Procedures in Purchase Contract Closing
Dennis Bourgoyne, a recent arrival to Phuket asked "I am
getting to the point of committing to the purchase of a house that I
have seen in Phuket. Can you outline the steps that I need to go through
to make a purchase?"
That's a wide question so my response will have to be concise.
First of course you will need to find a property that you like and at a price that you are comfortable with - assuming that you have reached that stage, your next step will be to do some due diligence work on the property. If you are working through a reputable real estate agent , he can do this for you (if he has not already vetted his listings), if not it would be best to speak to a lawyer. Essentially you need to check if the property you have seen is the one described in the title deed that represents it, you need to verify that the boundaries conform with those on the title, that no one disputes the boundaries, that the vendor is indeed the owner of the property and that there are no encumbrances registered against the property that would prevent you taking unencumbered transfer of ownership (or obtaining an unencumbered registered lease).
Once all that has checked out, you need to move towards a contract. If you are buying a new home from a developer they will almost certainly have a standard contract format (the format of these varies widely depending on the type and progress of the development and as a general rule, you should always have an attorney or an experienced independent realtor read through it and give you an opinion) - but I assume in this case that you are purchasing a completed property that already exists from a private vendor. Here the standard approach would be to draw up a reservation or purchase option contract - this is a contract which binds you and the vendor to a sale of the house at a specific price in accordance to a specific schedule, and will typically set up penalties for default of either party if he defaults under the agreement.
A deposit of 10% is usually required to secure a property and closing payments will typically be expected within 30 to 60 days. Longer closing terms are sometimes agreed but usually against the payment of a greater deposit. Deposits are typically non refundable, save in the event of default by the vendor, so bear in mind that once the deposit is placed you are committed. There is typically an equal and corresponding commitment from the vendor, where he will commit to refund of your deposit and a payment of a penalty of an equal amount if he defaults on the contract. Deposit in escrow is still rare in Thailand, but it is becoming an increasingly recognized way of proceeding. It generally trades off greater security for the buyer's deposit versus a weakened claim for damages in the event of vendor default.
Beyond the price, payment and closing schedules, it's important that a contract includes clauses to cover who will pay the legal fees, transfer fees and taxes (there is a often business tax and always an income tax assessment made at the point of sale) as well as an understanding of the value at which the sale will be declared - this is typically (for tax reasons) at or close to the government minimum assessed value. You need to sit down with the vendor or someone who knows how to do the calculation of these various fees and taxes and then , generally as part of the overall price negotiation, come up with an appropriate formula for sharing these costs. There is no fixed rule, it can vary from buyer pays all to seller pays all, but it's most important that you have resolved this in advance of the transfer date. The last place you want to be working out such details is when you arrive at the Land Office.