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Illegal Home Deals Rife in High Speculative Areas

Posted June. 19, 2009 04:56,   


A 34-year-old housewife recently had a tempting offer from a real estate agent operating near Pangyo New Town, south of Seoul.

The agent told her that if she bought the right of lease to a medium-size rental apartment for a premium of 30 million won (23,715 U.S. dollars) to the owner, she could expect capital gains after five years when the apartment can be legally sold.

“Sale of the leasing right is illegal but I was told that I could buy a rental apartment home under the market price and that there would be no problem if the seller makes a notarized document of the sale through a real estate agent,” the housewife said.

The incidence of such illegal deals is rapidly growing amid signs of recovery in property markets in areas such as Seongnam and Incheon in Gyeonggi Province. Unscrupulous “mobile” real estate agents who disappeared when the real estate market began its downturn have reappeared to pick up where they left off.

Real estate experts said yesterday that such agents scrambled to the sites of new apartment sales in Incheon that attracted many bidders, seeking to conduct illegal sales of leasing rights.

Under law, apartments on whose sale prices the government put a ceiling on cannot be resold for a year after the initial contracts are signed. Nevertheless, certain units are being resold under a method in which the sellers and buyers get their resale contracts notarized and transfer the resale rights a year later.

To pay less capital gains taxes, a seller can demand to a buyer to make a contract with a lower price than the one agreed on in return for a discount.

A real estate agent said certain sellers are insisting on such contracts, and those who will move into the apartments are accepting such illegal deals because they have nothing to do with the capital gains tax.

In Pangyo, where new apartment buyers have begun to move in, certain owners are selling their units before registering their ownership at a court to avoid heavy taxes.