[Yonhap]
[Yonhap]

Seller financing — a practice in which a property seller lends money directly to the buyer — is making a comeback in Seoul's Gangnam apartment market as tightened bank lending rules make it harder for buyers to cover the final payment. With conventional mortgage loans falling short, buyers and sellers are increasingly crafting their own financing arrangements to close deals.

According to real estate brokers, a listing for a 59-square-meter unit at Gangnam Jagok i'Park in Jagok-dong, Gangnam-gu, recently appeared with the note: "Owner loan: 600 million won."

The unit was first listed on June 29 at 1.95 billion won ($1.32 million) but the asking price has since been adjusted to 2 billion won. Under current rules in regulated zones, the maximum mortgage available for a home in the 2 billion won range is about 400 million won, leaving a 600 million won gap that the seller would cover in exchange for interest payments.

Under this arrangement, a buyer could acquire the 2 billion won apartment by combining 1 billion won in personal equity with a bank mortgage and the seller loan.

Seller financing draws attention whenever lending regulations tighten, as it lets sellers earn interest income while giving buyers a way to bridge a funding gap. The practice is not legally prohibited and has been used in cases where buyers struggle to raise the final payment.

In regulated zones, mortgage limits vary by home price: up to 600 million won for homes priced at 1.5 billion won or below, up to 400 million won for homes between 1.5 billion won and 2.5 billion won, and up to 200 million won for homes above 2.5 billion won. Analysts say seller financing is resurfacing as tighter household lending controls have made it even harder for genuine buyers to secure funds.

The practice gained traction before — during the Moon Jae-in administration in 2020, when mortgage loans were banned outright for homes priced above 1.5 billion won, seller financing spread among high-end apartment transactions.

It has drawn renewed attention after seller financing was raised as a possibility in the sale of an apartment formerly owned by President Lee Jae-myung and his wife in Sunaedong, Bundang-gu, Seongnam, Gyeonggi Province.

The apartment sold under a purchase contract signed July 14 at 2.9 billion won, with the ownership transfer registration completed two days later on July 16. The buyer acquired the unit under joint ownership and is understood to have completed the registration before the end of this month, ahead of a scheduled announcement designating a reconstruction project operator — a move that would secure the buyer's status as a union member.

Registration records show that President Lee and his wife, as sellers, set up a maximum-claim mortgage of 1.77 billion won against the buyer, prompting some to suggest the deal may have involved seller financing.

Real estate industry sources in Bundang say the mortgage registration was most likely a procedural step to secure the buyer's union membership rights ahead of the reconstruction project. Had the ownership transfer been registered after the project operator designation, the buyer might not have been able to inherit union member status — making the mortgage registration a way to complete the transfer first.

The presidential office said the mortgage was set up at the buyer's request. "President Lee Jae-myung recently completed the sale of his home, and the transaction was concluded at 2.9 billion won — below market price," the presidential office said. "Although he had no obligation to sell as a single-home owner, it was a gesture of his commitment to practicing the real estate normalization policy." On the mortgage registration, it added: "It was done at the buyer's request."

Experts say non-traditional financing arrangements such as seller financing are likely to become more common as lending regulations tighten. They caution, however, that because such deals are private loans made outside the financial system, buyers and sellers must carefully review contract terms, repayment conditions and collateral arrangements — or risk future disputes.


rainbow@heraldcorp.com