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Given that you might likely be spending a portion of your life savings to acquire a property in a foreign country, you should carefully plan and fully understand the process before engaging an agent, seller and/or a developer.

You need clarity on the process and legal ownership structures available to foreigners before acquiring property in Thailand and, definitely prior to signing a Reservation Agreement [with an agent] or a Sale & Purchase Agreement [with the seller or a developer].

You need clarity on what you can and cannot do in Thailand, as well as how an ownership structure for your chosen property type, provides both a) legal protection for you and b) within the eyes of the law in Thailand!

Once you understand property purchase process and ownership structures, as a potential buyer, you may now engage local expertise to locate a preferred property type, style, budget and location.

A good agent should be able to communicate with the locals [Foreign and Thai] and, be familiar with the area in which the buyer would like to purchase the property. An agent that listens to the buyer’s needs and wants could save valuable time in selecting and showing only those properties that are appropriate for the buyer’s specified requirements.

Purchasing directly from the seller does not always save money as compared to purchasing via an agent. Any quality property for sale in Thailand is offered at a fixed price by the seller and/or developer anyway so, the benefit of engaging a good agent is that they may be an excellent conduit, as both liaison and mediator [as required], between the buyer, the seller, the lawyers and/or the developer.

An agent should obtain the best possible price for the buyer, particularly given that around five (5) percent [typically] of the purchase price will be paid to the agent [as commission] from the seller, to represent the buyer’s best interests for the duration of the sale/purchase process.

As touched on above, agents in Koh Samui tend to receive higher than average commissions than most other western countries so, ensure the buyer gets the value they deserve from them both; a) upon engagement and b) throughout the entire pre-purchase process.

Once the buyer has selected an agent and the desired property then, in Koh Samui and the surrounding islands anyway, it would be normal practice, to now execute and sign a Reservation Agreement with the agent.

This simple [one-three page] agreement states that the seller agrees to remove the property from the market for thirty (30) days in exchange for a small holding deposit, the Reservation Fee, usually 100,000 – 200,000 baht, whilst the buyer’s lawyer conducts Due Diligence on the buyer’s behalf. Preferably, the Reservation Fee shall be deposited in their lawyer’s client/escrow account and be fully refundable upon a) an unsuccessful Due Diligence, for any reason whatsoever, b) review of the contractual agreement and/or c) a physical inspection of the property.

Once the buyer has signed the Reservation Agreement and paid the Reservation Fee, for the property the buyer desires to purchase, it’s highly recommended that the buyer now engage a lawyer to conduct Due Diligence on this property. All to often, in ‘the land of smiles’, people believe what others in a restaurant, bar, beach, the agent, the seller and/or the developer say about the property, and bypass this part of the process when, it could be the single most important step in the property purchase process in any country, let alone Koh Samui, Thailand.

What is Due Diligence? Put simply… It’s a comprehensive examination [health check] on the property which, may include some, or all, of the following:

• • ​title legitimacy [whether the title deed itself is actually legal] and,
  • title ownership and type [whether the seller/owner is in fact the legal owner of the property] and,
  • building permit [confirm the building regulations in relation to the building permit issued and any building(s)] and,
  • zoning regulations [zoning requirements, zone color code, zone number, size restrictions, elevation and slope] and,
  • company health checks [if the property is the asset of a Thai company and the company forms part of the property purchase] and,
  • land chronology [the history of the land and how it became the current title type and size] and,
  • house book [the ‘blue book’ or ‘tabien baan’ issued for any/all building(s) constructed in accordance with the building permit(s)] and,
  • private road registration [ensure there is registered legal access to the property] and,
  • liens/encumbrances [confirm there’s no outstanding loans against the property or the company, if included] and,
  • outstanding taxes [check with the revenue department to see if any taxes are outstanding] and,

​A thorough investigation usually takes between 1.5-3 weeks to complete and most of it will be conducted using resources and documents available from the land and building departments in Koh Samui. The buyer’s lawyer needs to verify that the seller, the property [and the company, if applicable], meet all of the above legal requirements prior to engaging in any formal contractual arrangement.

Once the buyer, and the buyer’s lawyer, are satisfied that the property is good health, either the buyer’s lawyer or the seller’s lawyer will draw up a ‘Sale & Purchase Agreement’ for both parties review. Providing the contract meets with both parties expectations then, both parties can sign the Sale & Purchase Agreement [the contract].

Upon both parties signing the contract, there’s usually an obligation [specified within the contract of course], for the buyer to pay a deposit between 10-30% of the total purchase price to the seller then, the balance remaining [minus the Reservation Fee and/or Deposit] upon transfer of the property from the seller to the buyer.

In the event that the seller, or developer, is constructing a building for the buyer as part of the contract then, it would usually include Progress Payments, preferably paid in arrears, upon each/every [contract specified] stage of construction.

The buyer maintains the right, within a specified time-frame, to inspect the building progress prior to making such payment(s). It would be beneficial for the buyer to have funds already parked in the their lawyer’s client/escrow account awaiting such stage payments as overseas transfer delays could cause penalty clauses to be activated.

The main benefits of using Samui Law Firm’s client/escrow account are:

1. 1. repatriation of funds [in the event that you on-sell the property] and,
   2. higher exchange rates [better than banks can offer] and,
   3. complete transparency [balance and/or statement available immediately upon request].

More information on exchange and escrow on the Exchange & Escrow page of our website.

In the event that the buyer is purchasing an existing property then, there may not be any Progress Payments required and upon signing the Sale & Purchase Agreement, and the buyer instead facilitates funds transfer to the lawyer’s client/escrow account, whilst coordinating an appropriate time-frame with the seller’s lawyer to execute Freehold Transfer upon payment in full [one lump sum].

In the Sale & Purchase Agreement for a new Condominium or Land and House in an official government licensed housing development, the law stipulates that the developer may ONLY pass on up to half [1.0% of 2.0%] of the Transfer Fee to the buyer, all other tax and fees are by law the responsibility of the developer. In other situations [private sale, or private apartment or housing development] the parties are free to divide the Transfer Fees & Taxes and it could vary from buyer pays all to seller pays all depending on the agreement between the parties. The following conveyancing taxes and transfer fees are involved with transfer of real estate in Thailand:

• • Transfer Fee = 2.0%
  • Specific Business Tax = 3.3% [if applicable: seller is a company or a condo owned for less than 5 years]
  • Stamp Duty = 0.5% [should not apply when Specific Business Tax is applicable]
  • Withholding [Income] Tax = 1.0% [calculated at a progressive rate for individuals and is fixed at 1.0% for corporations].

The above tax rates apply on the Freehold Transfer of ownership of land, land and house, condominium or the transfer of a house separate from the land. The above fees and taxes are charged at the time of transfer of the property.