5 Mistakes to Avoid When Purchasing a Property in Thailand
Buying property in Thailand (or anywhere for that matter) can be a minefield, especially for first time buyers. Most of us learn from our mistakes, but as these mistakes can be costly, it’s better to avoid making them in the first place.
In this article we have laid out the top 5 mistakes buyers make when purchasing property, to help you avoid any nasty pitfalls.
1. No Title Search
A due diligence on the title search can spare you a lot of headache.
So, what is a title search?
A title search is a comprehensive examination of the history of the property, which traces the land back to its first owner and is recorded at the land department.
What will the title search tell me?
● If the seller has clear and legal title to the land.
● If there are any mortgages, leases, creditor right of ownership (lien), or other charges against the property.
● Area zoning, environmental and planning codes.
Why is this important?
Clear and Legal Title – You most likely wouldn’t buy a bike or car without the necessary ownership paperwork, so why do it with a much bigger investment like a property?
Before putting down any kind of deposit or signing an agreement, verify that the seller has clear and legal title of the land. Take heed from the work of notorious early 20th century con man Victor Lustig, infamously known as ‘the man who sold the Eiffel Tower twice.’ You may well laugh and say that wouldn’t happen to me, but that is exactly what you’re opening yourself up to if you don’t do a title search.
Mortgages, Liens, Encumbrances – a purchaser’s right to use the land can be affected by these. It is important to note that a valid contract to lease property or land not gets terminated by transfer of ownership.
Zoning, Environmental and Planning Codes – When purchasing land it is extremely important to verify the areas zoning, environmental and planning codes, especially in beachfront areas which often have height restrictions.
Worst case scenario, you might find yourself owning a plot of land with little use for property, and even just having to compromise on your dream home design due to restrictions could be devastating and costly.
2. Buying Without a Lawyer
Although it certainly is possible to purchase property in Thailand without the assistance of a lawyer, we advise against it and always recommend our clients to get a lawyer.
Why do I need a lawyer?
- You are doing a business deal in a foreign country with a different language, legal system, and culture.
- Thai contracts can be quite different from Western contracts.
- The lawyer will guide you through the process and ensure you understand it fully.
- To safeguard your investment.
- Whatever knowledge and experience you think you have, a legal expert has more.
- A competent person to hold your hand through the legal process means less anxiety and sleepless nights.
Things to consider when hiring a lawyer
- You need a Thai lawyer, as lawyers from your country of origin will most likely not know the Thai legal system.
- Go with a reputable company and do your due diligence.
- Legal websites are not a replacement for a lawyer.
3. Buying Without a Real Estate Agent
What are the benefits of using a real estate agent?
- Your agent will liaise with the seller, be it a developer or a private seller, to get you a fair price and look out for your best interests throughout.
- They can communicate in the local language.
- The agent has in-depth knowledge of the geographical area and property market, as well as having experience of real estate transactions in the local area.
- The agent can sift through properties to find ones that best match your requirements, and will know the developments to avoid.
- It is in the interest of the agent’s reputation to have satisfied clients, so a good estate agent will put in the work.
As always, do your due diligence and choose a reputable agent with good recommendations such as us at Phuket Condo. Contact us and find out more about how we can help you with your property purchase.
4. Buying In a Mismanaged Project
There has been a huge rise in the number of property developers in certain areas of Thailand recently, which has added to the diverse nature of development companies available.
What can lead to mismanagement of a property?
- Lack of knowledge, expertise, and awareness of the local market.
- Taking on developments beyond the companies capabilities, for example, manpower issues.
- Insufficient financial backing.
How can this affect me as the buyer?
When investing in off-plan property you are looking to be able to move in as soon as possible or get a timely return on your investment. Mismanaged developments can lead to:
- Delays in completion or even non-completion.
- Issues which affect the design and the overall aesthetics of the final development.
- Use of inadequate building materials.
- Issues which arise after completion, such as design faults or broken fixtures and fittings.
Which developer should I choose?
You need to carry out due diligence on any developer you are interested to purchase from by looking at their previous projects and financial standing. If information is hard to find, ask your agent who will share their inside knowledge.
Pros and cons of choosing a larger more established development company
- Most established development companies are publicly listed which means that they can turn to investors for capital. Their transactions are more transparent and simply have more credibility in general.
- You know they have the knowledge, means and experience to ensure timely completion of developments.
- Less commercial risks.
- Their prices tend to be fixed and nonnegotiable.
- There is generally less flexibility when it comes to design, layout and customizations.
Pros and cons of choosing a new, smaller development company?
- More appealing prices.
- More flexibility in catering to individual needs.
- A riskier endeavor.
As we said at the beginning of this segment, the choice is ultimately yours and only what you feel comfortable with which matters. Keep in mind though, this is an area where the expertise of an estate agent can come in handy, as they will probably have knowledge of developers active in their area.
5. Making A Decision On The Basis Of Price
Everyone wants to know we’re getting a good deal, but when assessing price there are several variables to take into consideration.
What can I do to assess whether I am getting value for money?
- Research properties in the surrounding area. That will give you a good perspective on the current market situation. For most foreign countries, you can look at tax receipts for a certain area, but as Thailand is still developing in this capacity you will still see big inconsistencies between government measured value and the prices truly paid for property.
- Do a title search.
- Secure the services a reputable lawyer.
- Obtain the services of an estate agent with a good track record.
- Choose the right developer by completing due diligence.
- Research market value.
Get In Touch
You should now be well prepared for your property investment in Thailand, but do not hesitate to let us know if we can be of any assistance. If you find the process of browsing for property online to be tedious and a waste of your time? Fill out our Property Finder Service form with your requirements such as budget, preferred location, etc. and we would be happy to compile a shortlist of properties.