I have been a bit curious about the lack of so called owner financing available in the housing market in Taiwan. Owner financing, in my experience, means those contracts which are drawn between 3 people or agencies. 1. A willing buyer. 2 A willing seller and 3. an intermediary that holds a deed, collects, distributes the money and tracks the financials. Some may call this a fiduciary.
This type of transaction is not readily apparant here. I am not certain why but it may have to do with lending regulations.
The U.S. has recognized this type of financing for many years. We started with the typical mortgage situation, derived from the latter British Common Law, which served everyone well for many years until problems developed in the agriculturals which are too numerous and detailed to mention here. Thus started the days of the Deed of Trust. It also served well, along with mortgages for non-agricultural land, until some individuals recognised that banks were making 6-10 % on the loan proceeds but sellers were only gaining 2-4 % on investment from the sale proceeds which were deposited after the sale proceeds were received from the bank. Thus came about the so called “Real Estate Contract”.
It was, and is basically, an agreement whereby a seller sells for a certain percent down and an amortised amount monthly which was deposited to an escrow account. (the fiduciary) The seller and buyer both receive a monthly invoice detailing payment and balance deficiency.
The buyer may iincrease payments at any time but the seller is limited in that s/he may not increase the price, interest, or terms unlless otherwise stated in the contract to which all three parties have negotiated.
The upside to this arrangement allowed willing buyers and sellers to do their own dealings, knowing with whom they were dealing. It also allowed persons with low or no credit ratings to buy property without the seemingly careless demeanor of a large financial institution. It also allowed the buyer to take back the property, under recent tight controls, of non-payors.
These three forms of credit buying of property are fairly common in the Western world.
My question centers around why Taiwan has not endorsed the Real Estate Contract as a viable method of buying and selling real estate.
Certainly it entails some infrastructure of fiduciary obligations and contractual rights. However, I see no move in this direction. It would save the seller numerous interest points in investment but is for the most part unknown hereabouts.
I know, many will say that the government needs to be involved in the so called foreclosure process. However, the government was not so involved in the early days in the U.S. It simply played “catch up” as time went by. Much the same can be said about the evolution between mortgages and deeds of trust in the U.S. The rule of law evolved to meet the needs of business.
Perhaps the property registration system need to be examined. How can one be assured that the buyer is buying exactly what is being sold, by description, location, size, etc. I simply don’t know that such a system exists here but it probably does in some format. What keeps a seller from selling to more than one buyer. Same issue. I don’t know.
I do know that the people who sort this out will be the next land barrons of Taiwan. Anyone want to join?