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.
What’s the difference between RFO and Pre-selling house?
Advantages & Disadvantages for RFO units
- 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.
- 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
- 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
- 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.