Key takeaways
- Sales value on the contract is not the cash that reaches the project. Commission, marketing, discounts and freebies reduce both profit and cash
- Raising selling costs in the sample project from 5% to about 10.5% of sales reduces net profit from THB 359.3 million to THB 265.6 million and increases the funding gap from THB 49.7 million to THB 132.7 million
- Commission is paid at the time of sale, but revenue arrives at transfer. Splitting payments to match the timing of cash inflows reduces the gap without cutting agents' pay
What are the hidden costs?
Developers tend to look at profit as selling price minus construction cost, but every baht earned from Presale comes with costs attached. These costs are spread over several lines in the accounts, and some do not appear as expenses at all because they are embedded in the net selling price. They should therefore be combined into a single item called Cost of Sale Realisation
| Item | Characteristics | Cash flow timing |
|---|---|---|
| Commission for agents and sales staff | % of selling price; may be higher for overseas agents | At contract signing, or paid in instalments up to transfer day |
| Marketing and advertising | Launch budget, sales gallery, digital, media | Before and during launch, before any revenue |
| Early bird and promotional discounts | Direct price reductions; they do not appear as an expense | Reduce every instalment |
| Freebies, furniture, prepaid common area fees | Real costs borne by the developer | At handover or before transfer |
| Bearing the buyer's transfer costs | Fees that are the buyer's share but are paid by the developer | Transfer day |
| Cancellations and resales | Commission and marketing a second time | When the event occurs |
| Financing cost of down payment discounts | Buyers pay later, so additional borrowing is needed | Throughout the construction stage |
Worked example: the impact layer by layer
Sample project: uses the same assumptions as the other pages in this series: 20/15/65 payment terms and total sales value of THB 2,100 million before discounts. The rates in the table are assumed values for sensitivity purposes, not market rates
| Case | Comm. | Marketing | Discount | Net profit | Equity IRR | Peak Funding | Funding Gap |
|---|---|---|---|---|---|---|---|
| Base | 3% | 2% | 0% | 359.3 | 21.2% | 867.9 | 49.7 |
| Add commission | 5% | 2% | 0% | 324.1 | 19.1% | 900.8 | 85.0 |
| Add marketing | 5% | 3% | 0% | 306.1 | 17.9% | 921.8 | 107.4 |
| Add discounts | 5% | 3% | 1.5% | 283.0 | 16.7% | 929.4 | 115.2 |
| Add 1% freebies | 6% | 3% | 1.5% | 265.6 | 15.7% | 945.9 | 132.7 |
The 1.5% discount in the table is equivalent to giving a 5% price reduction to about 30% of the project's buyers. The 1% for freebies is recorded together in the commission column so that it shows up as cash paid out at the time of sale
Do not rely on a ready-made rule that selling costs are 25–30% of sales, because the components differ by channel and project type. Calculate from the project's actual policy and compare it with the approved budget
Commission timing can change the gap
Paying 100% at contract signing vs 50% at contract signing and 50% at transfer
In the sample project with 3% commission, deferring half to be paid at transfer reduces the funding gap from THB 49.7 million to THB 23.1 million. Peak Funding falls from THB 867.9 million to THB 845.8 million. Total commission stays the same. What changes is that cash outflows match cash inflows more closely, and agents also remain tied to the quality of the customer until transfer day
Commission and the financial statements
Under TFRS 15, incremental costs of obtaining a contract, such as commission paid because a sale was successful, may be recorded as an asset when they are expected to be recovered, and amortised as revenue is recognised on transfer. General advertising costs are usually expensed as incurred. The policy should be confirmed with the auditor, especially for entities that do not use full TFRS
Reported profit may therefore look normal in a year when the cash has already gone out. Management should therefore review the cash flow report of selling costs alongside it
Bearing the buyer's transfer costs
The standard transfer fee is 2% of the appraised value, and buyer and seller generally agree to share it. The examples in this series assume that the developer bears 1% of the selling price. If a promotion has the developer bear the buyer's entire share, this cost increases
The Cabinet resolution of 30 June 2026 extends the reduction of the transfer fee from 2% to 0.01% and of the mortgage registration fee from 1% to 0.01% for residential property with a sale price and appraised value of no more than THB 7 million per unit, effective from the date of publication in the Royal Gazette until 30 June 2027. Check the latest announcement and its conditions before using it in estimates, as measures of this kind can change. The 3.3% Specific Business Tax (SBT) must still be calculated separately
Selling cost policy to set before launch
- A total selling cost budget as a % of sales, with a ceiling for each channel
- Commission payment terms tied to cash receipts and transfer
- A discount approval authority table showing who can approve how much
- A rule that freebies must also be counted as discount value
- Report net sale value per unit, not just gross price
- A rule on how commission is refunded, or deducted from the next payment, when a sale is cancelled