Thailand Real Estate Pitfalls and Benefits
Should I Buy Privately or use a Professional Real Estate Broker?
Author: Ernie Draper, Managing Director / Co-Founder, Isan Real Estate Co., Ltd.
I am writing this blog not for the reason of trying to obtain more sales or increase the buyer’s database but more so to highlight the many concerns raised with us by buyers of Thailand properties on a weekly, if not daily basis.
We frequently receive calls or emails from buyers asking for help after succumbing to a ‘shady’ or ‘misleading’ deal which has proven costly or incurred financial and emotional stress to buyers.
One such incident was a contact from a buyer who had visited land with a so-called representative of the owners, was shown the photocopy of the front of the Chanote only, nothing else, considered it was ideal for them so negotiated a price. Upon agreeing on price, they then placed a substantial deposit with the ‘representative’, signed a contract and set a settlement date for 2 weeks.
The day following this contract and deposit paid, the buyers took friends to show them their latest purchase. Whilst there, the legitimate owners of the land appeared and asked them if they were lost or needed help? In reply they said they had just purchased this land and were glad to meet the owners. Low and behold, the true owners replied and said, ‘We are not selling this land, where did you get that idea?”
A very confused buyer then tried to contact the representative who sold the land by phone. Yes, you guessed it, no answer and no number, the sim card was cancelled, and the representative was gone, as was approximately 150,000 THB! They had been duped without conducting their due diligence on:
- The legal owners of the land;
- Whether the so-called representative actually had the authority to sell on behalf of the legal owners; and finally,
- They signed a contract without reading it thoroughly and naively paid money directly to someone they had only just met.
As Thailand is very unregulated within the Real Estate industry, it is very easy to get misled or duped, as many try to sell without any knowledge of Real Estate laws. I ask you, “Would you, or have you, willingly given money to someone without thoroughly conducting due diligence?
This is just 1 case. Thereafter, the buyers then decided to call a professional Real Estate Broker for assistance or advice after the fact and the illegal practice has already taken place. Whilst many professional Brokers and their agents are very well educated with the laws of property sale and purchase within Thailand, we are not professional attorneys (some may be) or solicitors that can solve your problem. We can only offer sympathy and ask why they didn’t call beforehand to allow us to act as the medium between buyer and seller? From our perspective, it is very saddening to hear of cases similar to this, but the only slim chance of recovering your outlay is to engage the services of a lawyer and or register your complaint with the police.
To avoid falling prey to such unscrupulous acts of fraud, theft, embezzlement or whatever you feel justifies this low-down act, lets’ take a look at how it could have been avoided.
A prospective buyer, and for that matter, a property seller, is very attuned to the use of internet searching, not only for Real Estate, but also many other consumables. The Web provides you with thousands of properties to choose from, or in the case of products or consumables, purchase from online stores such as Amazon, Lazada, eBay, etc.
The astute buyer will always research their options based on their needs and with so many sites, they can narrow down a selection that meet their criteria. Please don’t quote me, as I don’t have a link to confirm, but I did hear that nearly 82% of buyers use the internet to research any product before making a purchase either online or in-store. Very few buyers of any item nowadays that are outlaying substantial money ‘buy on a whim’ or without first asking a few questions.
Referring only to Real Estate websites, there are literally pages upon pages of professional Real Estate Brokers or portals on behalf of the owner displaying properties. The reputable ones will have most information provided to allow you to take the next step and make contact.
Now, this is a good time to point out that unless otherwise agreed, most professionals receive a commission from the Seller, so for the Buyer that means free professional advice. Yes, there is normally no fee charged to the Buyer for Real Estate services. The only fees you are likely to pay are proportional land transfer fees and if you choose, a lawyer to oversee your purchase.
The Real Estate Broker should not charge you anything for their services as they receive their commission from the Seller. The only exception to this rule is when a buyer engages the services of a Professional Broker to find a property that specifically meets the buyer’s needs. They are called Buyers Agents, whereas typically they are Sellers agents.
Now we get back to the original title of this blog: What are the differences between using a Professional Real Estate Broker and buying through an unrecognised agent or person?
From the beginning.
- Upon contact from the seller wishing to sell their property we ask for:
(a.) A front and rear copy of the Chanote (title deed) so we can clarify the owner, the plot size, location using GPS, dimensions, layout and any possible caveats lodged against the title.
(b.) A copy of the Legal Owner’s ID and House registration to confirm that indeed they are legal sellers with their name clearly stated.
(c.) Any images or photographs that can be used to search using apps such as Google Earth or Google Maps. Here we can see that everything matches providing the Google imagery is current.
- The next step is to arrange an appointment with the owner to physically view the property and the documents verifying proof of ownership. Note: we do ask to see the original of each document. If the original Chanote (title deed) is not available, it is fair to say, and we confirm with the owner, is there a lien or mortgage on the property? Should there be an outstanding loan or mortgage, it is common practice for the lending financial institution to hold the original as security. But … at least we know there is a mortgage to be paid and can advise any potential buyers. This does not pose any problems as when it comes time to sell, the mortgage is paid to the lender and the title is returned to the owner for legal transfer of ownership.
- How do we appraise a property? The most common myth amongst buyers is that the agent adds extra onto the selling price to cover the Brokers fees! Wrong. We appraise:
- Land value on the current property market. This can be checked in a number of ways but mostly, it is by experience and knowledge of your operating regions.
- Cost to build x Sq. Mt of the property x baht per Sq. Mt. Some properties are less or more refined than others using imported materials, type of construction materials, fixtures / fittings, landscaping, fencing, water supply, in fact everything that sits upon the land. The location, quality and presentation vary significantly through different regions.
- If the property is being sold fully, partly or unfurnished, this is acknowledged in the appraisal.
- This type of appraisal is normally carried out by a minimum of 2 colleagues, each going their separate ways and at the conclusion comparing each other’s findings as an appraisal. If there is a variance, this is discussed as to why and an agreement is reached on what each consider the property would sell for on the current market price, not what they bought it for, nor what they necessarily want.
- We then present to the owners our findings and provide reasons we determined that marketing price. The owners then consult each other and either accept or decline, in which case we respectfully will not market the property if declined.There is no point in trying to market a property to a particular buyer segment if it is overpriced. Buyers, as stated before, have a good knowledge of real value, given their research. Note: In some cases, the owner’s expectations can be lower than our appraisal, much to their delight. We are honest, straightforward and realistic about selling their property. Most professional Real Estate Brokers will ascertain which type of buyer they wish to target the property to. It could be a multitude of types. For example, investors, new home buyers, buyers upsizing from a smaller home, commercial businesses, hotel/resort owners, B & B’s, etc., The aim is to target the most obvious buyer type, not just a general advertising campaign, but real directed marketing.
- The suggested marketing price is not overinflated to cover costs from the agent. It is a realistic price that should entice buyers with good knowledge to arrange an appointment to view with an intention of buying. The commission is deducted from that price on the day of settlement. Obviously, there is no point (however some do) in raising the price which will then be bypassed by prospective buyers. The fact that prices are more expensive through a professional agent is a real myth and totally misunderstood. It does not make sense to try and oversell a property because if one should take that path, the property will remain on the market for a longer time.
- We acknowledge and respect the privacy of private sellers, that is their option to try and sell. However, many we speak to after not obtaining any buyer interest are asked why and how did you arrive at your selling price? In many cases, it revolves around so-called people saying that the property down the road is asking ‘X’ amount and we think ours should be the same or higher? Sellers asking a certain price does not justify any price and there is no benchmark until it has sold!If the properties are similar, then perhaps that reasoning could be justified, only when it has sold. If it has not, it is due to either bad marketing or overpricing. Would you want a fast sale or a prolonged waiting period? A professional will, or should, promote your property to potential buyers at every opportunity because that is how they derive their commission. Having the most listings is not a justifiable reason to be the preferred Broker. All that means is they have an oversupply of inventory (properties) that they have not manged to sell. The exception to this could be with larger franchised businesses required many listings in different regions or countries. So, overpricing is not our mentality, nor many other professional Brokers. It just doesn’t make sense to do so.
So far we have detailed our business model to you and I’m sure many other professional Brokers share this same agenda. At this stage I ask where have we described any fees or surcharges for servicing buyer needs? Nowhere, simply because without buyers, we have no business and no income. It is simply a professional service provided to buyers armed with the knowledge that we know the property is legal to sell, we have a complete understanding of all the property has to offer, and we have the avenue to assist right through to the final stage of transfer or ownership.
So that’s it, we’re finished right? No, wrong again. Just because the transfer of property has changed hands, service should not stop there for either seller or buyer.
There are utilities such as electricity, water, Wi-Fi, Cable or satellite TV, Estate fees and name changes that all need to be transferred. This is carried out with both seller and buyer within 24 hours with us and most professional Brokers seeing that your dream has become a reality and you can start living your life in your new property. Again, no fees charged to either party.
On the other hand, if you wish to buy privately, then please do your research and know what to look for in terms of legal requirements and opportunities. As mentioned earlier in this blog, it really is a case of ‘Buyer Beware’. You can get caught out very easily and unknowingly if you do not fully understand the Land Ownership laws of Thailand.
Disclaimer: This article is composed and published by a Professional Real Estate Broker and the opinions herein are those of the author based on true accounts and encounters within the business circle of Thailand Real Estate. No reference is intended to any individual or entity and is only written with assistance to buyers with bias. The author highly recommends you seek professional advice on all Real Estate matters relating to the sale and purchase of properties within the Kingdom of Thailand and not use this article as your sole reference.