Thai Property Dilemma: Mistakes You Should Avoid When Buying Thai Property
With the emergence of Thailand as a prominent choice for second homes and property investments, it has become more popular than ever with foreign buyers. However, the excitement of having a Thai property is often accompanied by the lack of knowledge in aquiring and handling properties.
Siam Legal provides us with a list of the nine top mistakes that property buyers commit when buying Thai property.
No Title Search
Once you find your dream property, it is best to check the title deed recorded at the Land Department first before making any deposit or signing a reservation agreement.
Legalities are essential when buying a property. You need to verify that the landowner is, in truth, the deed holder of the land or property. Once you conduct a title search, you will gain access to information such as the ownership history and any balances or penalties such as liens, leases, or mortgages. Aside from that, an investigation of the title will verify zoning, environmental, and planning codes in the area.
There have been instances of foreigners buying property in Thailand who later discovered that the land was restricted in terms of structural height. As a result, the land coud not be used. These kinds of cases are especially true in beach resort communities where there are height limitations as you get closer to the beach.
Given the example above, you can see how a title search is gravely important. You can always trade a few days of title search for a verified land or property title.
Failure to Conduct Due Diligence (Background Checks)
Investment properties can change your life – literally. It can escalate from a good investment to the worst decision in your life. With that said, you have to be diligent enough to asses if the property is really a worth it or not.
For instance, try checking the background of the property developer and the feedback from its customers. Have their previous projects garnered good reviews? Were their buyers satisfied with the quality and the time frame of the construction? You can ask a local lawyer near the development of the project, the developer’s reputation, or performance history. A Due Diligence report will also outline all the information included in the title search above.
Buying Without a Lawyer
If you plan to invest in a Thailand property, you better invest in a lawyer as well. For foreigners without any knowledge on how the paper works work in Thailand, having a lawyer is for the best.
Although buying a property without any help from a lawyer is possible, the risks it comes with is high, unless you have a good grasp of the country, its language, and its legal system. Contracts in Thailand sometimes deviate from the international standards you might use back home. So, make it a point conduct a thorough check of the contracts, or better yet, have a lawyer or a solicitor help you out.
You lawyer back home can give you general advice on the contracts and agreements, but not specifically about other Thai laws for foreigners. Better yet, find a local lawyer who has more experience in dealing with Thai contracts.
Buying Without a Real Estate Agent
The Thailand real estate market differs from one area to another, and unless you are familiar with these different markets, you need a real estate agent to help you know potential advantages and risks within your chosen area.
Thai real estate agents would be the ones to be of most help. These agents know how to communicate in Thai and are familiar with the location and the general geographic area. They can even refer you to many quality properties based on your needs and desires.
Typically, a good agent will weed out the inferior units. It is for the protection of their credibility as well since they want to satisfy customers and avoid any problematic developments. In essence, real estate agents will act as the middle man for you and the seller. They will get a fair price for you and act on your behalf to respect your best interest throughout the entire process.
Putting the Deposit Down Too Early
Deposits function as a reservation fee or an earnest deposit. Once you find your dream property, a deposit ensures that the seller or agent will reserve the property for you and will also begin drafting the contract. Normally, a deposit can range from 10-15% of the original purchase price, if the contract is fully performed by both parties.
If in case you do not proceed with the transaction, the seller has the right to retain the initial reservation deposit. On the contrary, if the seller defaults, the amount is usually refundable.
However, this is not always the case as sellers and agents sometimes keep the deposit for the opportunity costs while the property was reserved. Unless you specifically draft an “exit” clause in the deposit agreement, such as “subject to a clear title” or subject to agreement on contract terms,” the money deposited is non-refundable.
Exit clauses such as ‘subject to clear title’ or ‘subject to a new title deed being issued’ can be of fundamental importance when negotiating.
Buying in a Mismanaged Project
Thailand has seen a lot of new developers trying their hand at building homes. In Hua Hin, for instance, many of these property developers ventured into the industry because they perceived it as a lucrative real estate business. Some of them may not have the necessary experience to manage the project. As a result, their projects tend to be delayed in construction. However, these kinds of developers do offer much better prices and are more flexible in catering to your needs.
On the other hand, you could also find large developers who have their companies publicly listed. They have resources, experience, and expertise in completing construction projects on time. Usually, they will not negotiate on the price of the property. Some do not offer any advice on variations that you would like to make on the designed plan. In sum, they are less flexible but the commercial risks are much less.
In general, you should find a developer who you are most comfortable with. Be sure to check their previous projects for quality assurance and to ask people who have purchased from them before.
Consider the Surrounding Area
When buying a unit in a condominium, factors such as the floor, the view, and the desirability of your home come into play. If you purchase in a popular development, it will likely have a Phase II development. You should then plan your unit in a relatively safe area where you are far from potential construction noise and blockage from views.
Choosing On The Basis of Price
Before buying a property, you should asses the properties near your chosen area to check if the price given to you is fair. In case, it is possible to check various property prices through a regulated body and by looking at tax receipts of particular areas. You could also do an online search for online listings in the area to assess Thai property prices.
Forgetting Your Heirs
Death is a morbid thing to think about. But, in case of your unfortunate passing, you have to have a Last Will & Testament made for your heirs so as to not waste your Thai property investment. The document will detail your assets in Thailand such as property, bank accounts, vehicles, and personal items.
Upon the death of a foreigner in Thailand, the government officer will ask the family for a copy of a Will. They may also seek the deceased person’s lawyer for the document. For this, you will need to have a copy both in your home country and in Thailand to avoid any trouble in translating and notarizing the document. Siam Legal further suggests that you should have a separate Will for your assets in Thailand.
Do not that Thailand does not have any inheritance tax in general. However, the beneficiary will have to pay certain fees payable to the Land Department upon the transfer of title to place their name in the title deed.
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