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What is Kai Faak?

Kai faak (in Thai: ขายฝาก) is a financial transaction which the seller sells a property unto the buyer which the seller also reserves an option to repurchase it back at a predetermined price and within a set time frame.

 

It is very similar to a sale leaseback or loan and yet distinctively different in laws, risks and benefits to both the lender (buyer) or seller (borrower.) As in lending, in the event of defaults, the lender would have to hire legal teams to serve proper legal notices to initiate the foreclosure process. In Thailand all foreclosure proceedings must be adjudicated. This means that it will take time, a lot of time. As the result, this supposedly simple process can potentially be prohibitively expensive and last many years or even forever, in extremes. The borrower could use all types of loopholes in the laws as defenses against foreclosing to the lender. Therefore lending money may not be as lucrative and simple as some people might believe.

 

In a perfect world, if a property owner wants money, he would borrow against his assets and gets money from the lender right away. If the borrower fails to repay the loan plus interest, lender can simply take the assets pledged. However, due to sophisticated laws and loopholes, that simple process is no longer the best remedy in the event of a default.

 

Kai faak remedies these problems. Since Kai faak is not a loan but a simple straight-sale. Buyer(lender) is not required to do a thing if seller(borrower) chooses not to repurchase the property. This eliminates the foreclosure costs and time to take title for a lender(buyer). For the seller(borrower), he has a buy-back option, but not an obligation and is off the hook and faces no other consequences in walking away such as deficiency judgement in foreclosures. Therefore, Kai faak is a win-win for both parties.