Land Price Asked For And Actual Bank And Govt Valued At

[WilliamCave]

I noticed in a few areas like Chumphon and Chiang rai that the price the seller is selling the land for and the value the bank has put on property there is a big difference.

I think this is part of the problem as to why banks won't lend Thais the money to buy land because the seller has over valued there land and the price is to high for the bank .

Any thoughts on the price gap

Thanks

[David48]

Suppose it comes down to the concept of 'willing buyer and willing seller', as a determinate of value.

The no lend from the Bank may have several reason ... for example, bad credit, low deposit ... the list is almost inexhaustible.

.

[Khun Jean]

Land is never overvalued by a seller.

The buyer is responsible for that.

Banks have different sets of rules.

Those rules are based to minimize risk and maximize profits.

They want to lend as much as possible but still keep the risk low by high interest rates.

In Thailand real estate on the books by banks don't have to be at market value. They stay on the books for the full amount forever and probably even increase in value even if the realestate is a house that is changed into a ruin.

This holds up appearances (financial) that the bank has enough assets backing their risk.

And that is of course in most cases not true.

[johnnyk]

Land is never overvalued by a seller.The buyer is responsible for that.Banks have different sets of rules.Those rules are based to minimize risk and maximize profits.They want to lend as much as possible but still keep the risk low by high interest rates.In Thailand real estate on the books by banks don't have to be at market value. They stay on the books for the full amount forever and probably even increase in value even if the realestate is a house that is changed into a ruin.This holds up appearances (financial) that the bank has enough assets backing their risk.And that is of course in most cases not true.

Japan is a classic example of banks valuing dead assets at full book amount.

[Suradit69]

Land is never overvalued by a seller.

The buyer is responsible for that.

Banks have different sets of rules.

Those rules are based to minimize risk and maximize profits.

They want to lend as much as possible but still keep the risk low by high interest rates.

In Thailand real estate on the books by banks don't have to be at market value. They stay on the books for the full amount forever and probably even increase in value even if the realestate is a house that is changed into a ruin.

This holds up appearances (financial) that the bank has enough assets backing their risk.

And that is of course in most cases not true.

"In Thailand real estate on the books by banks don't have to be at market value."

In the case of real estate loans, the banks wouldn't normally carry the value of the collateral real estate on their balance sheets, it would be the amount of the outstanding loan balance. Presumably banks here have non-performing loans, for which they may or may not make proper provisions, but if they make a loan for 10 million baht for 30 years, they can't carry it at 10 million in year one and still 10 million at year 25 if they've been receiving regular & timely payments.

I doubt the banks can carry repossessed property at imagined valuations endlessly either. The major banks are open to the scrutiny of both local and international investors & regulators and unrealistic claims for overall loan performances would hardly go undetected forever, especially considering all the pain caused by ridiculous valuations on mortgage-backed-securities, MBS, in the west in recent years. S&P, Fitch, Moody's, et al got caught out on that and it's at the forefront of everyone's minds today.

As for sellers' asking prices being above & beyond official valuations, that happens everywhere. That's one of the reasons there's been a real estate lead economic crisis world-wide. After a dose of reality hit real estate prices, buyers and banks discovered they had loans secured by real estate that was worth less than the amount of the loan. Just because a buyer is asking a certain price it doesn't mean the buyer can't bargain and/or walk away. If the seller isn't in a hurry to sell he may choose to wait until someone comes along who's willing to meet his expectations. If he needs the cash urgently, he'll have to lower his asking price to the point where he'll get an offer.

Edited June 9, 2013 by Suradit69

[HerbalEd]

This is not at all a Thai thing. In USA ... and I assume other countries ... the bank's or taxman's valuation of a piece of property, house, business, etc. can be very different from the sellers asking price.

[THAIPHUKET]

How much a bank may lend per rai of rice paddy? What could be the average asking price?

All this related to Isaan,

[Chris Lawrence]

Suppose it comes down to the concept of 'willing buyer and willing seller', as a determinate of value.

The no lend from the Bank may have several reason ... for example, bad credit, low deposit ... the list is almost inexhaustible.

.

As a valuer this response makes the most sense.

One thing I saw with banks in Chiang Rai and Chiang Mai is that they had a number of properties on their books for sale. This is one thing a bank does not want to do, hold property. The prices achieved by the banks for this stock always seemed less than what was out there in the English speaking press.

The biggest problem for xpats is the ATM prophecy that is our alure. I would suggest this sends the price up, not the market.

[how241]

This is not at all a Thai thing. In USA ... and I assume other countries ... the bank's or taxman's valuation of a piece of property, house, business, etc. can be very different from the sellers asking price.

+1

[slipperx]

Suppose it comes down to the concept of 'willing buyer and willing seller', as a determinate of value.

The no lend from the Bank may have several reason ... for example, bad credit, low deposit ... the list is almost inexhaustible.

.

As a valuer this response makes the most sense.

One thing I saw with banks in Chiang Rai and Chiang Mai is that they had a number of properties on their books for sale. This is one thing a bank does not want to do, hold property. The prices achieved by the banks for this stock always seemed less than what was out there in the English speaking press.

The biggest problem for xpats is the ATM prophecy that is our alure. I would suggest this sends the price up, not the market.

Well Chris I was also a valuer and I agree with your perception as far as it would pertain to most countries. Thailand is however different. The banks here will sit on property and will let it rot. The bank will not sell below the loan value plus interest on the books. That is why Thailand arranged for all bad assets to be bought from the Thai banks to get them off their books. It is an unusual and quite strange thing. I know because I was at one time looking at buying 'repossessed' property. I think mostly the bank will sell at auction with the book value being the reserve price. Those that don't sell they add to their 'book' which is what you get to look at if you go to the bank to see what they have for sale. Some of those properties I saw were practically double what a similar property was selling for at that time. I asked how the bank expected to sell at that price and the manager just said the bank does not sell at a loss. At that point I gave up. Logic is a rare quality in these parts.

[stuartd1]

i understood that this is the reason that there a number of unfinished buildings in CM dating back to the 90's crash.

The banks are unwilling to write them off of their books at a loss!

[comserve]

I understand a few years ago, in a tight property market, an owner would go to the bank, overvalue their property & use the property for security of a loan.

Once the loan monies were paid, the house owner would simply not make any payments on the loan & wait for the bank to do something. It took some time for the bank to resume the property. Some of those over valued properties properties are still on the bank's asset sheets.

When I was buying a house, I had a look at some of these properties & they were simply shells of buildings with windows, doors & anything inside worth taking missing.

Hopefully the banks have improved their security valuations these days. (but perhaps not!)

[GarryUK]

What is the best way to get a true valuation on land? Don't want to be ripped off because I'm a farang, but at the same time should I really trust when the GF says it's worth much more but the family are doing a good price.

She wants me to give sinsod when we marry later this year (no problem personally with that, no responses on sinsod though, let's stay on land topic) which her mum will use to pay off the bank and transfer ownership of the land to the GF. As we'll (well she'll) only own the land and not the house on it (in which the parents will remain living even when the land is transferred), I don't know what'll happen when we want to build our own house on it in a few years. Hopefully I can persuade everyone to let the parents move into grandmas house when she's no longer with us, otherwise I'll have to build an annex to accommodate them too. Luckily retirement is some 18 years away so plenty of time for grandma to kick the bucket!

Edited June 9, 2013 by GarryUK

[mikemac]

I would be very wary about buying a "repo" from any Thai bank. Have heard some real horror stories including one where a western guy and Thai wife bought a repo house in a village and the Thai man who used to own it before the bank took it back kept coming around telling these people to get out of his house. This jerk's family gave the new owners a hard time as well, to the point where they moved out and put the place back on the market.

When lending money to buy a house or land in Thailand what kind of deposit do the bank usually ask for ? 25%, 50% ?

[AnotherOneAmerican]

I doubt the banks can carry repossessed property at imagined valuations endlessly either. The major banks are open to the scrutiny of both local and international investors & regulators and unrealistic claims for overall loan performances would hardly go undetected forever, especially considering all the pain caused by ridiculous valuations on mortgage-backed-securities, MBS, in the west in recent years. S&P, Fitch, Moody's, et al got caught out on that and it's at the forefront of everyone's minds today.

Thai law requires banks to never sell repossessions below the outstanding loan amount.

So if they get the valuation wrong, they will have an expensive millstone on their books, for as long as it takes to sell at that price.

[AnotherOneAmerican]

I would be very wary about buying a "repo" from any Thai bank. Have heard some real horror stories including one where a western guy and Thai wife bought a repo house in a village and the Thai man who used to own it before the bank took it back kept coming around telling these people to get out of his house. This jerk's family gave the new owners a hard time as well, to the point where they moved out and put the place back on the market.

When lending money to buy a house or land in Thailand what kind of deposit do the bank usually ask for ? 25%, 50% ?

For a Thai 5% - 10%, if you have a government job you can often borrow 110%.

[AnotherOneAmerican]

What is the best way to get a true valuation on land? Don't want to be ripped off because I'm a farang, but at the same time should I really trust when the GF says it's worth much more but the family are doing a good price.

She wants me to give sinsod when we marry later this year (no problem personally with that, no responses on sinsod though, let's stay on land topic) which her mum will use to pay off the bank and transfer ownership of the land to the GF. As we'll (well she'll) only own the land and not the house on it (in which the parents will remain living even when the land is transferred), I don't know what'll happen when we want to build our own house on it in a few years. Hopefully I can persuade everyone to let the parents move into grandmas house when she's no longer with us, otherwise I'll have to build an annex to accommodate them too. Luckily retirement is some 18 years away so plenty of time for grandma to kick the bucket!

You can only split land and house ownership from new build, unlikely this has already been done. You won't be able to do it.

It's normal for parents to give land to their children, not sell it to them.

Forget this deal, it will be a total loss of your money, they are almost certainly scamming you.

If you really want to buy land for her as an open, no strings gift, don't buy land from anyone related to her.

Popular scam non-Thai speaker with Thai (aka foreigner + gf)

Thai speaker finds land, gets seller to up the price by 50-100%, splits the excess money taken from the foreigner.

So widespread between Thai gf/realtor/agent + foreigner that it's almost impossible for any foreigner to get a legit deal.

I actually had to give up my attempt to buy an existing house or land and bought a new moobaan build from a developer with a published price list, so they couldn't inflate the price.

Edited June 9, 2013 by AnotherOneAmerican

[GarryUK]

What is the best way to get a true valuation on land? Don't want to be ripped off because I'm a farang, but at the same time should I really trust when the GF says it's worth much more but the family are doing a good price.

She wants me to give sinsod when we marry later this year (no problem personally with that, no responses on sinsod though, let's stay on land topic) which her mum will use to pay off the bank and transfer ownership of the land to the GF. As we'll (well she'll) only own the land and not the house on it (in which the parents will remain living even when the land is transferred), I don't know what'll happen when we want to build our own house on it in a few years. Hopefully I can persuade everyone to let the parents move into grandmas house when she's no longer with us, otherwise I'll have to build an annex to accommodate them too. Luckily retirement is some 18 years away so plenty of time for grandma to kick the bucket!

You can only split land and house ownership from new build, unlikely this has already been done. You won't be able to do it.

This site is so annoying - it's so difficult to quote just one part of an answer without it screwing everything up.

Apparently the mum owns the land, the dad owns the house, not sure how that works. I've read before that it's quite normal for some families to give sinsod back in the form of a gift to the couple, often land on which they can build their first marital home. I'm not against helping the family out, I don't think they're doing it to scam me, but it appears too that you also see shortcomings in the deal as we're not free to build what and when we want on this particular piece of land.

[khaowong1]

This is not at all a Thai thing. In USA ... and I assume other countries ... the bank's or taxman's valuation of a piece of property, house, business, etc. can be very different from the sellers asking price.

Very true.. I was a real estate appraiser for over 20 years in Maricopa County Arizona. Sellers are always trying to get a maximum price for their properties. If for example, a seller wanted 200,000 for his house and the bank and tax assessor says it's only worth 160,000, and the bank was willing to loan 90% of the assessed value of 160,000, then the buyer is going to have to put up approx. 56,000 bucks to buy this property if he wanted a bank loan. and still he would basically own a 160,000 dollar piece of property that he paid 200,000 bucks for.

What a prudent buyer does, is find a home that is for sale UNDER the bank assessed value, then borrow the money from the bank at the assessed price.

[taninthai]

What is the best way to get a true valuation on land? Don't want to be ripped off because I'm a farang, but at the same time should I really trust when the GF says it's worth much more but the family are doing a good price.

She wants me to give sinsod when we marry later this year (no problem personally with that, no responses on sinsod though, let's stay on land topic) which her mum will use to pay off the bank and transfer ownership of the land to the GF. As we'll (well she'll) only own the land and not the house on it (in which the parents will remain living even when the land is transferred), I don't know what'll happen when we want to build our own house on it in a few years. Hopefully I can persuade everyone to let the parents move into grandmas house when she's no longer with us, otherwise I'll have to build an annex to accommodate them too. Luckily retirement is some 18 years away so plenty of time for grandma to kick the bucket!

You can only split land and house ownership from new build, unlikely this has already been done. You won't be able to do it.

This site is so annoying - it's so difficult to quote just one part of an answer without it screwing everything up.

Apparently the mum owns the land, the dad owns the house, not sure how that works. I've read before that it's quite normal for some families to give sinsod back in the form of a gift to the couple, often land on which they can build their first marital home. I'm not against helping the family out, I don't think they're doing it to scam me, but it appears too that you also see shortcomings in the deal as we're not free to build what and when we want on this particular piece of land.

paying sinsot and then buying land from family ,since you cant own the land the land is only being transfered to mums daughter think you are getting a bad deal here as other posters said normally the mother would give land to daughter as she would generally inherit it upon mothers death ,have a good think about what you are actually doing,oh and you do know that sinsot is only for show and after the wedding costs are deducted the sinsot should be returned to the happy couple.

[Joe Mamma]

A couple years ago, the wife and I looked at 45 different homes and properties in search of our dream home.

Even with me, the farang out of the picture, these Thai owners were asking way too much.

Now settled in our beachside abode, I see that these over priced venues are still on the market.

I had the wife call again on the 2nd choice home and they had raised the price as a way to make up for the lost time of not selling for years.

Sounds like some twisted logic.

[Chris Lawrence]

Suppose it comes down to the concept of 'willing buyer and willing seller', as a determinate of value.

The no lend from the Bank may have several reason ... for example, bad credit, low deposit ... the list is almost inexhaustible.

.

As a valuer this response makes the most sense.

One thing I saw with banks in Chiang Rai and Chiang Mai is that they had a number of properties on their books for sale. This is one thing a bank does not want to do, hold property. The prices achieved by the banks for this stock always seemed less than what was out there in the English speaking press.

The biggest problem for xpats is the ATM prophecy that is our alure. I would suggest this sends the price up, not the market.

Well Chris I was also a valuer and I agree with your perception as far as it would pertain to most countries. Thailand is however different. The banks here will sit on property and will let it rot. The bank will not sell below the loan value plus interest on the books. That is why Thailand arranged for all bad assets to be bought from the Thai banks to get them off their books. It is an unusual and quite strange thing. I know because I was at one time looking at buying 'repossessed' property. I think mostly the bank will sell at auction with the book value being the reserve price. Those that don't sell they add to their 'book' which is what you get to look at if you go to the bank to see what they have for sale. Some of those properties I saw were practically double what a similar property was selling for at that time. I asked how the bank expected to sell at that price and the manager just said the bank does not sell at a loss. At that point I gave up. Logic is a rare quality in these parts.

Yeah that would be right.

I remeber auctioning a property that owed more than market value. My boss's advice was let it pass in to secure as mortgagee in posesion; as the market would eventually catch up in time and the mortgagee will recover its loss. And it did.

Then again some banks just don't want to own property.

[robertson468]

Land is never overvalued by a seller.

The buyer is responsible for that.

Banks have different sets of rules.

Those rules are based to minimize risk and maximize profits.

They want to lend as much as possible but still keep the risk low by high interest rates.

In Thailand real estate on the books by banks don't have to be at market value. They stay on the books for the full amount forever and probably even increase in value even if the realestate is a house that is changed into a ruin.

This holds up appearances (financial) that the bank has enough assets backing their risk.

And that is of course in most cases not true.

"In Thailand real estate on the books by banks don't have to be at market value."

In the case of real estate loans, the banks wouldn't normally carry the value of the collateral real estate on their balance sheets, it would be the amount of the outstanding loan balance. Presumably banks here have non-performing loans, for which they may or may not make proper provisions, but if they make a loan for 10 million baht for 30 years, they can't carry it at 10 million in year one and still 10 million at year 25 if they've been receiving regular & timely payments.

I doubt the banks can carry repossessed property at imagined valuations endlessly either. The major banks are open to the scrutiny of both local and international investors & regulators and unrealistic claims for overall loan performances would hardly go undetected forever, especially considering all the pain caused by ridiculous valuations on mortgage-backed-securities, MBS, in the west in recent years. S&P, Fitch, Moody's, et al got caught out on that and it's at the forefront of everyone's minds today.

As for sellers' asking prices being above & beyond official valuations, that happens everywhere. That's one of the reasons there's been a real estate lead economic crisis world-wide. After a dose of reality hit real estate prices, buyers and banks discovered they had loans secured by real estate that was worth less than the amount of the loan. Just because a buyer is asking a certain price it doesn't mean the buyer can't bargain and/or walk away. If the seller isn't in a hurry to sell he may choose to wait until someone comes along who's willing to meet his expectations. If he needs the cash urgently, he'll have to lower his asking price to the point where he'll get an offer.

In principle I agree with the points you made, except you missed out one important factor. The Thais love to barter and to them is a way of life, therefore they will initially over price and most expect to be bartered down.

[AnotherOneAmerican]

In principle I agree with the points you made, except you missed out one important factor. The Thais love to barter and to them is a way of life, therefore they will initially over price and most expect to be bartered down.

I haven't found many Thais that will barter on property price (in any significant way).

They state what they want, you buy or walk away. Big shame to sell for less than you want.

[amykat]

So, AnotherOneAmerican ...do you have any idea how Thais come up with their valuation? I know you can look up the government price of the land, I guess, and/or some people are to some extent using whatever debt they need to pay off, as a minimum to start with.

But I have got a feeling that a lot of it has to do with gossip, and gossip that is based on lies. I have found a lot of Thais like to inflate the price they say they paid for things as a way to brag. And I have heard a lot of people very excited to "hear' that some house/building/land is for sale for some huge price, and they immediately will say their house/bulding/land must now be worth X also. They don't seem to consider that it hasn't sold yet, hasn't sold for 5 years, may never sell, etc.

Or, for example, there is a new condo building near me, being built and ads say prices start at 60,000 baht per sq meter. They seem like they will just be the standard Thai condo, nothing special, nothing luxury. So if I were to assume that a house and land is worth more than a condo, but only took the size of my house and didn't consider land, at that same price, my house would be worth over 9 million baht. If I took the govt land price when I bought (6 years ago) that would add 1.5 million, and while I realize my house is older, it should be better as far as the outfitting inside, multiple bathtubs, 7 aircons, western kitchen, granite, good tiles, lots of good wood, good windows, solid real doors, good roof, blah, blah, whatever. But I am sure my house isn't worth anything near that, but maybe a Thai person would guess their house is??

I know that condos sell for more than houses here, although I am not sure why, other than for the farang ownership aspect in certain buildings, but I think this is opposite most places in the world, where condos are cheaper than houses.

Anyway, I have found everything you have said above to be true in my experience here, but wonder if you have any insight, (or anyone else here does) about my question.

Another question would be WHY would Thai people pay so much for a crappy condo, when they could buy a house in the same location for 1/2 or less. Other then if they are just buying a studio sized place, which most of them do seem to be doing. 25 sq meters at 60K is less than any house around here, because no houses are that small.

Edited June 10, 2013 by amykat

[culicine]

A couple years ago, the wife and I looked at 45 different homes and properties in search of our dream home.

Even with me, the farang out of the picture, these Thai owners were asking way too much.

Now settled in our beachside abode, I see that these over priced venues are still on the market.

I had the wife call again on the 2nd choice home and they had raised the price as a way to make up for the lost time of not selling for years.

Sounds like some twisted logic.

Same happens with second hand cars - they sit in the lot for years and the same or elevated price. Only the desperate part with their cash for them. in this country you either pay too much, or pay the right price. Nothing is discounted below market value here.