity or downpayment and then the 80% will be your loan. If you take out a Pag-Ibig loan or a bank loan. 20% equity is 400K.

Because it’s already RFO the developers would want you to pay the 400K within 1-12 months. If you divide 400k by 1 year it’s equal to 33K per month. After that you get to pay your loan.

Advantages & Disadvantages for Pre-selling units

Advantages

  • Pre-selling is the BEST price you can get for a particular project. It’s the lowest price you can get.
  • Pre-selling units in real estate prices goes higher and higher. The longer you wait, the higher the price becomes. The earlier you buy a pre-selling unit the lowest price you can get.
  • Pre-selling units are 20-30% less than RFO units.
  • Pre-selling units have very flexible payment terms. You get to pay your down payment the 400k by 2 – 4 years.

For example you buy the same 2M townhouse and you get your pre-selling very early so you get the 4 year term.

Instead of paying the 33K for 1 year you get to pay 8K per month for 4 years.

The total is the same 400K but it’s a lot easier in the pocket.

If you’re earning 30K per month and you’re going to pay 8K for your future house and the rest is for your living expenses.

It’s a good deal.

  • One more advantage for pre-selling units is you get to choose your unit early because you’re one of the first buyer of that particular project you get to choose a PRIME location.For example you want a corner lot or you can go for a condo unit for the sea view, a house near the pool.

You have to choose the BEST units cause you’re buying pre-selling

Disadvantages

  • Pre-selling units typically take 2-5 years to be completed
  • Sometimes there are some construction delays with the developers like bad weather and problems with the logistics.