Question About Sales Commission

[sotsira]

A deposit should be paid to the seller who then holds it until the sale is completed,

if the seller then reneges then he would be held responsible for the refund to the buyer,

if the buyer reneges then the seller keeps the deposit, this should be stipulated within the sale

agreement contract so both parties are in agreement with each other.

Why should the vendor be trusted with the money? That sounds like a really stupid idea to me.

Having met some of the out and out crooks who own property here I would only pay a deposit over to a third party.

Given that a sale can easily be arranged within a couple of days anyway I don't really see the need for a deposit at all.

So you would trust a 3rd party instead of the seller?

I think that is really stupid!

[PattayaPhom]

The main point of the OP is that until the transfer is done, anything could happen and the sale may not go through, so why should the agent receive his commission. Lets look at in the event that the OP holds the deposit and decides to renage, that then leaves the buyer without his deposit and the agent with a bad reputation as he wouldnt be able to have the deposit refunded.

There are two sides to every story, the deposit should be held either by the agent or a 3rd party until the transfer is complete. This is the only way to ensure nobody looses out.

Another example of how unregulated the property business is in Thailand, every agent seems to have their own

rules & regs regarding correct and ethical procedures.

As you say,

some agents keep the deposit to pay out once both parties complete.

Others keep it to pay for their commission.

Then there's another which gives the deposit to a 3rd party? what if there isn't a 3rd party?

A deposit should be paid to the seller who then holds it until the sale is completed,

if the seller then reneges then he would be held responsible for the refund to the buyer,

if the buyer reneges then the seller keeps the deposit, this should be stipulated within the sale

agreement contract so both parties are in agreement with each other.

You really dont have any experience in real estate in Thailand, In the past 2 years I could name 6 instances where buyers have gone directly to owners to try and negotiate a better price. As I have a good relationship with all our owners they have told the buyers to only negotiate through me. On 4 occassions the buyer lost out as the properties were then sold to other clients while they were trying to do the dirty.

As for owners/vendors holding deposits, that is a definate no no, when it comes to a rental contract terminating I need to know my customers will receive their deposits in full (minus outsanding utilities ets} without delay....that could be difficult as many vendors work off shore or just are hard to contact, not to mention those that think deposits are something that shouldnt be returned, the same goes for sale, deposits held by agents is safer for everyone...

[IamNotaNumber]

So you would trust a 3rd party instead of the seller?

I think that is really stupid!

A third party with no axe to grind (such as a lawyer who isnt the brother-in-law of the buyer or vendor) is exactly the sort of person who should be holding a deposit. This is the principle of escrow and it works well enough.

Worth noting that in many European countries agents are specifically prohibited from holding cash deposits, presumably due to trust issues as they have a vested interest in the sale.

[IamNotaNumber]

In the past 2 years I could name 6 instances where buyers have gone directly to owners to try and negotiate a better price.

Maybe you should consider making potential buyers sign a contract with you before the viewing? This is common enough in much of Europe. And your contract with the vendor should specifically prohibit him from doing this anyway. This is also a common clause in Europe.

Of course you would still have the hassle of taking either or both of them to court if they went behind your back.

[PattayaPhom]

In the past 2 years I could name 6 instances where buyers have gone directly to owners to try and negotiate a better price.

Maybe you should consider making potential buyers sign a contract with you before the viewing? This is common enough in much of Europe. And your contract with the vendor should specifically prohibit him from doing this anyway. This is also a common clause in Europe.

Of course you would still have the hassle of taking either or both of them to court if they went behind your back.

Contract with vendor/owner is already done but contracts with buyers...its not really possible, I was just trying to make the point taht buyers and sellers are not to be trusted and a deposit should certainly not be handed to teh owner until completion.

[sotsira]

So you would trust a 3rd party instead of the seller?

I think that is really stupid!

A third party with no axe to grind (such as a lawyer who isnt the brother-in-law of the buyer or vendor) is exactly the sort of person who should be holding a deposit. This is the principle of escrow and it works well enough.

Worth noting that in many European countries agents are specifically prohibited from holding cash deposits, presumably due to trust issues as they have a vested interest in the sale.

In Thailand, it's not necessary to hire a lawyer to buy property as it's a simple and quick procedure.

Hiring a lawyer just to hold a deposit isn't the norm also, and they would have to be working equally for both

buyer and seller, otherwise they would have a vested interest in whoever is paying their fees.

Also it has been known for lawyers to be so crooked where by

they have taken peoples properties, worth a lot more than just a deposit,

so would you trust them.

Remember that as a foreigner you wouldn't stand a chance if a crooked lawyer ripped you off,

and they're more likely to rip a foreigner off than a Thai.

[sotsira]

In the past 2 years I could name 6 instances where buyers have gone directly to owners to try and negotiate a better price.

Maybe you should consider making potential buyers sign a contract with you before the viewing? This is common enough in much of Europe. And your contract with the vendor should specifically prohibit him from doing this anyway. This is also a common clause in Europe.

Of course you would still have the hassle of taking either or both of them to court if they went behind your back.

I was just trying to make the point taht buyers and sellers are not to be trusted and a deposit should certainly not be handed to teh owner until completion.

It works both ways P.P as your an estate agent in Thailand you come under the umbrella of not being trusted too!

And as a seller, if a deposit is withheld until completion (especially by an agent)

then i would not consider it as a deposit at all.

[cdmtdm]

all good points , but legally, if i do not have the deposit into my account by the date in the contract is the contract then void ? or is the third parties account deemed to be the same ?

[sotsira]

all good points , but legally, if i do not have the deposit into my account by the date in the contract is the contract then void ? or is the third parties account deemed to be the same ?

If the contract clearly states that the deposit is paid to you by a certain date and it is not done so, then the contract is void.

Is the lawyer holding the deposit, acting solely on your behalf?

And, are you the only party in this transaction paying him?

If both answers are yes, then i would be asking him why he isn't conforming to the contract agreed and signed.

Then only you can judge the situation from his response to that.

[pbre]

So what you saying is, if an agent is selling a condo in a new project that is finished in 2 years. The Agent has to wait 2 years for the final Payment to get his commission?

And also for a house sale lets say 10 mill baht. 10% deposit will be payd non refundable. Agent get 3% seller 7% if the deals fall apart the seller made 700.000 for nothing.

The Agent has expenses like advertising, office work, spending hours showing buyers the house. All this the agent do for free if he cant sell the house.

So pay the Agent from deposit is only fair.

[sotsira]

The problem in Thailand is that there are no regulations set for honest and ethical practice

when it comes to property dealings.

So everyone wants to cover themselves in every possible way as to not get burned.

This results to no trust between all concerned, therefore everyone has their own opinions on

what should be the correct protocol.

In my opinion, estate agents should get their sales commission only once a sale is completed,

just like any first world civilised country, and deposits should be paid to the seller.

[PattayaPhom]

I believe most civilised countries have a 3rd party, ie agent, lawyer, land office, mayors office, escrow to hold deposits.

[sotsira]

I believe most civilised countries have a 3rd party, ie agent, lawyer, land office, mayors office, escrow to hold deposits.

Yes, that would be so, and they would also come under some laws and regulations, but NOT in Thailand though!

That's why nobody trusts anyone withholding their money.

[PattayaPhom]

I believe most civilised countries have a 3rd party, ie agent, lawyer, land office, mayors office, escrow to hold deposits.

Yes, that would be so, and they would also come under some laws and regulations, but NOT in Thailand though!

That's why nobody trusts anyone withholding their money.

Maybe the people you know but thats certainly not true of everybody, especially those that have purchased properties in Thailand.

I think you should look at Spain, Northern Cyprus, Bulgaria to name a few, they are considered Western countries.

[IamNotaNumber]

I think you should look at Spain, Northern Cyprus, Bulgaria to name a few, they are considered Western countries.

Spain maybe, but the others I would describe as barely Western. And Spain is not exactly a shining example of transparency and buyer-protection in the real estate market, as many expats with property soon to be bulldozed would testify.

Northern European countries (ie the civilised ones) generally do not allow real estate agents to hold purchase deposits. They consider this a job for lawyers, solicitors or notaries, or the local equivalent thereof. And these, of course, are heavily regulated usually with ring-fenced deposit protection for the end client.

I think that Thailand needs something like regulated bank escrow services with government insurance protection. This should be cheap and simple to put in place.

[sotsira]

I believe most civilised countries have a 3rd party, ie agent, lawyer, land office, mayors office, escrow to hold deposits.

Yes, that would be so, and they would also come under some laws and regulations, but NOT in Thailand though!

That's why nobody trusts anyone withholding their money.

Maybe the people you know but thats certainly not true of everybody, especially those that have purchased properties in Thailand.

I think you should look at Spain, Northern Cyprus, Bulgaria to name a few, they are considered Western countries.

I've bought 5 condos during my time here, every one was purchased directly with the seller, and paid the deposits directly

to them, with no third party or agent or middle man involved. Everything went smoothly with no problems at all.

If i buy anything else in the future i would only do so in the same way again.

By the way, you really are showing your ignorance in quoting Northern Cyprus as a western country. When in fact

Northern Cyprus is considered by the international community to be occupied territory of the Republic of Cyprus.

[IamNotaNumber]

I've bought 5 condos during my time here, every one was purchased directly with the seller, and paid the deposits directly

to them, with no third party or agent or middle man involved.

I'm still waiting for someone to explain why a deposit should be payable at all, given that a condo sale can be negotiated and finalised within a day or two maximum.

And good luck with trying to get the deposit back if the vendor changes his mind, not to mention trying to get double the deposit back which, of course, is what you should be due in such a situation.

[chiang mai]

I've bought 5 condos during my time here, every one was purchased directly with the seller, and paid the deposits directly

to them, with no third party or agent or middle man involved.

I'm still waiting for someone to explain why a deposit should be payable at all, given that a condo sale can be negotiated and finalised within a day or two maximum.

And good luck with trying to get the deposit back if the vendor changes his mind, not to mention trying to get double the deposit back which, of course, is what you should be due in such a situation.

Many people will be renting when they suddenly find the place they want to buy, most would hope to make the purchase effective on the date their lease rental ends so they don't have overlappig costs, the deposit allows them to fine tune all of that.

[sotsira]

I've bought 5 condos during my time here, every one was purchased directly with the seller, and paid the deposits directly

to them, with no third party or agent or middle man involved.

I'm still waiting for someone to explain why a deposit should be payable at all, given that a condo sale can be negotiated and finalised within a day or two maximum.

And good luck with trying to get the deposit back if the vendor changes his mind, not to mention trying to get double the deposit back which, of course, is what you should be due in such a situation.

In fact a condo purchase can be finalised in half a day from start to finish, if all the required paperwork is at hand.

In addition to chiang mai's post, some buyers will need to transfer funds from abroad in order to buy in their name

which could take 3-5 working days or longer.

Other times sellers need time to move out to their new place too.

If a purchase can be made within a short time period, then a deposit isn't needed, but when there are delays then a contract

stipulating all the needs of the two parties should be drawn up incorporating the deposit to secure the sale agreement.

[dksharron]

Lawyers and agents can close their doors, AND DO, at anytime.

As the owner, you and only you should hold the deposit, and if the buyer wants someone else to hold it, then with no deposit in the seller's hands, there is no reason that a seller should take his property of off the market.

There appears to be several RE agents on the boards here.

Agents have closed shop and left the country in the past and it will happen in the future.

There is no escrow here, so the system is imperfect. That is how it is. And as the seller, there is no reason to trust in anyone, and without a deposit in his own hands, he should keep the property on the market.

For the poster who mentioned that once a deposit is paid, there is nothing more for the agent to do; this is entirely false.

Plenty of sales deposits are walked away from. If there is a 5% or 10% deposit, the agent does not deserve 3%. The signing of a contract is just the beginning.

As sales are often between two foreigners, they are not able to walk into the land office to perform all of the necessary work for the property transfer.

The typical owner does not know that he needs a maintenance letter from the condo administration, and the typical buyer does not know that the needs a letter from the bank showing the money was wired in for a condo purchase.

There is much to do after a contract is signed.

In response to the poster who mentioned that agents should not have to wait for two years while a condo is being built in order to receive his full deposit, which would normally be about 5%.

I have one agent friend who sells mountains of properties to Russians. They receive their commission in full after about 30% of the deposits have been paid. I do not remember exactly, but they do not have to wait two years.

A sales commission is for the completion of a sale. This only happens at the land office, or at the commercial office for share transfers for companies owing houses.

[chiang mai]

There is a system of escrow here that was introduced a few yeaqrs ago by government, unfortunately it's a voluntary scheme that very very few people want to participate in.

[dksharron]

Please post a link about it. I am sure Thaivisa would be happy to make it permanent information available for all. I was unaware of it.

The Land Office would be the "perfect" or at least the best for the time being, location for a deposit to be held. The Land Office knows WHO the owner is, WHO any mortgage holder is, HOW MUCH any mortgage or lien is, etc., and call also review any and all paperwork prior to a deposit being given, so the buyer knows that the property for which is placing a deposit is really everything the buyer states it is.

[chiang mai]

Real Estate Escrow in Thailand:

http://www.siam-lega...in-Thailand.php

Edited November 2, 2012 by chiang mai

[IamNotaNumber]

Many people will be renting when they suddenly find the place they want to buy, most would hope to make the purchase effective on the date their lease rental ends so they don't have overlappig costs, the deposit allows them to fine tune all of that.

I think that would be a very rare situation. And I doubt that many potential buyers would be concerned about losing a month or two's rent payments even in that case. And it is still no reason at all to give any money to the owner rather than some trusted third party.

It also speaks eloquently of the poor state of the market here, with places hanging around for ages waiting for a buyer. A house I know of in the UK that was sold recently had a couple of prospective buyers. The one that got it was the one that bought immediately. The one that lost out was the one who wanted to complete a few months later.

[IamNotaNumber]

There is a system of escrow here that was introduced a few yeaqrs ago by government, unfortunately it's a voluntary scheme that very very few people want to participate in.

I wonder what they have against it?

[cheeryble]

Real Estate Escrow in Thailand:

http://www.siam-lega...in-Thailand.php

So it look like you can easily make an escrow though there's no standard govt form yet.

As for doing via a bank it would require a contract to be filed with the escrow.

Looks like Siam Legal would like to make some money filling in a boilerplate form for individuals.

Seems to me the boilerplate would be a useful thing to have, then you could deposit escrow at bank presumably at modest cost.

Perhaps forms to fill in are freely available online from other countries and can be used here at little or no cost?

Ps: very much like the idea of escrow deposits for offplan condo and moobahn developments.

Escrows would very much inhibit developers from getting carried away with ambition as they would have less funds to work with and more to prove to the bank.....which I would see as moderately conservative and a good thing.

Edited November 2, 2012 by cheeryble

[chiang mai]

There is a system of escrow here that was introduced a few yeaqrs ago by government, unfortunately it's a voluntary scheme that very very few people want to participate in.

I wonder what they have against it?

There's a cost involved that somebody has to pay. Developers don't like it because when some one buys off plan that means they don't get paid until they've actually built the dam_n thing, in the meantime the developer has to resort to paying for bank financing and that's not good, I mean, what other uses does a farang have if not to finance all these things! Finally, both sides have to agree to using escrow and the buyer can't impose it on the seller - there is no real incentive to the seller to use it.

Edited November 2, 2012 by chiang mai

[cheeryble]

Finally, both sides have to agree to using escrow and the buyer can't impose it on the seller - there is no real incentive to the seller to use it.

Actually when you think about it providing escrow would ease some buyers minds and could be a selling point.

ps: another friend buying at One Plus Suan Dok was shocked to see his view was going to be badly impacted by another twin building going up next to him same company. To be fair they offered for him to exchange to the other building which he did.

Interestingly he is buying to rent out for a few years (probably move in later) first person I know who has done this but it shows the animal does exist.

Edited November 2, 2012 by cheeryble