The Process of Purchasing Property in Thailand
The Process of Purchasing Property in Thailand
So, you visited Thailand recently and you found yourself asking the question, “wouldn’t it be great to live here?” You are not alone, out of the millions who visit Thailand every year, there are many who are so captivated by its charm and dream of staying on a more permanent basis.
Some travel from colder climates and live with weather that is not ideal. But in Thailand, no one worries about the weather. It’s almost always nice and never cold. The water temperate averages 84 degrees year-round.
And then there is the food. Everything is delicious. Fresh fruits and fresh vegetables. The flavors are plentiful with regional delicacies that can only be found here. By the end of your trip, you find a whole new world of food and you begin to acquaint yourselves with real local Thai spots.
You observe that the Thai people are extremely kind, positive, and generous. Friendships begin to be formed, relationships prosper and suddenly, life gets easier and a little less lonely so far from home. You feel safe here.
The Property Market
It is estimated that 35% of foreign buyers of property in Thailand choose to live in Phuket. Many of these foreigners live in Thailand year-round. A large number of these owners are retirees and snowbirds that prefer the warmer climate to the cold and wet weather of their home country. This percentage of property owners is growing as more foreign buyers are able to work remotely or support themselves by running online businesses.
More than 50% of villa and condominium sales are concentrated on investment-oriented products with rental management programs. The average investment return on these products can be as high as 8% per annum.
The Process of Purchasing Property
For those who would like to visit Thailand more often or to settle permanently, buying a property in Phuket is a logical option and the process of purchasing property is not too complicated.
Buying a vacation home or property in Thailand just requires a little forward planning, time, and effort. There are a number of considerations to make beforehand. The very basics would include:
- The type of property
- The location of the property
- The reason for the purchase
- The budget for the property
- Exit strategy for the property
The Steps to Purchasing Property
So, you’ve decided it’s time to purchase a property in Thailand. Awesome! Buying a second home or vacation home in a foreign country is a big step and these steps can make the buying process manageable and help to guide you through the process of purchasing a property in Thailand.
Step 1: Reason to purchase: Determine the purpose of your investment. Will the property be used as your home, vacation home, rental property, or a combination of these. This should always be the starting point because the answers influence the majority of subsequent decisions related to the purchase of property, including what to buy, where to buy, and how to structure the purchase. Maybe Thailand would be an ideal place to retire or run your remote business as Phuket has excellent medical care, high-speed internet, good infrastructure, and an international airport.
Step 2: Conducting preliminary research: The first part of the preliminary research should be to narrow down your property type from step 1 taking into consideration your budget. Next, you will want to narrow down your search related to a specific area or location. High-speed internet now covers 80% of the island. But do you need to be 20 minutes from the airport or 20 minutes from the nearest hospital? Next, achieving a fundamental understanding of Thai property law and what a foreigner can own. This enables you to ask relevant questions and communicate effectively with your agent, lawyer, and the seller.
Step 3: Find the right real estate Agent: You know why and what you are looking for in a property with your list of needs, wants, and likes. Now it’s time to bring in an expert to help solidify what you already know and make sure you are not missing anything. Nothing can replace the local expertise of an experienced agent. They will sit down with you and listen to your needs. If they do not have an answer to a specific question, they have contacts with local attorneys that can provide accurate information. When all is said and done, you will feel confident knowing you made a decision that was right for you and your family.
Appoint your own Lawyer: While your agent will know your buyer’s rights and the process of purchasing property, they will still recommend a solicitor. A lawyer will conduct Due Diligence on the property and issue a report for your review. You will discuss this report together. Typically, a local law firm will break their work down into three parts: due diligence, contract and review, and transfer of title at the land office.
Step 4: Home viewings and inspections: The next step in the process of purchasing property is to compile your list of homes, you and your agent can discuss them. Then allow your agent to go to work for you. With years of experience and being part of the community and knowing more about you, your agent will show you properties that he or she believe will fit you perfectly. Then will go over the pros and cons of each. They will set appointments to view properties that are within your budget range. Staying within your budget when buying a home takes discipline, so you must approach the home inspection process with a goal in mind. Know what you're willing to spend, and refuse to look at homes listed above your budget. Lastly, you will want to narrow down the homes you viewed, shortlist and choose one.
Step 5: Make an Offer: You have found the perfect property and all your legal concerns have been answered, it’s time to make an Offer. Have your agent present the Offer to the seller and negotiate it for you. The best Offers are formal and attached with the buyer's information and promise to pay the booking fee if the Offer is accepted.
Step 6: Sign and Pay a Reservation (Booking Fee): Once you have reached an agreement with the seller, the next step in the process of purchasing property is to make a reservation agreement and pay a booking fee to hold the deal. This will also take the property off the market until due diligence can be performed and a contract drafted and approved by both lawyers.
Step 7: Due Diligence: Due diligence will be performed by the buyer's lawyer and a report will be issued for review. If there are any defects the booking fee is refundable (per the reservation agreement). If there are no defects both parties move forward to the next step. Due diligence can take anywhere from 7 to 14 days depending on the law firm.
Step 8: Sign the contract and pay deposit: This is typically done within 30 days from the reservation agreement but other terms can be negotiated in the Offer. By this time your agent and lawyer have reviewed the contract with you. Your lawyer has discussed with you any changes they feel are necessary and contacted the seller's lawyers for approval. The final contract is signed and the initial deposit is paid.
Step 9: Balance payment and transfer of ownership (keys): This step is completed at the local Phuket land office. Any final paperwork required to complete the purchase and transfer will be done at this time. If you are not currently in Thailand it is common practice to sign a power of attorney (POA) to complete the transaction. The final payment is delivered to the seller at this time and you get the keys to move into your new home or condominium. If other terms are desired they can be negotiated in the initial Offer and spelled out in the contract.
According to official statistics, more than one billion Thai baht is invested in Thailand by international buyers each and every year. Unfortunately, some of these international buyers rush forward with excitement only to get extremely frustrated with the buying process of purchasing property. Later some will find out that they made a mistake.
Many of the pitfalls can be avoided by following the steps above and working with a professional. Here are some pitfalls that can make your home purchase less than perfect. These can end up costing you tons of money, cause lots of aggravation, or both.
Not fully understanding the costs involved: The cost of living in Thailand is one reason many choose to live here but you must also consider closing costs, carrying costs, and moving costs. Make sure you fully understand the costs involved when purchasing a property in Thailand. Many times, home buyers overlook the costs that are above and beyond the purchase price. Your realtor can break down closing costs and carrying costs for you so you know the costs upfront.
Flooding: You might be viewing property when the sun is beating down – so the thought of what happens when it rains will be far from your mind. But when it rains in Thailand, it can really come down and this can produce flooding in some areas. To be sure that you are not a victim of this, ask some neighbors if the street floods or view the home during or after a big rain. In Phuket, flooding is uncommon.
Noise: When viewing homes be aware of how loud or quiet it is. Take your time and listen for possible street noise, neighbors, dogs barking, or a mosque nearby. Ask yourself, could I live here, and would what I am hearing now bother me.
Termites: If it’s an older home you need to check for termites. There are companies in Phuket that will come out and inspect your home. Most modern houses and new developments will have a termite system installed. If the home has a lot of woodwork, do not overlook this possible pitfall.
No exit strategy: Creating an exit strategy early in the buying process is essential. Your exit strategy will influence the majority of subsequent decisions related to the purchase of property, including what to buy, where to buy, and how to structure the purchase. An exit strategy is a contingency plan and should not be overlooked.
Phuket Thailand has one of the fastest-growing property markets in the world with an increasing number of high-quality projects by internationally renowned real estate developers. Infrastructure and services continue to improve at a fast pace in Phuket.
Purchasing property in Thailand can be done safely by following these steps and working with a good agent and lawyer. These experts will guide you through the process of purchasing property to ensure no steps are missed avoiding headaches and ensuring that your purchase is done according to the laws of the Kingdom.
Owning property in Thailand can be very rewarding and just takes some forward planning, time, and effort. Give us a call, send me an email, or if you are in town come by our office for a coffee or fresh juice.