House Buying Information
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 Sale
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 judgement. 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).
You will generally be required to pay a holding deposit to the seller on the date of executing the Purchase Agreement. This agreement is effectively an offer by you to the vendor to buy the property at the agreed price and under the terms detailed, and an acceptance by the vendor to sell the property at the same agreed price and terms detailed.
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!