Putting the Deposit Down Too Early



Owning Property in Thailand Contact UsAccording to Thai law foreigners can purchase property only if 51% of the apartment complex is owned by Thai people at the time of purchase. Nothing will change in the future if less than 51% of Thais own apartments in the complex at a future date. By law foreigners are not allowed to buy land and houses at ground-level. There are two ways around this, one is acquiring a 30 year leasehold on the property or purchasing a property through a limited company where you would be the legal owner.Before you make any purchase it is very important to know your legal standing. You should get legal advice before paying any deposit, signing a lease or any contractual agreements. It is your money that is at stake and you need to be clear on your rights. Using a property agent can save valuable time in acquiring the right property. Opting to buy directly from a developer can have its risks. We have come across cases a deposit has been paid to a developer for a new property being built only for the developer to pull out of the construction. The purchaser is then left high and dry trying to pursue the deposit from the developer, oftentimes with no success. We have a 100% success rate in ensuring that our clients receive all of their money back from the developer. Thai developers make millions of Baht every year from non-refundable deposits. Usually a nominal amount of between 10 percent and 15 percent of the purchase price is required. We are always told that when we invest in property, we should always invest in an area that we are familiar with. This is because property markets are affected by so many variables. It is important to know the market and manage the potential risk which may be involved in any transactions.Investing in Thailand is no different. You will need a local expert who is experienced in real estate transactions in the local area that you intend to make your purchase. The agent knows how to communicate in Thai and they're familiar with the location and the general geographical area. They can show you many quality properties in their inventory based on your needs and desires. Typically, a good agent will weed out the poor quality units. They want satisfied clients and they will avoid problematic developments. Think about it: you may not really know the community and it would be wise to find someone who has in-depth knowledge and experience with the property market. The most telling benefit of a using an estate agent is that they will act as a conduit between you and the seller. They will obtain a fair price for you and act on your behalf to respect your best interest throughout the entire process. Several international estate agent firms have recently established themselves in Thailand. This provides you access to the same international standard of business practice as in your home country.Putting the Deposit Down Too EarlySellers and agents obviously want to sell properties. When you have found the ideal property and you are satisfied that it will meet your expectations, the usual process in a transaction is to put down a reservation fee or an earnest deposit. In return, the seller or agent will reserve the property for you and begin the process of drafting the contracts for the acquisition. This is normally a nominal amount of 10-15% of the purchase price. This will in most cases be deducted from the original purchase price, if the contract is fully performed by both parties. However, in the event that you are not going to go through with the purchase, it is the Seller's right to retain the initial reservation deposit. If in case, it is through Sellers default, this amount is usually refundable. Be sure to retain a receipt and terms of agreement in respect of the reservation deposit.This is not always the case as sellers and agents sometimes keep this fee for the opportunity cost involved while the property was reserved. Unless you specifically draft an "exit" clause in the deposit agreement, for example "subject to a clear title" or "subject to agreement on contract terms," the money deposited is non-refundable. Exit clauses can be items of fundamental importance such as 'subject to clear title' or 'subject to a new title deed being issued' and so on.Buying In a Mismanaged ProjectSeveral areas in Thailand have recently seen a surge in new property developers arriving on the scene to build homes. These developers do vary in size and experience. There are many new developers who see the potential in property development as a lucrative business in Hua Hin and decided to venture in this industry. They may not have the necessary experience to manage the project so you would often see delays and other fundamental problems. However, these developers do tend to offer much better prices and are more flexible in their approach to cater to your needs.The larger developers, on the other hand, are more established and many of them are publicly listed companies. They have the resources, experience and expertise in completing construction projects on time. They generally will not negotiate on the price of the property and some do not offer any advice on variations that you would like to make to the designed plan. They are, therefore, less flexible but the commercial risks are much less. The key factor is to find a developer in which you feel comfortable with. It is recommended to check their previous projects for the quality of their work and ask questions from people who have purchased from them before. You will know them by the fruits of their labour. Sample condo contract payment FOR A RESALE OR OFF-PLAN CONDO IN THAILANDIn case of the sale of an existing condo unit/ apartment in Thailand (as opposed to off-plan) the purchase price for the unit could be paid by cashier's check to the seller at the time of transfer of ownership of the condominium at the land office (standard practice). The buyer pays when his name is registered as the new owner of the unit. In this case the foreign buyer of the condo must obtain a cashier's check?AND?the foreign exchange documents (FET form) from?his bank in?Thailand. The foreign exchange transaction form is?required for registration of foreign ownership under Thai?condominium laws.The conditions under which a seller will complete a sale of a condominium usually stipulates that a deposit as part of the total purchase price is paid directly to the seller at the time of signing the sale and purchase agreement for the unit. As deposit payments are usually unsecured payments it is recommended to keep this to a relatively small amount, say in the current market up to 1% of the total purchase price. The seller could ask a higher deposit (up to 5%) when the period between the signing of the sale and purchase agreement and transfer of ownership is more than 3 weeks. The buyer could demand a smaller deposit when there is a shorter period between the signing of the contract and transfer of ownership of the unit.Sample clause in the sale and purchase agreement:On the execution of this agreement, the buyer agrees to pay a holding deposit of __ numbers _____ (__writing___) Thai baht (the ‘deposit’) to the seller to secure the purchase of the condominium unit.The remaining balance of the purchase price in the sum of __numbers_____ (__writing___ ) Thai baht will be paid by the buyer to the seller by a cashier cheque on the settlement day at the Land Department at the time of registration of the transfer of ownership.In some cases the purchase price is paid into the condo seller's bank account prior to transfer of ownership procedure (not recommended). In this case the seller is responsible for obtaining the foreign exchange documents for the buyer. The clause in the sale contract would be something like:Sample condo payment terms (II)(with payment instructions for transferring money into Thailand for the purchase of the condo unit)The buyer shall pay the purchase price to the seller by 2 instalment payments as follows:Upon the execution date hereof, the buyer shall pay a deposit as part of the purchase price in the sum of baht___.- (__ thousand baht) to the seller.The balance of the purchase price of baht__.- (__ million __ hundred __ thousand baht) shall be paid by the buyer to the seller within 30 (thirty) days following the execution date of this agreement.The buyer shall make payments to the seller by remitting funds from abroad into the seller’s designated bank account in Thailand, with details as follows:Account Name:Account No.:Bank:Branch:Address:Swift Code:Message:?“Purchase of Condominium Unit No. ____ in _____ Condominium by ________purchasers name____".The name of the remitter must be the same as the buyer as indicated herein. The buyer shall fill in full name and address of the remitter and the beneficiary. The purchase price shall be transferred as foreign currency. The buyer shall not to convert the purchase price into Thai baht before making funds transfer. The conversion into Thai Baht will be done only by the beneficiary bank in Thailand.The buyer shall be liable for any remittance fee associated with the transfer of funds. The seller or its representative shall issue a receipt for each and every payment made under this agreement by the buyer.In the event payment of the purchase price has been made by the inward remittance of foreign currency into the seller’s designated bank account as above-mentioned, then it is agreed that the seller shall be responsible for obtaining evidence representing such inward remittance issued by the bank and provide the same to the buyer immediately upon request. The parties agree that as long as no payment of the purchase price has been made in full as required herein, the ownership and various rights over the condo unit shall continue belong to the seller, regardless as to whether or not the buyer has access to and resides in the purchased condo unit.Purchase terms for an-off plan condo unitForeigners buying an off-plan condo under the condominium law in Thailand will usually have to comply with a purchase payment schedule during the construction of the project. A common payment schedule in a condo project is a first deposit of 10 to 20% of the total purchase price on the execution date of the sale agreement (less the reservation fee, if any) and periodical monthly instalments during the construction with a final instalment of maybe half or less of the total purchase price upon completion and registration of ownership of the unit. The payment schedule for an off the plan apartment unit could be:CONTRACT PAYMENT SCHEDULEThe buyer shall pay the purchase price of the unit as follows:- On the execution date of the reservation agreement, the buyer paid a deposit to the seller in the amount of ___ baht. Such amount is deemed as part of the purchase price.- On the signing date of this agreement, the buyer agrees to pay the seller the amount of ___ baht. Such amount shall, after including the deposit under clause 1, equal to twenty percent (20%) of the purchase price.?- During the construction of the condominium, the buyer shall pay the seller another thirty percent (30%) of the purchase price, or ___ baht, in 12 equal monthly instalments, each of which shall amount to ___ baht and shall be made on the ___ day of each month. The first instalment payment shall be made on ___________.- For the remaining amount (50% of the purchase price) of ___ baht, the buyer shall pay such sum to the seller on the date of the registration of ownership transfer of the condominium unit.Payments under this payment schedule are made directly into the developer's bank-account. Any buyer who pays deposits and instalments directly to the developer in Thailand puts himself in a weak legal position and takes the risk of losing his payments. Should the developer default, become insolvent, bankrupt or simply runs with the deposits payments you lose your money. When you pay upfront as the buyer of an off/plan condo you take all the risks and in fact are financing the condominium project. It is recommended to arrange that payments are made under an?escrow arrangement, under the Thailand Escrow Business Act 2008. Only in this case upfront payments made by the buyer are secure. ................
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