Purchasing Condo - Hypothetical

[nitram]

This is a hypothetical question only.

If I wish to purchase a condo that is for sale for 5 million Baht and the estimated value is 3 million Baht (Land Department).

I have reached an agreement with the seller to have a contract stating that I will purchase the condo for less than the estimated value and pay the difference in foreign funds outside of Thailand.

Is this possible?

As long as I pay the taxes associated with the estimated value, can I "legally" purchase a condo less than the estimated vale?

If the bank issue a FETF stating that I transferred 2 million Baht to purchase the condo..... will it go through?

Any constructive thoughts on this?

Thanks

[trogers]

First question! When has a buyer started paying for taxes? That's the liability of the seller.

And when you become a seller in the future, what taxes will such under declaration be on the capital gain?

[hhgz]

"If the bank issue a FETF stating that I transferred 2 million Baht to purchase the condo..... will it go through?"

Will "what" go through?

[tangoll]

nitram, I think such an arrangement is fraught with problems/risks from both the seller's and buyer's perspective. Let's use your example of a 5 mil baht condo where you declare 3 mil as the amount paid in Thailand at Land Dept, and equiv 2 mil paid outside. Your fees/tax savings on let's say a one year held condo transferred before 28 Mar 2010 will be about 20,000 baht or so; more if the govt doesn't extend the reduction measures, or the condo has been held more than one year and seller is non-Thai.

From the seller's viewpoint, I would want that 2 mil in my hands before I go to Land Dept to do the transfer. But would the buyer want to pay 2 mil which is not covered by the local S+P agreement? Especially if the typical S+P agreement has a clause saying the seller can cancel the sale by returning the typical 10% deposit (300,000 baht) plus pay a penalty equal to the deposit? So if I as seller take the overseas 2 mil then locally say I cancel the S+P and pay the 300,000 baht penalty; now go sue me overseas.

This would be if seller/buyer are dealing at arm's length; and not as related parties.

I don't understand your question on the FETF either. If you transferred in 2 mil, then the bank will issue the FETF for 2 mil. You would still need an FETF with an additional 1 mil baht to cover the 3 mil baht transfer declared at the Land Dept for this transfer to go through.

BTW, tax/fees on S+P payable at Land Dept for individual sellers do not depend upon capital gain, but on amount declared for the transfer, and on other things like number of years between transfers and whether a Thai owner has used the unit as residence.

Edited January 11, 2010 by tangoll

[Pakboong]

Why would you buy a condo for 5 million that the bank says is only worth 3 million?????? You will have to find another farang willing to pay 2 million over appraised value to sell it and foreign demand for housing in Thailand is at an all all time low. Occupancy in Bangkok is around 71% and the demand in Pattaya and Chang Mai have dropped off the charts.

[PattayaParent]

"As long as I pay the taxes associated with the estimated value, can I "legally" purchase a condo less than the estimated value?"

Yes, a mate of mine purchased a 1 million baht condo for 800k, tax was paid to the land office on their valuation of 1 mill.

FETF had to match or be greater than the land office valuation.

Edited January 11, 2010 by PattayaParent

[nitram]

Thank you all for the responses. But I did say that it was hypothetical.

My only inquiry was to find out if the Land Department will allow a sale of a condo be approved if the FETF statement was lower than the estimated price of the condo.

It is my fault that I incorrectly worded the question. But I do appreciate all the answers

[hhgz]

"Why would you buy a condo for 5 million that the bank says is only worth 3 million??"

You misread the OP's post and, although it has been covered many times before, it is clear that you do not understand the method by which the Land Department evaluates property.

The OP did not mention a "bank" - he mentioned the "Land Department". Incredible as it may seem, a "bank" is not the Land Department". Furthermore, the Land Department's valuation of property is based on the original construction cost, and does not consider the increasing cost of construction and land. Accordingly, the LD's estimate is very conservative. It is probable that the actual market value of a property is considerably higher than the LD estimate.

[Pakboong]

"Why would you buy a condo for 5 million that the bank says is only worth 3 million??"

You misread the OP's post and, although it has been covered many times before, it is clear that you do not understand the method by which the Land Department evaluates property.

The OP did not mention a "bank" - he mentioned the "Land Department". Incredible as it may seem, a "bank" is not the Land Department". Furthermore, the Land Department's valuation of property is based on the original construction cost, and does not consider the increasing cost of construction and land. Accordingly, the LD's estimate is very conservative. It is probable that the actual market value of a property is considerably higher than the LD estimate.

You are correct. My point is that a Thai Bank will normally lend, to a Thai, a maximum of 95% of the appraised value. I have no idea from where they get the appraisal. It may come from the land office for all I know or care. I would simply be cautious in this market if anybody in any "official' or "semi official" capacity values the land at 2 million less than I plan to pay for it.