The common errors made when buying a property in Thailand
Property transactions are usually quite smoothly, especially with the help of experts. When issues do occur, they are often down to the buyer making a mistake that was easily avoided. Here we look at some of the most common errors, and how you can avoid them.
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Not understanding the market
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Investing without a lawyer
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Searching without a real estate agent
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Investing only on the basis of price
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Purchasing a mismanaged project
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Not conducting Due Diligence
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Not conducting a Title Search
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Not thinking about heirs
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Giving the down-deposit too soon
Not understanding the market
A lot of foreigners who invest in property in Thailand will have good knowledge of the property market in their own country.
Many of these people will also think that this knowledge transfers directly to the Thai market, but this is not the case. While overseas real estate markets might appear to be similar, or even identical to the Thai market, there are some considerable differences. There are also many nuances in the market that take experience to learn regardless of how much knowledge you might have.
Foreigners who make this error will sometimes find themselves losing out. This can mean anything from purchasing a property that has been overvalued to finding themselves investing in something they do not own. It is a much better idea to go through the local realtors or property lawyers to help ensure everything is done as it should be.
Investing without a lawyer
The complexity and nuance involved in the Thai property market makes it a very good idea to use a local real estate lawyer.
Property contracts in Thailand will often not meet the standards you used to in your own country and speaking with a lawyer that you know and trust in your own country can also be a good idea, but you should always refer to a Thai lawyer that understands the Thai system specifically.
Another good reason to use a Thai lawyer is the language barrier. Many contracts will be written in Thai so it will be essential that you are going through somebody who understands the language as a native speaker. A Thai lawyer can also help to avoid any misunderstandings when speaking with other people when trying to make a deal.
Searching without a real estate agent
A lot of people might want to try and avoid going through a real estate agent, for various reasons, including trying to avoid paying commissions to the agent.
This would be a bad move because an agent’s fee is a small price to pay for the benefits they provide. The main one is their knowledge of the properties available in the area, but also to help you preparing your investment in a foreign country.
Using an agent will help you to find the best property that you can for your budget. Their understanding of Thai property laws, like the right of usufructs, the right of superficies or the title deeds, will also help to ensure that your investment goes as smoothly as possible.
Investing only on the basis of price
Property prices in Thailand tend to be very appealing, and this can lead to some foreign investors making a quick decision.
The chances are, however, that there are better opportunities to be found in the area. Instead of investing on price, there are many other aspects to look at when it comes to Thai properties.
How much a property is likely to increase in value is something that should always be taken into consideration. Foreigners should also consider the surroundings, the lifestyle and culture, and how well they are likely to adjust to living in the area.
Purchasing a mismanaged project
The property market in Thailand is one with many opportunities to make a good return on investment and this has led to an increase in developers looking to get involved. Many lack of experience and resources needed to complete projects successfully.
This, in turn, can cause investors to end up with properties that are not up to expected standards. Some projects might not even be completed at all.
However, there are some very well-established developers in the country that have all it takes to deliver on what they promise. The more established developers are less likely to negotiate on price, simply because they do not need to. It might be tempting to go for the less costly developments offered by the less established developers, but this makes your investment riskier.
Not conducting Due Diligence
Due diligence basically means looking into an investment opportunity to ensure that everything is as it appears to be. Otherwise it can be easy to invest in something that is riddled with issues. Due diligence should be performed for every investment that you make, and property investments are no exception
When it comes to property investment in Thailand, this due diligence should be undertaken by a Thai real estate lawyer who understands the market well. A Thai real estate lawyer will know what to look for in every transaction. They will be able to investigate the property’s history and any legal documentation pertaining to the transaction.
If this due diligence is not undertaken, then the buyer might end up with a property that is worth a lot less than the price it was purchased for. It could also mean ownership right issues that can threaten the buyer’s right to the property altogether.
Not conducting a Title Search
A title search will help reveal all the relevant details regarding the land associated with the transaction. This includes details like any restrictions on developments on the land which could leave the buyer with land that they can’t do anything with.
Other things that need to be revealed are any zoning restrictions that might leave the buyer unable to develop the property as they were planning to. Such restrictions are especially likely to be found on properties that are located on or near beaches, which is the preferred property location for many foreigners.
A title search is also necessary to ensure the seller is the rightful owner to the land. Otherwise, the buyer might find themselves facing a challenge to their rights over the property. This could potentially lead to losing their investment completely. A title search is a reasonably straightforward and inexpensive procedure so there is no excuse for not having one conducted.
Not thinking about heirs
We can never be sure of what might happen tomorrow, and even the healthiest investors should make plans in case the worst does happen.
This includes leaving a will to the family so that the estate is passed on, and this includes any property that the investors own, including in Thailand. You should also ensure that a will is made in Thailand as well as in your home country, to help ensure a transaction that is as smooth as possible.
Even if a will in your own country does meet with the Thai law, it can still be cumbersome for your family to receive the property. The last thing your family want at such time is to have to deal with the language barrier, trying to understand Thai law, and especially any disputes that might occur.
Giving the down-deposit too soon
When you have decided on a suitable property, it is standard to put a deposit down so it is reserved. This then means that the property cannot be purchased by anybody else while the purchase is being processed. The deposit will then usually be deducted from the agreed purchase price when the transaction is completed.
If the buyer pulls out for any reason then the seller is within their rights to keep the deposit for themselves, which they usually will do.
With this in mind, it is wise to be sure about a property before putting down a deposit because you can’t change your mind if you see something else you prefer.
If the seller defaults, then the deposit will usually be returned to the buyer in full – but this is not always the case. Before paying down any deposit, it is necessary to first ensure that you get a full refund on the deposit if the seller defaults.