2014-06-15

Trending in Shenzen: Sell Your House to Yourself, Obtain Millions in Bank Loans

Property agents and homeowners are working together to obtain bank credit. A homeowner dumps their property to an intermediary for an inflated price. This leaves the buyer flush with cash and able to obtain a mortgage to buy a new home. The intermediary then sells the property to a company controlled by the original owner. Since it is a company, the homes are recognized as fixed assets and the company can obtain credit to purchase the homes. The process pushes up home prices, increases transactions, increases the amount of credit available to speculators, which then benefits an array of high risk borrowers starved for credit. A win-win for everyone involved in inflating the real estate bubble.

Although this scam has always existed to some degree, due to the cooling real estate market, it is becoming much more popular. Real estate appraisers, real estate agents and micro-credit lenders are teaming up with real estate speculators. The appraisers inflate the value of the properties, which by the end of this process may be inflated by more than 80%. (First the home is sold for an inflated value of 35% through the sales agent, then the company buying the property has the appraiser appraise the homes at 35% above the purchase price.) Then the sale is contracted outside of the banking system, with the final step being the obtaining of fresh bank credit. If a home buyer went straight to a bank, the bank would only lend 60-70% of the home's value and they tend appraise value on the low side.

Mr. Zhu of Shenzhen used this process to obtain ¥30 million in bank credit. "The homes are still in my possession, but by transferring them I can obtain much more money."

Some of that money is used to buy more homes, but some is also lent to micro-finance companies for high interest lending. Some are also moving into commercial real estate investment.

In order to pull this off, you need a lot of guanxi (关系), relationships with these various parties. An individual cannot do this on their own. This method is also explicitly illegal under Chinese law. A recent case in Dongguan involved a developer who used this process 7 times over in order to obtain more than ¥10 million in credit. He is currently being criminally prosecuted for fraud.

"This type of mortgage financing method can increase leverage and hide the greater risk. If one link becomes frozen though, it can set off a series of crises," said a employee of the Shenzhen branch of Agricultural Bank of China.

中介联手炒房客伪抛盘套房贷 暗催楼市泡沫
Recently, Guangzhou, Shenzhen and other cities are frequent hand housing focus on selling. Significant increase in the number of second-hand housing behind the plate, the hidden part of the real estate speculators who made ​​"pseudo-selling" phenomenon.

"China Times" reporter found that some have multiple sets of real estate investors, first outside "sell" personal name in real estate, then operated by the company I then set. During this period, I and the company are to "increase the bank account running account" and "fixed property increases" as an excuse, taking double the loan, or find housing valuation rating agencies will do high, obtain from banks, small loan companies and other institutions far exceeding the value of housing loans, credits or even up to tens of millions.

"Just housing transfer, changed the name, you can increase the loan amount, but directly to the mortgage, mortgage loans from banks is certainly not so much." Intermediary agents in Guangzhou, a senior, said Mr Wong.

Although this phenomenon has always existed in the secondary housing market, but the recent transaction with deserted started to become more frequent. Had "disdain these penny earned" intermediary agency, housing assessment companies and small loan companies, real estate speculators who now work together to help cover the loan earn commission, formed a gray interests of the chain.

"Left hand down the right hand," the taking of loans

"City House, 9 sets, centralized Asking, MISS." Above Guangzhou Wong, senior intermediary agents to issue a message to the old customers. He told this reporter: "These people do not buy real estate outside of less than one thrown out, the other will soon pick plate, both sides are good agreement."

Mr Wong said this 9 suite is owned by private business owners, then the disc is a company that operates the business owner. "Fast disk access their company, intermediary which assistance can be taking large loans. Similar approach has a lot."

Mr Wong told reporters, these business owners through intermediary agents familiar Asking and find "opportunities" in the housing assessment agencies do high housing valuations. After the completion of the transaction, holding down payment loan has been paid to prove, they can obtain bank loans. "After obtaining the loan, but also notary house is still owned by sellers who, after the signing of the contract by doing the yin and yang of high housing valuations, the contract price of a suite of more than 30% of the actual maximum energy turnover."

"If you have to go to the bank is the lender for a loan, the loan amount only to assess the price of 60-70%, and housing prices have much lower assessment." Guangdong Development Bank, an insider told reporters.

Shenzhen business owners Chu also passed two months ago in a similar way, the success of taking loans in excess of 30 million yuan. "The house is still in my hands, but the revolution can get more money." He said.

Wong Chu arbitrage path and the examples would be similar. First, he told an agent familiar released eight sets sell real estate news, intermediaries will be given a relatively high prices, then, Mr. Zhu's company acquired the eight sets of real estate agency in accordance with the pricing.

Similarly, the company prior to the banks for home loans, first by assessing the company "gives about 35% higher than the trading price of the highest appraised value" basis which means that the housing transaction price has been raised on the intermediary, assess the price continues to increase by 35%, to "do the double high" purposes. After the transfer procedures, Zhu my account adds a substantial amount of revenue their company's real estate assets also increased significantly.

"In general, individual mortgage loan amount up to assess the price of just 70% of the purchase if the company, and good water company accounts, mortgage companies can find a facility to do XF, fixed assets if the company is more, even Jiucheng. "Agricultural Bank of China [1.18% funding research report] Shenzhen Branch of a person engaged in the loan business, said.

A real estate appraisal company insiders told reporters that the current real estate assessment has enough "flexibility" of space, according to customer needs, providing the highest and lowest evaluation price, "look for relationships, assess the company will give as much as possible under the provisions of assessment of the highest price. "

According to media reports, real estate speculators who bought the property, then the relationship between the secondary real estate mortgage, then the money to buy a house, or to lend mortgage money to lend microfinance companies. Now that the government carry out the purchase of housing, some real estate speculators put investments concentrated in commercial projects, in the same manner mortgage financing.

However, a number of respondents said that the operation can be realized so successfully taking loans, have a lot of "relationship", ordinary people difficult to achieve.

Interests of the chain "pseudo-selling" behind the

In the hundreds of thousands of yuan of bank loans seduction, with a large number of real estate firms, and intermediary agencies, housing assessment companies and small loan companies have become part of the interests of the chain.

"Over time, I will consider sub hands again." Chu told reporters that the reason for the use of the house sets the loan, mainly to ease the financial pressure Industrial operations. He admitted that he does not look empty real estate appreciation, on the contrary, he is more optimistic about the real estate investment, real estate so he insisted to remain in their own hands, not really foreign sales.

Reporters learned that, with Mr. Zhu few like-minded business owners.

Many respondents said that as an intermediary agency, housing assessment companies and small loan companies in the business of the off-season to help owners "borrow Housing Financing" you can get some commission, which part of the revenue to offset the loss of income during property transactions deserted.

Guangzhou, a small loan company official said Guo, small loan companies are mainly financed shareholder loan capital and bank loans, since this year, there are many difficulties in business operations and cash flows of the entity, coupled with the overall tightening of bank loans, small loans operating pressure has become more evident.

Guo said that part of the success to the room set-prime real estate speculators money into private lending, the pursuit of higher returns.

" Small property room bear a lot of risk mortgages, small loan companies are now doing good business, have scrambled to do a similar business, they are willing to take more risk. "By taking small property loans Liu said .

Guo said that business is good in small loans, the loan amount will be slightly below normal valuation. Now business is not satisfactory, the loan amount will be raised, so then the business will be considered at high risk, such as small property mortgages.

"With this set-prime mortgage financing, not only magnified the leverage effect, but also a greater risk of hidden Once a link is stuck in the middle, ready to lead a series of crises." Agricultural Bank of China Shenzhen Branch, told reporters.

Meanwhile, participants taking loans may touch the law "red line", the law provides for the sale of housing in the form of cash in bank loans is illegal.

Dongguan City, the second Court recently heard a related case, the Australian developer of Dongguan City, Lee Garden Development Co., Ltd. and its former legal representative Cui Zhiguang charged with liquidity problems due to the company, seven false name of another person the way from the bank to cheat buyers loans, accumulated more than ten million yuan. The prosecution, Cui Zhiguang fraudulent loans should be held criminally responsible.

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