Buying a property in Thailand should be a pleasurable and rewarding experience. And buying the right property is likely to give you many years of happiness in this incredible part of the world.
Sadly, sometimes people don’t buy the right property, and things do not go as planned. Quite often this is because the necessary due diligence was never carried out on the property or the developer. Alternatively, people failed to understand the laws governing property purchases in Thailand.
Amendments to The Condominium Act in 2008 put into place a number of provisions designed to help investors in the condo market.
Up until then, there was little protection for anyone who wished to purchase a condominium in Thailand. The amendments changed things for the better, but that does not mean nothing can go wrong.
What is Due-Diligence?
In the business world, especially when the purchase of a sizeable asset is involved (e.g. a property or a company), it is essential that multiple layers of screening are carried out to ensure that the buyer is making a properly informed decision, based on all available information available.
The text book definition of due diligence is as follows:
“The steps and research taken by an individual or corporation as a prospective buyer in order to satisfy the full legal requirements and to obtain a comprehensive appraisal to establish the value, liabilities and financial potential of the asset, company or property in question.”
In other words, do your homework, and don’t just rely on what you are being told by the seller.
When purchasing a property in Thailand, due diligence does not simply begin and end with a review of the financial data. It is a many-faceted process, involving a series of enquiries.
At the heart of it is a thorough scrutiny of the property, and in some cases, the seller. The goal is, insofar as it is possible, to remove your investment risk as the buyer.
Once any potential risks or liabilities have been ascertained and mitigated only then can you dispassionately assess the true value of the property as an investment.
Conducting the Necessary Due Diligence When Buying Real Estate in Phuket
Due-Diligence When Buying Property in Thailand
Impulsive buying decisions can and often do lead to disaster.
It’s one thing if the buyer is wealthy enough that the property is “just another investment”. But if you are using the capital saved over a lifetime, or the proceeds from selling a family home in another country, then it is essential that your purchase is backed by as much information as you are able to gather.
Unless you have a fleet of luxury cars (or the money to buy them) buying a home or an investment property is likely to be the most important purchasing decision you will make in your life.
With this in mind, if you have decided to buy a property in Thailand, then you want to make sure you understand the market, the laws of the country, and the potential risks and pitfalls. Do not just focus on the positive attributes and “the dream” until you are certain you know what you are getting.
In order to minimise all the uncertainties when purchasing real estate in Thailand, you must seek out the best independent legal advice.
A good lawyer will carry out all levels of due diligence on your behalf, so that you can make informed, practical and insightful decisions.
The Importance of Sound Legal Advice When Buying Property in Phuket
See Through the Marketing Material
It is sometimes difficult for buyers to grasp anything beyond the marketing literature. And even though marketing material touting properties is available in many different languages, it is not always a true reflection (or translation) of the deal being offered.
In many countries, firms worry about reputational risk, or “losing face” as the result of bad publicity. This could stem from a poor customer service record, complaints brought against them, or even regulatory damages they have been forced to pay.
Loss of reputation can lead to lost revenue and profit, which for listed companies could mean a decline in shareholder value.
Unfortunately, many real estate companies in Thailand do not worry much about reputational risk, especially those selling mainly to foreigners.
Why Developer Reputability is Important When Buying Real Estate in Phuket
One of the positive changes to the Condominium Act in 2008 was to bind the information in the marketing literature to the sale and purchase agreement for the property.
This may protect you down the road if anything goes wrong with your investment, but you can save a lot potential aggravation by seeing through the marketing materials on day one, and doing your own homework.
Why Due-Diligence Is So Important?
Many people buying property are enamoured by glossy brochures, dazzling development models, a professional appearance, and a smooth tongue (and, yes, sometimes even the physical appearance of the staff).
A glitzy presentation, fancy showroom and special treatment help a buyer begin to take ownership in their mind. Even a well-crafted brochure can have that effect on some people. Marketing material has no other function than to create a desire for the product. And for the most part, it works.
By confirming or verifying the accuracy of the information provided, the methodical and unemotional process of due diligence acts as reality check to ensure that emotion is not taking over your decision-making process.
Due diligence isn’t just important, it is essential.
It helps to quantify the risks associated with purchasing a property in an effort to ensure that the buyer is not vulnerable to any inaccuracies or misleading claims.
Without due diligence, buyers are relying solely on the emotions they elicit from the seller’s marketing and sales prowess.
Buyers of Phuket condominiums need to ensure that any property they purchase is of an acceptable quality, that they are protected legally in every way, and that what they are buying is a safe and secure investment.
In a nutshell, investors should not simply jump head first into a purchase without first carrying out the necessary due diligence.
Read more of our articles on the Phuket real estate market:
Owning Property, including Phuket Villas, through a Thai Company Limited. Is it Legal?
Is Thailand Alone? How Many Countries in the World Prohibit Foreign Ownership of Land?
The Different Types of Property in Phuket
Reasons to Invest in Phuket Property for New and Experienced Investors
Buying Freehold Villas or Houses in the Name of a Thai Spouse
Condominiums Explained – What is a Condominium?
The Benefits and Advantages of Owning a Freehold Condominium in Thailand
Illegal Home Ownership in Thailand – An Inconvenient Truth
Owning a Freehold Condominium through an Offshore Company
Using a Thai Company Limited to Purchase a Leasehold Condo Unit
What is a Condominium Sinking Fund?