By the Book: Benefits of vendor financing

PHUKET: Although the property market has recently been slow in Phuket, properties are still selling.

In previous years, buyers would pay full cash for properties. However, in today’s climate, sellers are being more flexible to achieve a sale.

One of the main head winds Phuket’s property market faces is that the majority of foreign buyers do not live here all year round. When a potential buyer comes to Thailand, he or she may not have all of the funds readily available to make a purchase on that trip.

Unfortunately for foreign buyers, no facility exists to obtain a mortgage / bank loan to fund a property purchase here. Therefore, without a source of finance, buyers must wait until a subsequent visit to Thailand when they have the full funds available to make a purchase.

For buyers wanting stage payments, there has always been the option of buying off-plan and spreading payments throughout the construction period. In more recent years, it has become common for property developers to offer short-term finance, typically one to three years, on up to 50 per cent of the purchase price.

Now, through Siam Real Estate’s Vendor Financing terms, private sellers are offering buyers stage payments on property purchases.

Vendor financing terms are where a seller will accept a down payment, typically 50 per cent of the purchase price, with affordable repayments over one to three years. The seller retains legal ownership until payments are complete and there is a legally enforceable contract between buyer and seller.

Property ownership documents are held in escrow by a lawyer to ensure that the property cannot be sold to another party. Should the buyer cease to make payments, the ownership remains in the seller’s name.

BENEFITS OF VENDOR FINANCING

– It increases the chances of selling your property.

– It is not possible for a foreigner to get a bank loan on property in Thailand.

– It enables buyers to purchase earlier: buyers may not have 100 per cent of the purchase price on hand during their current visit.

– It offers flexibility for the buyer to pay early with no penalties and reduce interest charges.

– It creates security for buyer and seller: lawyer safeguards the property deeds; ownership is not transferred until payments are complete.

– If the buyer defaults, the seller retains the down payment and the property.

– The buyer takes possession of the property upon down payment. The buyer can then move in or start renting out the property.

This is very similar to a bank loan / mortgage, without the bank fees, and will help buyers to purchase a property sooner than would otherwise be possible.

For more information about this article, contact Kevin Hodges, Siam Real Estate (SRE), quoting Vendor Financing. Tel: 076-324042 Email: kevin@siamrealestate.com Web: siamrealestate.com

— Kevin Hodges