REAL ESATE LAWS AND REFERENCES 2.9

Why is there a need of a Reservation Agreement when there is Contact to Sell, and why there is a need of a Deed of Sale when there is Contract Contract to Sell

The Reservation Agreement pertains to the agreement that focuses on the terms and conditions on the payment of reservation fee. This is actually the first step that is necessary because it stipulates that when the buyer does not proceed to sign the contract to sell, or for whatever reason does not pursue with the purchase, the buyer agrees that the reservation fee will be forfeited. Without this agreement, a buyer who can make a reservation can demand a refund when a buyer decides not to push through because there is no legal basis for the forfeiture. Besides, the Reservation Agreement is the basis in which the Contract to Sell shall be made leading to the more important contract – the Contract to Sell. In brokerage term, Reservation Agreement is called Earnest Money – a small amount of money usually few thousand pesos or 2% to 5% of the Total Contract Price to show interest to purchase on the part of the buyer and that the property can be put on hold until such time the Contract to sell or Deed of Sale is ready for signing.
The Contract to Sell – pertains to the entire Total Contract Price stipulating the terms and conditions of payment and the description of the unit purchased. This is the contract that will be used as legal basis on the right of the buyer to demand a DEED OF SALE when the property is fully paid. But the Contract to Sell is not enough basis for the transfer of title to buyer’s name. It will only serve as a legal document that will compel the seller / developer to execute the Deed of Sale when the property is fully paid and/or when all conditions in the contract to sell are complied with.
The Deed of Sale or Deed of Absolute Sale,  is the final contract that will be required by the Register of Deeds for the transfer of ownership. In case of purchase by installment, this will come later when the unit is fully paid; this deed of sale will be the basis for the issuance of the Transfer Certificate of Title (TCT) in case of lot purchase or Condominium Certificate of title (CCT) in case of Condominium unit purchase to be transferred in the name of the buyer which is the final and strongest proof of ownership.