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Step by Step Buying Guide
Step by Step procedure for buying real estate in Phuket, Thailand.
Before you start looking for a new home, sit down and take some time to think about exactly what it is you want in a new home:
- How much can you afford to spend?
- Where do you want to live?
- What type of home do you want?
- When do you want to move in?
Developing this 'wish list' will save you time when you start to look for your new home, and will allow you to spend most of your time on only those homes that come close to meeting all of your requirements. It will also be of value in explaining to real estate agents exactly what you are looking for in a home.
How much do you want to spend?
The first step when you start thinking about buying a new home, is to sit down and work out how much you can afford to spend. Bear in mind that it is almost impossible for a foreigner to directly obtain mortgage financing in Thailand.
When calculating how much you have to spend on a new home, don't forget to take into account all the 'add-on' cost associated with the purchase, such as:
- government charges (stamp duty, transfer tax, business tax and income tax)
- building inspection costs
- legal expenses
- insurance
- repairs
When you are satisfied that you know how much you can afford to spend on a home, enter this figure onto your 'wish list'.
Where in Phuket do you want to live?
Your budget and your desired lifestyle will influence where you want to live. When considering the financial aspects, start by taking a look at the average property values in the areas you like. This will give you a good indication of whether the properties in these areas are within your price bracket. If you really like a particular area but find that the average property price is well out of your range, don't despair, remember the old real estate adage 'buying the worst house in the best street is better than buying the best house in the worst street'.
Always ensure that you get professional advice on the cost of any repairs or renovation work you expect to undertake on the property.
The home that you purchase is likely to be one of your most valuable financial assets, therefore, you should endeavour to select a property that is likely to substantially increase in value over time. Prime locations to consider are those where property prices have performed well in the past in terms of capital appreciation.
Finding a location that suits your particular lifestyle requirements is also very important. Perhaps you need or want to be located close to specific amenities such as:
- Family and/or friends
- Shopping facilities
- Public transport
- Work place
- Educational facilities
- Beaches
- Parks
- Sporting facilities
- Entertainment facilities
- Low noise area
- Quiet safe street
What type of home do you want?
As well as deciding on where you want to live, you also need to decide on exactly what type of home you want. Again, your choices may be influenced or constrained by your budget. For example, if your dream home is out of reach at the moment, you could decide to buy a block of land and defer building your home until a later date.
Below is a list of options you will need to consider when deciding on your type of home:
- Type of home, free-standing, semi, condominium, terrace (shophouse, townhouse)
- New, used or old
- Renovated or unrenovated
- Number of bedrooms
- Number of bathrooms
- Yard, courtyard or balcony
- Garage, under cover parking or off-road parking
- North facing
- Floorplan and facilities with access for furniture and whitegoods
- Privacy and security
- Swimming pool
The next thing to consider is the time frame you want for moving in to your new home. You may have to move out of rented accommodation by a certain date or perhaps you are relocating as a result of an employment transfer. Whatever your circumstances, you will need to plan ahead to ensure a smooth move to your new home.
Bear in mind that several hours each weekend, or during the week will need to be set aside for viewing prospective properties. Be realistic about the amount of time house hunting is likely to take.
You probably won't be lucky enough to find your dream home within the first five houses you see - possibly not even the first twenty houses, so if you are working to a tight schedule, try and make your 'wish list' as accurate as possible and discuss this with your Real Estate Agent prior to inspecting any properties.
Beginning the search
Once you have finalised your wish list, you can begin the search for your ideal home, which will involve:
- Looking for a home, and
- Real Estate Agents
There are now many ways of accessing information on the property market in Thailand. Of these, the Internet is fast becoming the most popular means of finding details and pictures of real estate for sale - particularly for people not currently residing in Thailand.
As an independent free Phuket real estate directory our site lists most of properties available for sale. Use our search feature to access properties listed. You can select any or all of the search criteria to narrow your search, ensuring that you only need to view those properties that closely match your chosen criteria.
One of the first things you should do when you start looking at property listings is to check that the general price of properties in your chosen area is within your price range.
Driving around those areas that you would like to live in is also a very good way to identify house you would be interested in. Write down the property addresses and let your real estate agent know what you like about these properties, and if he has any similar properties on his books.
Meet with Real Estate Agents
Instead of spending time scanning through newspapers and classified ads, why not let the real estate agents do some of the work for you? When you approach real estate agents and let them know what you are looking for, make sure you provide them with as much detail as you can on what you require in a home. Perhaps you can even provide them with a copy of your wish list.
The more information you can provide, the more chance there is of a Real Estate Agent being able to match you to your ideal property. Both you and the Real Estate Agent will be spared a great deal of time by dealing only with properties that closely match your requirements.
One of the major advantages of telling a Real Estate Agent exactly what you are looking for in a property, is that you are likely to hear about newly listed properties soon after they come onto the market. As soon as a property that meets your specific needs comes up for sale, the Real Estate Agent will be able to match it up with your needs. This is an excellent way to keep at the front of the queue for the good properties.
The next step is to take a look at your prospective properties.
Having a Look
Searching for your ideal home will quickly lead you into inspecting prospective properties. When looking over these prospective homes, be sure to:
- Make notes on each property
- Review any Purchase Agreement
- Perform a comprehensive inspection
- Arrange a professional inspection
Because you are likely to be seeing many properties, it is a good idea to write down your impressions of each property you visit. This will help you to compare properties easily and assist you in your recollections of the various features of each property.
Make sure you record all the details, including the property address, date of visit, real estate agent's details and price range, as well as the property location details.
Draw a rough floor plan of the property, and if possible ask the real estate agent for a photograph of the property.
Review any Purchase Agreement
Ask the Real Estate Agent to provide you with a copy of the Purchase Agreement to review, and to show you the following documents to sight:
- A copy of the Land Title, showing the boundary measurements of the land, location from the nearest streets and any easements or covenants registered on the title.
- Planning information, defining what the land can be used/developed for (e.g. residential or commercial purposes)
- Details of any existing mortgage on the property, in case you agree to take over the mortgage.
- Outgoings, e.g. taxes, body corporate contributions, village common area costs.
- Building restrictions.
- Any other agreements which the vendor may have entered into with other parties in relation to the property (e.g. regarding fencing or building over easements).
If you are really keen to buy a particular property, it is advisable to retain the services of a good legal representative to review the Purchase Agreement and all other documentation.
Perform a Comprehensive Inspection
It is difficult to imagine buying a motor car without checking the engine and taking it for a test drive. However, many people do just this when buying a home, which costs significantly more.
It is imperative that you perform a comprehensive inspection of any property you intend to purchase, in order to ascertain the exact condition of the property. This should ensure that there are no major repair surprises that come to light once you have taken possession of the property.
Read through the list below for just some of the aspects that you should consider when inspecting a property.
INSIDE THE PROPERTY
- Check that all the floors are level and that there are no gaps between the floors and the walls.
- Jump lightly on wood floorboards to assess their stability.
- Check tiled floors for any loose tiles.
- Look for signs of rising damp, including rotting carpet, mould on the walls or ceiling and musty odours.
- Check the walls and ceilings for warping and cracks. Fresh paint or wallpaper may be hiding problem areas.
- Check whether doors and windows are square. Jamming may indicate structural subsidence.
- Make sure all light switches work. Also check each power point by using a power tester.
- Check the circuit breakers/fuse box.
- Test the water pressure in both hot and cold taps, and check the shower hot water systems.
- Partially fill the bath or sink and observe the drainage of the water. Sluggish flow may indicate damaged or blocked drains.
- Inspect any fences and gates for stability.
- If there are any large trees near the property, check for any possible root damage to the building.
- Check that any water runoff will drain away from the building.
- Check the condition of the brickwork, concrete work and plastering on the building.
- Check the condition of the eaves, water staining may be an indication of damaged rain water gutters.
- Check the line of the roof to make sure it is straight, check for any broken tiles.
- Check the woodwork/timber and any stumps for rot, borer or termite attack.
Arrange a Professional Inspection
If you feel you do not have the practical and technical knowledge required to perform an inspection yourself, then hire a professional inspector. The cost of a professional inspection will be minimal relative to what you stand to save.
Professional inspections should cover every accessible part of the building, including roof space and sub-floor. It should check for poor structure, leaking roof and guttering, subsiding footings, faulty wiring and plumbing, dampness, rot and many other faults. A comprehensive inspection should take 2 to 4 hours.
Inspections are not designed to disclose cosmetic deficiencies (e.g. paint chipping in the kitchen). You will need to decide for yourself whether these types of items need attention.
You should receive a written Inspection Report following the inspection, which will inform you of any property faults, how bad they are and a likely cost to repair them.
Armed with this information you can then decide whether you wish to purchase the property. If you do decide to make an offer on the property, you will be in a far better position to negotiate.
If possible, be present at the inspection so that you can discuss any concerns you may have with the inspector.
Negotiate a Deal
Negotiating a deal can be one of the most disconcerting aspects of buying a home.
- Private Treaty Sale
- Check the Title, Costs and Fees
- Purchase Agreement
- Pay a holding deposit
- Start the transfer process
Private Treaty sales occur when property is purchased through a Real Estate Agent or directly from the owner. If you intend to buy a property through this process, you must agree to pay a specific price set by the seller.
The trick to negotiating, therefore, is in trying to find the lowest price the vendor is willing to sell at. The key rule when negotiating is to try and give the impression that you don't care whether you buy or not.
Unfortunately this is often extremely hard to do because if you really like a property, it can be very difficult to act indifferently to the prospect of owning it. Remaining unemotional during negotiation discussions will enable you to reason logically with the Real Estate Agent. This approach is likely to produce a better price for you than if you give the impression you are desperate for the property. An attitude of indifference will also help minimise disappointment if you do not secure a purchase.
Most asking prices of properties have some built-in buffer for negotiations. The Real Estate Agent will report your offer to the vendor and then let you know if this is or isn't acceptable. You may need to re-assess your offer several time before both parties can reach an agreement.
For this reason, it is wise to always have a fallback position. Do not tell the Real Estate Agent the maximum amount you would be willing to pay. Instead, gradually increase your offer over time if the vendor remains unsatisfied. Persistence will often win through in the end.
Unfortunately there may be occasions when you do not have the luxury of time, for example, when the market is strong. If there appears to be several people interested in the one property, determine the amount you are comfortable to pay and make this your offer.
In both cases, do not exceed your desired upper limit. You must avoid getting carried away by your emotions, as they will cloud your judgment. You might end up with the property, but you could also end up in a tighter financial position than you bargained for.
If it appears the vendor will not budge and the price remains above what you are willing to pay, tell the Real Estate Agent why you believe his price is too high. For example, you may love the property, but believe the kitchen will need to be replaced at significant cost - the Real Estate Agent can then pass this information on to the vendor, who hopefully will see the validity of your argument and lower the price accordingly.
If your offer is accepted, make sure you obtain written acknowledgement of this fact. This will involve both parties signing a Purchase Agreement or Agreement to Sell. The Purchase Agreement will set out the agreed price and any terms and conditions, e.g. subject to a satisfactory building inspection and finance. Upon signing a Purchase Agreement, you will be asked to pay a holding deposit.
Check the Title, Costs and Fees
Once you have found your ideal home, you should inform your legal representative who will now make thorough inquiries to the relevant authorities, e.g. Land Department, local council, Revenue Department and etc. This should be completed before paying any holding deposit or signing any Purchase Agreement. Once you are satisfied that the property has a clean title and there are no caveats or encumbrances a Purchase Agreement can be prepared.
You will probably find that the biggest expenses over and above the purchase price are the duties and transfer taxes (as a percentage of the total purchase price). Ask your legal representative to calculate the various government fees and duties to be paid, such as stamp duty, income tax, business tax, land office fee and etc.
The sale/transfer of property in Thailand will be subject to the following fees:
- Stamp Duty: of 0.5% of the property price is payable to the Ministry of Finance.
- Special Business Tax: equivalent to 0.11% of the property price is payable to the Ministry of Finance, if the property has been held by the seller for less than five (5) years.
- Income Tax: can range from 1% to 3% of the property price (this is the Thai equivalent of a Capital Gains Tax).
- Transfer Fees: of 0.01% of the sale price (or Land Department assessed value) payable to the Ministry of Finance.
Once you agree to purchase the property through private treaty, a Purchase Agreement will be prepared by the vendor's representative. This Purchase Agreement should detail the following:
- Title Deed details
- Property address
- names of the parties to the contract (you and the vendor)
- Selling Price
- Terms and conditions
- Payment of costs and fees
- Goods and Chattels to be included (excluded)
- Settlement date (when you can take possession of the property).
Paying a holding deposit
Payment of a holding deposit occurs once the vendor accepts your offer/bid in writing, normally upon execution of the Purchase Agreement.
The holding deposit can be any agreed amount, but is normally 10% of the total purchase price. This deposit is refundable in full if the sale does not proceed through no fault of your own. In this context, it is often wiser to pay the deposit to the Real Estate Agent to hold in trust, rather than direct to the vendor. The balance, i.e. the difference between the agreed price and the deposit, should be paid upon settlement, when you officially take possession of the property.
Start the transfer process
It is often wise to employ a legal representative to perform the transfer of property ownership from one party to another, although in Thailand, a good Real Estate Agent should be able to attend to this process for you.
Your legal representative is responsible for checking the details of the Purchase Agreement, ensuring that it has a clean title and that it doesn't contain anything detrimental to the purchase or intended use of the property, e.g. caveats, encumbrances or title restrictions.
Once your legal representative is satisfied with the contract, you will be ready to close the deal!
Closing the Deal
The buying process doesn't end once you have negotiated an acceptable price. There are still a number of steps to be taken before you can even think of moving in. You will need to:
- Exchange Contracts
- Finalise your financing
- Settlement
- Organise Insurance
In a private treaty sale, the transfer process begins with your legal representative examining the Purchase Agreement prepared by the vendor's representative. This Purchase Agreement should detail the following:
- Title Deed details;
- Property address;
- Names of the parties to the contract (you and the vendor);
- Selling Price;
- Chattels (movable possessions which may be included in the sale);
- Terms and conditions (e.g. conditional on financing, sale of an existing property, satisfactory property inspection or repair work on the property you want the vendor to complete prior to settlement);
- Settlement date (the day on which you agree to pay the full purchase price and take possession of the property).
Make sure the Purchase Agreement details all fittings and inclusions to the property that you believe should be incorporated into the purchase. Such items are collectively known as chattels, examples of which include the cooker and rangehood, curtains, light fittings, and etc.
The Purchase Agreement is signed once all the inspections are satisfactorily completed and the finance has arrived into your Thai bank account. Each party signs their own copy of the Purchase Agreement, which has been prepared in duplicate. The vendor keeps the copy you have signed and you retain the copy the vendor has signed. This process is referred to as the 'exchange of contracts'.
Once all the parties have signed the Purchase Agreement, it cannot be altered or changed. However, there may be unforeseen changes of circumstance which affect either party to the contract, between signing and settlement, that may require a change to be made to the Purchase Agreement. Provided all parties agree, there is no reason why changes cannot then be made.
Finalise your financing
If you are buying a condominium, you will need to show that the funds have been sent into Thailand in foreign currency from overseas. The local receiving bank should be asked to provide the buyer with a Tor Tor 3 Certificate of remittance, stating that the funds arrived in Thailand for the purpose of buying a condominium. These certificates need to cover the full buying price of the condominium and need to be presented at the Land Department when the transfer is made. The certificates do not need to specify a particular property. The funds sent into Thailand must be in a foreign currency and be converted into Thai Baht on arrival - DO NOT send Thai Baht from overseas, as it will not be accepted for the purchase of a condominium.
Remember to remit the monies into your Thai bank account in foreign currency, and ensure you alert your bank to provide you with a Tor Tor 3 for the remittance.
Settlement
The settlement date is the day on which you finalise payment and assume possession of the property. In legal terms, settlement is the completion of the property transaction.
Your legal representative should arrange the settlement date, time and location and inform you of the details and requirements.
On settlement day, the balance of the purchase price is paid and the title deeds (legal documents stating property ownership) are taken to the Land Department for registration of the transfer, and the keys to the property will be handed over.
You will also need any Tor Tor 3's (if you are buying a condominium), your passport and a photocopy of your passport, and details of your parents names, dates of birth and place of birth. You will also need a copy of your name and your parents details translated into Thai language for the Land Department.
You are entitled to vacant possession at the time of settlement. You are also entitled to a final inspection just prior to settlement - if the property is not as expected, i.e. the property has been unfavorably altered in some way since you exchanged contracts, talk to your Thai lawyer. Your lawyer may choose to inform the vendor that you will not settle until the property is returned to the state it was in at the time the offer was made.
Organise Insurance
Immediately following settlement, ensure that you take out a cover note insuring both the property and any movable possessions included in the sale. It may well be worth taking out this cover note even earlier, i.e. as soon as you sign the Purchase Agreement. This will ensure that the property is fully covered, just in case the vendor's insurance is inadequate or unpaid.
Most insurance policies will provide for either 'replacement' or 'market value'. A replacement policy will give you 'new for old', whilst an indemnity insurance will give you 'old for old'.
(Text by Thaiproperty.com)
