How a Real Estate Commission is Paid in Thailand?

When it comes to buying or selling property in Thailand, understanding the real estate commission structure is crucial. The commission, often referred to as the Broker fee, is a crucial aspect of any real estate transaction. In this page, we'll explain the world of real estate commissions in Thailand, exploring what they are, when they are due, who pays them, and the standard commission rates across different regions.

What is a Real Estate Commission?

A real estate commission is a fee paid to a real estate agent or broker for their services in facilitating a property transaction. This commission is typically a percentage of the total sale price of the property and is negotiated between the agent and the seller.

The commission serves as compensation for the agent's efforts in marketing the property, showcasing it to potential buyers, handling negotiations, and guiding the client through the entire sales process. It's important to note that the commission is not a government-mandated fee, but rather a contractual agreement between the parties involved.

When is the Commission Due to be Paid?

The timing of the commission payment can vary, but it is typically due upon the successful completion of the real estate transaction at the Land Office, also known as the "closing" or "completion" of the sale. This means that the commission is usually paid at the time when the property's ownership is officially transferred from the seller to the buyer at the Land Office.

In some cases, the commission may be due earlier in the sales process, such as when the property is listed or when a sales contract is signed. However, this is less common and would be specified in the listing agreement or sales contract.

Who Pays the Commission?

In Thailand, the commission is typically paid by the seller of the property. This is because the seller is the party who has engaged the real estate agent to market and sell their property. The commission is usually deducted from the sale proceeds before the seller receives their final payment.

It's important to note that the commission is not paid directly to the agent by the buyer. Instead, the commission is paid to the real estate brokerage or agency that the agent represents. This ensures that the commission is properly handled and distributed according to the brokerage's policies and any applicable laws or regulations.

To Whom Should the Commission be Paid?

To ensure maximum protection for both the buyer and the seller, it is recommended that the real estate commission be paid directly to the broker's office, rather than to the individual agent. This practice helps to safeguard the transaction and ensures that the commission is properly accounted for and distributed.

By paying the commission to the broker's office, you can be confident that the funds will be handled in a professional and transparent manner. The broker is responsible for ensuring that the commission is properly allocated and that any applicable taxes or fees are correctly deducted.

Does the Buyer Need to Pay Any Commission to the Agent in Thailand?

In Thailand, the standard practice is that the buyer does not pay any commission to the real estate agent. The commission is solely the responsibility of the seller, who has engaged the agent to market and sell the property.

This is different from some other countries, where the buyer may be required to pay a separate commission to the buyer's agent. In Thailand, the buyer's only financial obligation is to pay the agreed-upon purchase price for the property, as well as any applicable taxes, fees, or other associated costs.

What is the Standard Commission Rate in Thailand?

The standard real estate commission rate in Thailand can vary depending on the specific region or location of the property. However, there are some general guidelines:

Thailand Commission Rate: The minimum commission rate set for any listing agreement across Thailand, excluding specific regions such as Hua Hin, Cha-Am, Krabi, Phuket, Koh Samui, and Pattaya, shall not be below the rate of 3% of the total sale transaction value.

Commission Rates in Specific Regions: In certain popular tourist destinations, such as Hua Hin, Cha-Am, Krabi, Phuket, Koh Samui, and Pattaya, the standard commission rate is typically higher, often around 5% of the total sale transaction value.

It's important to note that these commission rates are different in this specific area due to higher marketing and operational costs.

Why Does the Agent Ask to Pay an Additional 1% Commission for the Initial Period of 90 Days?

In some cases, real estate agents in Thailand may ask the seller to agree to an additional 1% commission for the initial period of the listing, typically 90 days. This additional commission is often referred to as an "incentive" or "marketing fee."

The rationale behind this request is that the agent may need to invest more time, resources, and marketing efforts to ensure the property is effectively promoted and sold within the initial 90-day period. The additional 1% commission serves as an incentive for the agent to work diligently to find a buyer and complete the transaction as quickly as possible.

It's important to note that this additional 1% commission is not a standard practice across all real estate transactions in Thailand. It is often negotiated on a case-by-case basis between the seller and the agent, and the seller is not obligated to agree to this additional fee if they feel it is not warranted or necessary.

Is the Commission Subject to VAT Tax?

Yes, Only if the Broker company is registered in the VAT System of Thailand.

The real estate commission in Thailand is subject to value-added tax (VAT), which is currently set at 7% of the total commission amount.

This means that if the standard commission rate is 3% of the property's sale price, the actual amount paid to the real estate agent would be 3.21% (3% plus the 7% VAT). The additional 0.21% represents the VAT that is added to the commission.

It's important for both the seller to be aware of this VAT charge, as it will impact the overall cost of the real estate transaction. The VAT is typically included in the commission amount, so the seller will receive the net commission after the VAT has been deducted.

Example of Commission Calculation Based on a 3% Commission Rate

Let's consider an example of how the real estate commission would be calculated based on a 3% commission rate:

Suppose the property is sold for 10,000,000 Thai Baht (THB).

The commission calculation would be as follows:

• Property Sale Price: 10,000,000 THB
• Commission Rate: 3%
• Commission Amount: 10,000,000 THB x 3% = 300,000 THB
• VAT (7%): 300,000 THB x 7% = 21,000 THB
• Total Commission Paid: 300,000 THB + 21,000 THB = 321,000 THB

In this example, the seller would receive the net sale proceeds of 9,679,000 THB (10,000,000 THB - 321,000 THB), while the real estate agent would receive the total commission of 321,000 THB, which includes the 7% VAT.

Are You Still Not Sure if You Need to Pay a Commission or What the Commission Should Be?

If you're still unsure about the real estate commission in Thailand or have any other questions, it's always a good idea to consult with a experienced RE/MAX agent. They can provide you with detailed information and guidance specific to your property transaction, ensuring that you understand the commission structure and any associated fees or taxes.

RE/MAX agents are knowledgeable about the local real estate market and can help you navigate the commission process with confidence. They can also provide insights into the standard commission rates in your area and assist you in negotiating the best possible terms with the real estate agent.

By working with a RE/MAX agent, you can feel assured that your real estate transaction will be handled professionally and transparently, with your best interests in mind.

Conclusion

Understanding the real estate commission structure in Thailand is crucial for both buyers and sellers. In this comprehensive blog post, we've explored the key aspects of real estate commissions, including what they are, when they are due, who pays them, and the standard commission rates across different regions.

Remember, the commission is typically paid by the seller to the real estate agent or brokerage, and it is subject to a 7% VAT tax. While the standard commission rate is generally 3% of the total sale price, certain regions may have higher rates of around 5%.

If you're unsure about the commission or have any other questions related to your real estate transaction in Thailand, don't hesitate to reach out to a experienced RE/MAX agent. They can provide you with the guidance and expertise you need to navigate the process with confidence.