How to buy a piece of land that is presently mortgaged?

[JayBird]

Note: No foreigners will be present, involved, or having anything to do with this transaction.  100% Thai Only.

 

My friend found a piece of land she likes, but is concerned about how to buy it given that the owner says it is in the bank (mortgaged).  My understanding is that there is *no* safe way to buy it.

 

Came up with a couple of scenarios:

Scenario 1:

1. She gives the owner the money
2. Owner gives the money to the bank
3. Owner runs away.

 

Scenario 2:

1. She gives the owner the money
2. The owner signs a contract to give the land
3. Owner gives the money to the bank
4. Owner runs away
5. Years of court fees

 

Scenario 3:

1. Buyer, Owner, Bank rep all appear at land office together.
2. She passes over the money.
3. The bank passes over the Chanote
4. The land office updates the name to the owner (has to do this first)
5. Owner grabs the chanote and runs away before land office can update the name again.

 

None of those are good.  Yes, it may be a bit dramatic (especially #3), but she says in this time and climate people would do this for that amount of money.

 

I inquired about some of the ways we foreigners would do it in the west, but turns out they don't exist here:

 

• Escrow apparently does not exist
• Loan Ownership Transfer: Apparently cannot transfer the loan from the owner to the buyer, and allow the buyer to take full responsibility.

 

 

Some people have indicated the *only* way to ensure the transfer of the chanote is to *trust* the seller.  I am wondering if this is really the case, or if there is something else can be done.

 

It seems a bit depressing if this is the situation, as it means some lands will default simply because there is no *safe mechanism* to transfer it to a willing buyer.

 

[Crossy]

No.3 is closest. It will need some prior preparation.

 

Should go something like this.

 

The buyer will need a statement from the bank as to how much is owing and should get a cashiers cheque for that amount, have the rest in cash if you like. No reason why the seller couldn't cut that cheque if he has the funds.

 

Everyone turns up at the land office. Bank rep hands over the chanote to the land office who witness the cheque going to the bank rep.

 

The Land office amends the chanote removing the mortgage.

 

The buyer then hands the $$$ to the seller via the land office who then amend the chanote to the new owner.

 

The land officers are not stupid, they won't hand the paid off chanote to the seller so he can "run off" with it (and if the land office is anything like ours he wouldn't be running anywhere, the place is always packed).

 

EDIT There's loads of stamping and fees involved too of course, left out for simplicity. The bank and land office chaps are well versed in doing this kind of transaction.

[Peterw42]

As Crossy says, its scenario 3 except for the seller running off with the chanote part.

 

The transaction wont, and cant, happen unless all parties and payments are taken care of.

The bank wont sign off unless they get paid, the land office wont transfer title unless the mortgage/seller has been paid. The buyer will be the new owner as per land office records, and listed on the chanote.

 

There is no possibility of the seller obtaining the chanote, even if there was, it would be theft etc and a new updated chanote would be printed. Possession of a chanote is not ownership, your name on the chanote, reflecting land office records, is ownership.

[blackcab]

Exactly as Crossy said. The current owner has to obtain a settlement fee from their bank that is based on the agreed transaction date.

 

You bring a cashier's cheque for this amount, payable to the bank that holds the mortgage.

 

You bring a second cashier's cheque for the difference, payable to the owner.

 

Bring cash to pay any Land Office fees (if you paying fees is part of your agreement with the seller).

 

It's that simple. These types of transaction happen on an hourly basis at the Land Office, to the extent that in Bangkok some banks have a member of staff almost permanently stationed at the Land Office.

 

As stated above, the Land Office controls the entire process. To be honest, I wish it was this easy in my home country.

[Peterw42]

32 minutes ago, blackcab said:

It's that simple. These types of transaction happen on an hourly basis at the Land Office, to the extent that in Bangkok some banks have a member of staff almost permanently stationed at the Land Office.

I went to a big land office on the western side of Bangkok, and the banks all had permanent staff there, they even had there own desks. Kasikorn even had coffee for their customers.

I think there was a lot of re-financing and sales going on for massive big moo baans close by.

[rwill]

It happens all the time as others have mentioned above without the owner running off.

 

You can also wait to give the owner his money until the chanote paperwork is finished.

 

We recently bought some property, but no bank involved.  We did not transfer any money until we were handed the chanote.  Actually the owner forgot we hadn't paid him until I mentioned it.  There is money that has to be paid at the land office for the transaction.  Depending on your agreement it could be the buyer, seller, or split between the two to pay those fees.

[JBChiangRai]

My company went through this process.  We build high end houses for resale.

 

We bought a 10 rai plot in Chiang Rai town that was in the bank.  After meeting the bank manager, we concluded the only way was to give the seller enough money to get the chanote out of the bank and then conclude the deal at the land office.

 

We used a lawyer to get the owner to confirm the process with a contract but there were still a few sleepless nights as we were exposed for a couple of million baht before completion.

[Sydebolle]

My (Thai) wife had exactly that scenario and we went for option three with a deviation of the last two point.

The bank representative, the seller and the buyer met at the land office. To simplify the transaction, easier amounts are shown hereafter. 

The purchase price was THB 2 million,
the mortgage was THB 1.5 million and  
the transfer fee THB 0.1 million. 

My wife had a bankers draft in the name of the bank over THB 1.5 million, THB 400,000 in cash for the seller and THB 100,000 in cash for the various fees by the land office. 

The officer at the land office removed, on the behest of a form signed and stamped by the bank, the mortgage - which freed the land title deed (Chanote ) from any obligation. The officer then continued immediately with changing the ownership, also on the back of the land title deed to the buyer's name and 30 minutes later all was done. 

As all the papers in relation to the removal of mortgage and change of ownership are handed over to the officer at the land department at the very beginning, the land title deed comes, duly stamped and signed, back only once everything is done and dealt with! The identity of everybody involved is known with ID cards etc. so nobody would be foolish enough to try a runner ..... me thinks! 

[ncc1701d]

Probably a naive question - but isn’t this all coordinated through lawyers?

[JayBird]

Thank you, this was *very* helpful information.  I'll let her know and see if this can help her in some way.

 

Thank you again!

[Peterw42]

1 hour ago, ncc1701d said:

Probably a naive question - but isn’t this all coordinated through lawyers?

There is no real need for lawyers, its all done at the land office, and nothing happens unless the land office completes all the checks during the process. A lawyer would just be duplicating what the land office does anyway.

[khunPer]

20 hours ago, JayBird said:

My friend found a piece of land she likes, but is concerned about how to buy it given that the owner says it is in the bank (mortgaged).  My understanding is that there is *no* safe way to buy it.

The mortgage needs to be fully paid before transfer of title deed, normally the land office will not transfer a deed with a not cancelled mortgage.

 

A representative from the bank having the mortgage might be present at the land office to receive the due mortgage, which might be part of the total payment for the land, and cancel the servitude on the title deed. (I've experienced it the other way around as seller, where the new owner needed a mortgage, and representatives for the bank declared the mortgage servitude in the land office and gave me a cashier's cheque.)

 

If in doubt, contact the bank holding the mortgage servitude for further clarification of the procedure, you can normally trust a bank...????

 

 

[blackcab]

7 hours ago, JBChiangRai said:

...After meeting the bank manager, we concluded the only way was to give the seller enough money to get the chanote out of the bank and then conclude the deal at the land office.

 

We used a lawyer to get the owner to confirm the process with a contract but there were still a few sleepless nights as we were exposed for a couple of million baht before completion.

 

There was no need to visit the bank, no need to pay a lawyer and no need to expose yourself to the risk of losing your money.

 

Instead of taking days, the sale could have taken a couple of hours.

 

Ask the seller to obtain the redemption fee from their bank and tell them to ask the bank to be present with the chanote on the transaction day. It really is that simple.

[JBChiangRai]

17 hours ago, blackcab said:

 

There was no need to visit the bank, no need to pay a lawyer and no need to expose yourself to the risk of losing your money.

 

Instead of taking days, the sale could have taken a couple of hours.

 

Ask the seller to obtain the redemption fee from their bank and tell them to ask the bank to be present with the chanote on the transaction day. It really is that simple.

The bank refused to do that.

 

In any event, the bank loan was recorded on the chanote and had to be redeemed at the land office before any transfer could take place, they wouldn’t do no h steps at once.

 

All land offices have their own procedures, they’re not all the same.

[patman30]

happens all the time TBH
i bought land like this last year
my advice, pay a broker, preferably one that knows the seller personally
it will cost you a bit more obviously
but this is how we purchased last year
we dealt with the broker
the broker fronted the money to pay the bank and took possesion of the title deed
until we met at land office with seller and broker to transfer ownership

another option you have is find out EXACTLY how much is owed to the bank
and pay ONLY THAT BY CASHIERS CHEQUE, going to the bank with the seller
and then take possesion of the title deed until you go to the land office, or proceed directly to the land office from the bank
if they do not want to show you a bank letter displaying the exact owed amount, do not trust them.
Video/photo the meeting and any transactions


***our broker did explain they used to do as suggested above, but banks no longer pay staff to go to the land office etc.

Edited September 27, 2021 by patman30

[Dogmatix]

I have done this several times with three types of encumbrance: bank mortgage; mortgage to gold shop; and khai fak (sale with right of redemption.  

 

Khai fak is the easiest because the lender who holds the title will always come to the land office, assuming they don't run away to try to allow the underlying owner's right to redeem go past the expiry date, so they can keep the land.  Assuming the lender will play ball to allow themselves to be redeemed, they will come to collect their money at the land office.  So you are doing a three way transaction where you are paying off the lender with any residual amount going to the seller, who signs documents. Khai fak is better for individual lenders as the title automatically passes to them without any court procedures, if the borrower defaults, even though borrowers will often plead for roll overs or special rights to buy back even years after expiry.  I have ended up several pieces of land like this and will sell back at a fair price after expiry, if they can come up iwith the money which has happened but most can't come up with the money even after negotiating a price.  

 

Gold shops are often a good source of cash to country folk as they have unlicensed lending businesses on the side and many are willing to lend on mortgages, rather than khai fak, which involves much lower fees and tax to the borrower but the gold shop has to take the risk of years of court case to foreclose, if the borrower defaults.  since they have economy of scale and capital, it is worth their while to do this and the lower cost makes them more competitive than khai fak lenders. I have seen gold shop owners with stacks of title deeds for agricultural land, all of which I assumed came from foreclosures.  Gold shops are usually easier to deal with than banks as they are more flexible.  The gold hops use brokers to get deals and the deals I have done buying land mortgaged to gold shops were organised by the broker.  We stopped off at the gold shop on the way to the land office, having drawn up a sales and purchase agreement.  The gold shop owner was paid and signed documents and power of attorney to the broker who signed for him at the land office where the balance was paid to the seller. 

 

Bank mortgages in my own experience are more of a PITA and I will think carefully how badly I want that piece of land before touching them. Banks are usually inflexible and in the two or three deals I have done that involved banks, the bank insisted on being paid off in advance before releasing the mortgage and was not willing to send someone to the land office or make any special effort to allow the whole transaction to be done in one day.  They have their own rigid procedures and could not care less about the convence of the buyer or seller or whether the deal gets done or not.  So we had to pay the seller the amount owing the bank on a sales and purchase agreement and trust them to pay the bank and show up at the land office.  We eyeballed them pretty closely and Mrs Dog had been to school with the sister of one of the sellers who actually later bought the land back from us at a higher price a couple of years later.  But, as I say I will usually not go and look at land, if there is a bank mortgage on it and there is no connection to the seller.  Sellers and brokers often just give you a copy of the front of the deed, so you cannot see mortgage or khai fak on the back but there again i will not look at land without seeing the complete deed. 

 

Unfortunately there are no good ways to buy mortgaged land that don't involve trusting the seller.  If they are getting a reasonable amount of cash after paying the morgager, there is at least an incentive to go through with the transaction. It should be possible in most cases to pay the bank direct, which reduces the risk.  If you have any doubts about the seller, the best thing is to walk away.  There are plenty more pieces of land out there that don't have bank mortgages on them.  Since it is more difficult to obtain bank mortgages, most encumbered land in rural areas tends to be khai fak. 

Edited September 27, 2021 by Dogmatix

[watboy]

Anyone who's paying a dime before going to the land office and getting your name registered is taking an unnecessary risk. There's no bank won't do this, office won't do that. Its the seller's job to tell the bank they are going to repay the loan, they want the property unencumbered by the mortgage and they want the chanote, the bank has to comply. Then set a date for all of this to happen at the land office and the seller, their bank, and you the buyer shows up. You pay the outstanding balance of the bank, the bank releases the mortgage, returns the chanote, you pay any remaining amounts to the seller and whatever stamps/fees you agreed to cover. All of this happens at the same time, no one leaves until everything is done. There is no risk and no sleepless nights. Any seller/bank telling you differently is either lazy or lying.

[Dogmatix]

Does it make any difference, if foreigners are present at the land office? I have often not been present at the negotiations to avoid pushing purchase prices up but go to the land office and transfer to my own name as a Thai citizen.  Once the seller seemed quite agitated and said to Mrs Dog that it was somewhat deceptive of her not say her husband was a farang as she would have bargained for more money 555.  Then it turned out that she was the one who was dishonest as she had lied about a road project that was planned in the area, saying it was yet to be approved.  The land office director told me it had been approved but she was the one blocking it because she was afraid some of her would be cut off.  Most sellers and land officers have been very friendly.  

[BTB1977]

Doesn't say who's paying for it. If not you, not your problem. Let the thai sort it out. I assume they are of legal age and can make adult decisions.