Owner Financing

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?

In Taiwan the land and property registration is handled by the local government office. Their records include a description of the land and property including size of each in Ping. Selling such involves the seller getting a certificate of the property from the land registration office. The buyer and seller get together with an agent known as a “Daishu” which is a special agent for handling these sorts of transactions. The Daishu performs services along the lines of what a Broker, Notary and Lawyer would do in the west, but is a separate occupation. When the buyer, seller and Daishu are together, all the details of the transaction are discussed and finalized, and then once payment is confirmed the Daishu will stamp the documents in all the right places. At that point the deal is finalized and the papers are returned to the land registration office to be filed at which point the owner can get a certificate that the land and property are theirs. This is a bit vague as to the details but is the best I understand it.

I think what is needed for your system is a legal mechanism to do liens on a property. In the west, when a secured loan is made, the lender places a lien on the property which allows the lender to take possession of the property if the terms of the loan are not met. I’m not sure if there is any legal mechanism to register or enforce leans against property here.

Thanks jlick;

As for the issue of liens, the Mortgage and Deed of Trust effectuate the lien. THe real estate contract provides no lien as title to the property does not pass until the loan is fullfilled. In the early days of these contracts in the U.S., the owner simply had a quit claim deed signed at the closing meeting when the right of occupancy passed to the intended buyer. If a payment was late, the seller simply recorded the quit claim deed and called upon the police to remove the buyer with force if necessary. As one can imagine, the abuses of the system became rampant and the various state legislatures provided a formal foreclosure process much like those required for more traditional financing vehicles.
Thanks again for the registration information. I have been curious about this for some time.