"Not Illegal, But..." Experts Say President Lee’s Mortgage Deal Needs Policy Consistency

Seller Financing Listings Emerge Amid Loan Restrictions
"Simply a Choice by Buyer and Seller... No Issue"
"Out of Sync with Loan Regulations... Interest-Free Deals Are Unusual"

Recently, the so-called "seller financing" that came to attention through President Lee Jaemyung's apartment sale has sparked mixed views: some see it as a loophole to bypass loan regulations, while others regard it as a legitimate private transaction. This is a type of transaction in which the seller allows the buyer to pay a portion of the home price at a later time. Experts advise that efforts are needed to align the fairness between loan regulations in the financial sector and private financing.

According to the real estate industry on July 23, such alternative transactions—where homeowners defer part of the sale price—are increasingly emerging in the high-priced housing market, which has recently seen tightened loan regulations.

For example, a 59㎡ exclusive area unit at Gangnam Jagok I-Park in Gangnam-gu, Seoul, is listed with an asking price of 2 billion won and a note stating "Owner loan of 600 million won." Similarly, a 129㎡ exclusive area unit at Gwanggyo Joongheung S-Class in Suwon, Gyeonggi Province, with an asking price of 2.75 billion won, includes the note "Seller financing available."

This type of deal is called "seller financing." The seller establishes a collateral mortgage on the property to secure unpaid amounts, while the buyer can obtain the needed funds when unable to get a bank loan.

President Lee followed a similar arrangement when selling his apartment in Bundang for 2.9 billion won: he set a collateral mortgage of 1.777 billion won and deferred payment interest-free until the final settlement in October.

Real estate expert A commented, "This is not a deal exclusive to the president—anyone can utilize it if both parties agree. Unless the transaction involves tax evasion or is fraudulent, third parties have no grounds to raise objections."

A 59㎡ property in Gangnam Jagok I-Park, Gangnam-gu, Seoul, features a description stating "Seller's loan of 600 million won." This is a "seller financing" listing where the seller lends part of the purchase price to the buyer, with an asking price of 2 billion won. Screenshot of an online real estate platform.

However, most experts point out that while such transactions are not illegal, they raise concerns about inconsistency with loan regulation policies.

Expert B remarked, "The government is strictly restricting leverage through banks, yet policymakers themselves have provided private leverage through seller financing. This creates a significant disconnect with the sentiments of genuine homebuyers." Another expert, C, added, "This is inconsistent with the administration’s stated goal of curbing real estate speculation."

Experts suggested that, following President Lee Jaemyung’s real estate forum, there is a need to review the fairness between loan regulations and private financing. Real estate expert D commented, "It seems unavoidable to face political criticism for undermining the effectiveness of government policies aimed at cooling the housing market through tighter loans."

There is also an opinion that tax rules on interest-free transactions need to be clarified. Expert D explained, "In principle, when the benefit from interest-free lending between unrelated parties exceeds 10 million won per year, it is considered a gift for tax purposes. However, if the transaction is justified and recognized as common practice, taxes are not imposed. It is difficult to regard the act itself as illegal."

The head of a real estate agency in Daechi-dong, Gangnam-gu, noted, "In more than 20 years of brokering deals, I can count on one hand the number of cases like this. It is unusual to not only defer a substantial payment but also not charge any interest."

This content was produced with the assistance of AI translation services.