I recently received an e-mail enquiry through our website with a seemingly simply question:
"Do you have any advice on how to get a fair price when buying land?"
This gave me pause for thought as I realised that whilst we cover "land and ownership" on our website the topic of the actual buying process has not been addressed and yet it can be fraught with potential problems.
I responded to the question by outlining a number of things to consider and things to look out for when looking for land and negotiating a price. They found my reply useful, so I thought I would share the same points here, for the benefit of others thinking of buying land in Thailand.
There are reputable real estate agents in Thailand that operate as legitimate companies with registered offices. However a large proportion of land, particularly in rural areas, is sold by word of mouth through third party individual 'agents'. It is usual for the agents to get a 3% commission from the sale, paid by the seller. It there is a chain of multiple agents involved, then this 3% would be split between them. In principal the system works, but it can be frustrating trying to find land in an area you are unfamiliar with as there is no central re-estate agent(s) you can go to. It can also be a concern that they are not controlled by any official body such as the “National Association of Estate Agents” as in the UK, so there is greater possibility of malpractice. Assuming you have found a plot, it can be hard to evaluate what a real fair price to pay would be. It obviously helps to have a bit of local knowledge, but it also helps to get a bit of background on the seller and agent's circumstances. Things to be aware of that I have experienced are the following:
The agent may tell you that the price is higher than it really is. Obviously, if they can get you to pay more, then their commission will higher. If possible, try to speak with the owner directly. Even if you do this, the agent will still get their percentage as they introduced you to the owner, however the price will be an agreement between you and the owner and not a third party.
Ridiculously over priced land can also be common. In some cases, owners have land as a long term investment. They may be in no particular hurry to sell, however will advertise their land for sale at an extremely high price, with the thinking that if someone was willing to pay it, they’d be foolish not to take it. However they will not be open to negotiation to a more reasonable price on the land. In this case there usually is nothing that can be done, except keep looking.
It is sad, but a lot of land sales come about as a result of the owners being forced to sell due to financial difficulty. In some cases, this can mean a good deal for the buyer as the property is priced for a quick sale. However, in other cases, the seller simply sets the price of the land as equal to the debt they are trying to pay off, even if this is more than the true market value. Illogical, but I have seen this on a number of occasions, so even if it seems that some one is desperate to sell, this does not necessarily mean that the price is a good one, as you may expect!
The foreigner tax, as some people call it, where people will give a different price to a foreigner than a Thai person, believing that either they won’t know the true price, or that they don’t care and can afford to pay a higher price, is occasionally an issue. With this and the previous case, it is just a question of knowing what the land is really worth and what you are prepared to pay. If they want to sell and you are making a reasonable offer, then in the end (unless of course you are out bid) they may come back. Do a bit of research to know the right price in your area and stick to it. If you fall in love with a particular location then you may be prepared to pay a little more, but that is up to your discretion.
Also when doing your local research, be sure to find out what the land is like at various times of the year. We had one client who bought a plot of land next to a small stream, during the dry season… 6 months later, during the rainy season it was under 1m of water. In the end he had to fill up his land two metres to protect against flooding during the rainy season, which added considerable cost to his initial plans.
Somewhat related is the question of has the land already been filled up? If so this may have saved you a lot of money and needs to be factored into any comparison with other options. The cost of filling land varies from area to area, but as a guide a truck with 5 cubic metres of soil could cost about 500Baht so then 1 cu.m is 100 Baht. If you want to fill one Rai (1,600 sq.m) of land up by 1 metre, then that may cost 160,000.
Is there a mains electricity supply next to the property or within a couple of hundred metres? If not it can be very costly to install. We had a client who had brought a plot of land in a beautiful rural location amongst rice paddies. He had no neighbours, which is what he was looking for. However, he was also over 2km from an electricity supply. The electricity company wanted close to 1million baht to install the supply to his land… This would have eaten up a large portion of his project budget. He didnt want to rely on solar power or generators, so in the end he had to sell his land and look for somewhere else.
Similarly with water supply. Many people manage without mains water and drill a well instead, which is certainly an option. However, be sure that the area is suitable for a well. In some instances it can be either very difficult to find water and in other cases the water may be salty. Certainly not suitable for drinking but also can be corrosive to bathroom & kitchen fittings.
The previous four points relating to location and utilities should certainly be thoroughly investigated for every plot of land. The points relating to potential issue with sellers and agents are just things to be aware of, in case you feel that something does not feel right about the asking price. I would say that with the majority of land sales through third party agents, everone involved behaves in a fair and ethical manner and the outcome is a happy seller, a happy agent and a buyer with a beautiful plot of land on which to build their dream home.
Everyone has different requirements when looking for land and there are many things to consider. I hope that this post has given some useful advice to help on your search for land. If you have any other experiences that you feel would be worth sharing, feel free to contact us and I will add them to this post.
