Issues that may occur when using an agent

Most buyers purchasing real estate in Thailand will do so buy purchasing through the services of an agent.

The first difficulty buyers will encounter is that Thailand does not have for the time being (if there are, they aren’t enforced) a regulation that would obligate professional real estate agents to formally notify the buyer that they’re acting as the seller’s agent.

While this information will generally pop up in the conversation, the effect on the buyer is not the same as signing a form to this effect as it is practiced in many western countries.

My Agent

How many times have I met with clients who came to see me at my office with a “cute girl” they proudly introduced as “My agent”.

It’s always evident that the client sincerely believes that “My agent” will be trying to obtain the best deal possible, when all what “My Agent” really wants is to close the deal as soon as possible in order to receive her commission.

Except for the case where you paid an agent to find a property on your behalf (which to my knowledge is very rare in Thailand), always remember that, in most cases, the agent will be a seller agent, meaning he/she is not working for you and does not have your best interest at heart.

Conflict of Interest

While the buyer’s interest lies in purchasing the property with the best quality per price ratio, the agent’s interest is to sell to the most expensive property or the one promising the best commission, because that is how “My agent” will the most benefit of the transaction.

In other words, “My Agent” will have no real incentive to negotiate a sweet deal on your behalf because the first effect of the sweet deal would be to reduce “My Agent” commission.

Note that often it is not a matter of greed but simply a matter of common sens that will push the agent to get the bigger commission as possible. Indeed it is not rare to see up to 3 agents working on a transaction.

One being the agent that bring the buyer to the deal, the second the agent that bring a seller to the deal, and the third being the agent that bring together the two first agents together.

Now if you are dealing with honest agents the effect of the agent multiplicity will only be to reduce the agents individual commissions as they will have to share the standard 3 to 5% commission in three.

But if you are unfortunate enouth to deal with the bad apple then the multiplicity of agents will result in an increase of the property price each agents adding a few hundred thousands bahts to the property price.

Are Real Estate agents honest?

Most of Thai agents are honest. While they will push you to conclude the deal and will try to have you purchase the property that gave you them the biggest commission most of Thai agents will not try to cheat you.

Furthermore, it is quite easy to check if your agent is honest or not. Check for properties on the net. Identify one particular property which price is given online. Give the property specifics to the agent and wait for him/her to come back with a price. If the price given to you by the agent is not the same than mentioned on the web then you know you are dealing with a rotten agent. Just look for someone else

Does the agent lose his/her commission if you cancel the purchase after having paid a deposit?

One thing buyers don’t always realize is the agent’s right to a commission as soon as the buyer has paid the deposit (deposit is different from the reservation fee you will first paid).

Buyers who change their minds and don’t go through with the transaction after having paid deposits will, in most cases, lose their entire deposit.

What is often a complete loss for the buyer is no loss for the agent, because most agents will still collect a commission on the forfeited deposit (usually 30% of the forfeited deposit).

If you’ve lost your deposit after a change of mind, there’s no need to profusely apologize to your agent, because the chances are in favor of the agent still making money out of the transaction.

Furthermore, in most cases where buyers change their minds, it’s because they were pressured by the agent to close the deal too quickly and didn’t have proper time to decide whether they really wanted to purchase the property or not.

What should you never tell an agent?

Never tell your agent real estate seems cheaper in Thailand than at home. Those kinds of small remarks will kill any chances of a bargain.

Should you give a maximum price to the agent?

It depends upon the situation. Yes, doing so will save you from wasting time looking for properties that are too expensive, but it will also motivate the agent to search for property at the top of the price range without looking for those at the bottom of your price range.

Agents generally like to close deals quickly, so they might sometimes say you don’t really need to hire a lawyer to check the documents which counsel I would advise you not to follow. But for certain type of transactions a buyer should always have legal assistance when purchasing a property in Thailand.

Agents generally like to close deals quickly, so they might sometimes say you don’t really need to hire a lawyer to check the documents which counsel I would advise you not to follow. But for certain type of transactions a buyer should always have legal assistance when purchasing a property in Thailand.

To be continued: May you trust your real estate agent – Part 2

Note: This post is an excerpt of Rene Philippe Dubout first book: “How to Purchase Real Estate Offshore Safely: The Case of Thailand” published in february 2009

The original post was first published by Rene-Philippe Dubout on the 25/06/2009 and was first posted on his former blog www.howtopurchaserealestateoffshore.com. The version posted this day is a modified version

About the Author:

The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.

http//:www.renephilippe.com

© Copyrights 2009 – Rene Philippe Dubout – This article may be reprinted if information about the author, the websites, and the URLs remain intact.

Originally posted 2009-07-26 03:27:37.