View Full Version : Inflating property price to beat LTV restriction?
Assuming you have only $200K, you want to buy a $1m investment property, buy can only borrow $500k due to LTV.
Possible solution is that you get the seller to inflate the price to $1.6m so that you can borrow $800,000K from the bank. In return, you take up a short term loan to make round trip of $200K + $600K (short term loan) through the buyer and then you retire the loan.
Disadvantage is of course you need to pay higher stamp duty, but the advantage is that you could now own a property.
The above is just a simplified example for discussion sake.
So Clever, in the US they did it this way, called Cash Back. You buy 1 million they give you 200,000 back.
There is such a thing called valuation. I don't think bank can let you inflate loan by so much.
I doubt anyone wants to increase their loan quantum like this though...
There is such a thing called valuation. I don't think bank can let you inflate loan by so much.
I doubt anyone wants to increase their loan quantum like this though...
loan quantum is still the same if you are buying your first property
80% of $1m = 50% of $1.6m = $800k
obviously you can t put this on the s and p. Seller decide to play punk you die jialat jialat
The banks valuation can't be that far off, and I believe you need to declare if you have any discount kick backs from seller etc. If found out, they can call back the loan and the buyer's property can go up lorry.
Autumnwinds
09-07-13, 19:46
Not possible, for a higher loan quantum, you'd have to be earning much higher for the bank to even grant you that amount.
Assuming you have only $200K, you want to buy a $1m investment property, buy can only borrow $500k due to LTV.
Possible solution is that you get the seller to inflate the price to $1.6m so that you can borrow $800,000K from the bank. In return, you take up a short term loan to make round trip of $200K + $600K (short term loan) through the buyer and then you retire the loan.
Disadvantage is of course you need to pay higher stamp duty, but the advantage is that you could now own a property.
The above is just a simplified example for discussion sake.
You teach pple go holan.
Not possible, for a higher loan quantum, you'd have to be earning much higher for the bank to even grant you that amount.
Do you mean its possible if your income could qualify for the loan.
obviously you can t put this on the s and p. Seller decide to play punk you die jialat jialat
It could possibly be done between family members, partner relatives or friends.
Assuming your relative is selling and you are want to buy. So you orchestrate this round trip scheme to overcome the LTV restriction.
err... you know what LTV stand for?
I thought it is Loan To Valuation? Do they care what your selling price is?
Condo Kaiser
09-07-13, 23:07
Definitely not possible... the valuer will never give you valuation of 1.6m when it is only worth 1m...
err... you know what LTV stand for?
I thought it is Loan To Valuation? Do they care what your selling price is?
Why you pichar his pipe dream?
He haven't say his relative is the property valuer...
Not possible, if caveat shown 1.6m, tax man will go after the seller.
Not possible, if caveat shown 1.6m, tax man will go after the seller.
Why? Is it gov collect more Tax, the Tax man need to investigate, maybe they got noting better to do is it. If I am the Tax man I would say it the job of MAS not IRAS.
Or maybe you might say the gov will stop you from selling your property too high.
Not possible, if caveat shown 1.6m, tax man will go after the seller.
why would tax man go after seller when there is no such thing as a capital gain tax? The only tax is SSD, which only affect those who sold their property within 4 years from purchase date.
Ya maybe it's MAS and not tax man.
You just sold ur property for "1.6m"
But your bank did not reflect the additional "600k".
My friend sold his condo x 2 and received 12m. The very moment the money is credited into his bank account, the next day Iras called to enquire about the money and transaction.
And I think the lawyers will not "help"
you to do so as they need to collect "800k" from you to the seller.
Ya maybe it's MAS and not tax man.
You just sold ur property for "1.6m"
But your bank did not reflect the additional "600k".
My friend sold his condo x 2 and received 12m. The very moment the money is credited into his bank account, the next day Iras called to enquire about the money and transaction.
And I think the lawyers will not "help"
you to do so as they need to collect "800k" from you to the seller.
In this case, MAS is only concern about the source of fund, they are not concern if you gamble it away in Casino or give it to your mistress.
So no issue on the round tripping if you ask me.
I rem last time FEO used to do this, if the property cost is 1m and you only have 100k, they can mark up the selling price to 1.1m but you have to pay all the difference in SD n interest.
It is easier if its direct from developer, but if you do it vs resale owner, I doubts lawyers from both sides will help and bank normally do not give valuation 10% higher than previous sale unit.
I still rem many years ago when I buy my property in D1, the bank are reluctant to match the valuation unless I took a lower LTV.
Bank usually bias new launch against resale. Example Corals can sell 3000psf and bank will match the valuation but if you try to buy Carribean at 2500psf, your valuation sure rejected.
In this case, MAS is only concern about the source of fund, they are not concern if you gamble it away in Casino or give it to your mistress.
So no issue on the round tripping if you ask me.
Maybe u try 1st den let us know if successful :D
And why last time only FEO doing it is because they are not listed.
Assuming you have only $200K, you want to buy a $1m investment property, buy can only borrow $500k due to LTV.
Possible solution is that you get the seller to inflate the price to $1.6m so that you can borrow $800,000K from the bank. In return, you take up a short term loan to make round trip of $200K + $600K (short term loan) through the buyer and then you retire the loan.
Disadvantage is of course you need to pay higher stamp duty, but the advantage is that you could now own a property.
The above is just a simplified example for discussion sake.
wah piang, i hope u know that people have been convicted for such practices before.
:doh: :doh: :doh:
like that hamilton scott also roundtripping le. from 3000psf suddenly jump to 5000psf.
Condo Kaiser
10-07-13, 11:06
I hope someone will propose this to me when buying my property.
1mm sell as 1.6mm...
after execute liao then i decide if i want to return him the 600k.....
:D :D :D
I might even propose to him why not inflat to 3mm? then he no need downpayment at all and still can get 2mm back from the bank....
:doh:
Regulators
10-07-13, 12:14
After signing the contract, i will pretend there is no private agreement :D
I hope someone will propose this to me when buying my property.
1mm sell as 1.6mm...
after execute liao then i decide if i want to return him the 600k.....
:D :D :D
I might even propose to him why not inflat to 3mm? then he no need downpayment at all and still can get 2mm back from the bank....
:doh:
astroboy8681
10-07-13, 12:27
like that hamilton scott also roundtripping le. from 3000psf suddenly jump to 5000psf.
goodness gracious 5000psf!!! for these whales they already do not need to round-trip....
but at this price i really start to wonder...
err... you know what LTV stand for?
I thought it is Loan To Valuation? Do they care what your selling price is?
Maybe you can write to your good friend at IRAS or MAS to ask them to look into this.
Someone just paid $2922psf for a 8902sqft landed property at Sentosa.
A whopping $26m for a 8902sqft?? And purchaser has got HDB address.
I am just wondering what is going on there.
Ya maybe it's MAS and not tax man.
You just sold ur property for "1.6m"
But your bank did not reflect the additional "600k".
My friend sold his condo x 2 and received 12m. The very moment the money is credited into his bank account, the next day Iras called to enquire about the money and transaction.
And I think the lawyers will not "help"
you to do so as they need to collect "800k" from you to the seller.
I believe u, I kena called before also.
Ya maybe it's MAS and not tax man.
You just sold ur property for "1.6m"
But your bank did not reflect the additional "600k".
My friend sold his condo x 2 and received 12m. The very moment the money is credited into his bank account, the next day Iras called to enquire about the money and transaction.
......
but...but....but...bank accounts is supposed to be private. MAS cannot suka2 any old how check people's bank acct le.
ooop, i just woke from my dream, USA, land of the free also have massive spying programs, what more authoritarian states like Singapore.
Remember: your vote is not a secret. 2016, vote PAP.
Someone just paid $2922psf for a 8902sqft landed property at Sentosa.
A whopping $26m for a 8902sqft?? And purchaser has got HDB address.
I am just wondering what is going on there.
when you sign OTP, S&P, u use what address?
many foreigner used their property agent's HDB address for correspondence purposes.
are you really that interested?
you have squarefoot, you know address already. then pay money lor. no need to wonder anymore.
Maybe you can write to your good friend at IRAS or MAS to ask them to look into this.
using your example earlier. LTV50%.
bank valuation is $1million.
you buy at $1.6million.
how much can you borrow from the bank?
using your example earlier. LTV50%.
bank valuation is $1million.
you buy at $1.6million.
how much can you borrow from the bank?
Of course you will need the bank to value your property at more than what you are actually paying in order to exploit any loophole. Like i said, $1m is just an example, so dont be overly fixated by the amount.
Condo Kaiser
10-07-13, 13:49
This will only be worth it if the inflated price is significantly higher than the actual price. In order to extract equity / or to borrow more.
So whether it is 1mm or 2mm or 20mm doesnt make a difference... No one will do it for you...
And like I said... please introduce to me anyone who is interested to do that.. I have all kinds of properties to sell to him... as long as he willing to inflate the selling price....
This will only be worth it if the inflated price is significantly higher than the actual price. In order to extract equity / or to borrow more.
So whether it is 1mm or 2mm or 20mm doesnt make a difference... No one will do it for you...
And like I said... please introduce to me anyone who is interested to do that.. I have all kinds of properties to sell to him... as long as he willing to inflate the selling price....
For a $1m apartment is will be difficult, but for a landed property, it might be possible because land property are harder to compare against transacted price because they comes in all forms and conditions.
this is what other people do in neighbouring countries.
A sell to B a house at $1m.
A & B both report the house transacted at $500k. to avoid govt taxes.
B work together with bank manager, valuation teams, say house worth $2m.
even though the bank manager know that house transacted at $1m.
B will borrow $2m. the difference of $1m is split by B, bank manager, valuation teams. A dont get anything extra.
Condo Kaiser
10-07-13, 14:05
In singapore cannot as the bank only lend transacted price or valuation, which ever is lower...
Condo Kaiser
10-07-13, 14:09
For a $1m apartment is will be difficult, but for a landed property, it might be possible because land property are harder to compare against transacted price because they comes in all forms and conditions.
Haha, I'm not sure what type of landed buyer you refering to... the ones i know dont take 80% loan....
if you need to take 80% loan in order to afford... then i would say stay out of landed.
be it 3.5mm terrace or 35mm GCB
this is what other people do in neighbouring countries.
A sell to B a house at $1m.
A & B both report the house transacted at $500k. to avoid govt taxes.
B work together with bank manager, valuation teams, say house worth $2m.
even though the bank manager know that house transacted at $1m.
B will borrow $2m. the difference of $1m is split by B, bank manager, valuation teams. A dont get anything extra.
I don't think it can be done in Indonesia. Tax is based on "taxable value" of the land, which is vary from year to year and it is determined by the gov every year. "Taxable value" is the value of the land when u pay your property tax. It usually much lower than the transaction value.
Inflating the transaction value now is hard. U can normally only borrow 50% and the property usually only valued at 80% from the normal value. Even worse if the bank decided to use "taxable value"
Condo Kaiser
10-07-13, 14:58
I know this is done in India - but that is only because govt's valuation of the land is still based on value in the 70's which is many cases only 10% of current value. And sellers often under value the land to pay less taxes.
So the rest is sort of Cash-over-valuation paid to the seller. Banks are able to lend you based on the full trasacted price...
But........ india market is not say you want to enter can enter one...
hahaha....
Of course you will need the bank to value your property at more than what you are actually paying in order to exploit any loophole. Like i said, $1m is just an example, so dont be overly fixated by the amount.
You think banker want a call from CPIB to help you out?
Now loan amount is dependent on total amount of debt, already bankers got headache, you think they want to give themselves this one?
Anyhow, if you want to buy a 1 million dollar property for 1.6 million drop me a line - I will help you out. Let me know the location you want so I can find one and buy it first yah? I'll take a free 600k for you to get on the property ladder.
this is as sound as his claims about a third IR at JLD that will propel jurong property prices into the stratosphere.
like that hamilton scott also roundtripping le. from 3000psf suddenly jump to 5000psf.
This is one case which is worth investigating for sure.
this is as sound as his claims about a third IR at JLD that will propel jurong property prices into the stratosphere.
I honestly have no clue about what you are talking here. If you have nothing to comment, perhaps you can just read.
the valuation will kill it. No bank will value it that high.
I've tried it before (in Malaysia) by going the other way though (putting a lower price in the SnP)...and the valuation department (stamp duty) disagreed and marked it higher...
It's a common practice in M'sia.
In Singapore, the banks will always value a property conservatively (meaning direction is down, not up).
a better bet is to borrow money cheaply from relatives to top up as a result of the new restrictions!:banghead: :banghead: :banghead: :banghead:
the valuation will kill it. No bank will value it that high.
I've tried it before (in Malaysia) by going the other way though (putting a lower price in the SnP)...and the valuation department (stamp duty) disagreed and marked it higher...
It's a common practice in M'sia.
In Singapore, the banks will always value a property conservatively (meaning direction is down, not up).
a better bet is to borrow money cheaply from relatives to top up as a result of the new restrictions!:banghead: :banghead: :banghead: :banghead:
There is a unit at Hamilton Scotts that was sold recently at 5000psf, prior to that all transaction was below 3500psf. How is the bank going to justify on the valuation for this one?
this is what other people do in neighbouring countries.
A sell to B a house at $1m.
A & B both report the house transacted at $500k. to avoid govt taxes.
B work together with bank manager, valuation teams, say house worth $2m.
even though the bank manager know that house transacted at $1m.
B will borrow $2m. the difference of $1m is split by B, bank manager, valuation teams. A dont get anything extra.If $1mil split between 3 people, each will probably get only between $300k to $400k. Just go to bank and take equity loan. If valuation is $1mil, and B only bought for $500k, he already secured $300k (80% of $1mil - $500k). No strings attached and no further complications with the other 2 parties. Better still if actual valuation comes above $1mil. :cheers6:
There is a unit at Hamilton Scotts that was sold recently at 5000psf, prior to that all transaction was below 3500psf. How is the bank going to justify on the valuation for this one?
actually i am curious too!..wonder if the transaction is in cash or loan..
Banks do valuation to protect themselves too.
If they allow you to inflate,
1. Seller takes money and run (legally)
2. You decide to walk away from purchase.
Who will top up the excess, inflated value?
The bank? Remember why they need to be conservative and provide an underestimate or at best a fair value.
There is a unit at Hamilton Scotts that was sold recently at 5000psf, prior to that all transaction was below 3500psf. How is the bank going to justify on the valuation for this one?
That might not be due to valuation. You want to pay $10 million for your valued $1million property, the bank won't stop you.
But they only lend you 800k at most. You gotta figure out by yourself where to find funds for $9.2 million.
Banks do valuation to protect themselves too.
If they allow you to inflate,
1. Seller takes money and run (legally)
2. You decide to walk away from purchase.
Who will top up the excess, inflated value?
The bank? Remember why they need to be conservative and provide an underestimate or at best a fair value.
Its doesnt really make a difference to the bank actually because the intention is to bypass the LTV restriction for 2nd and 3rd property.
80% x 1m = 50% x 1.6m = still $800k to the bank.
How can seller take money and run and you walk away from the purchase at the same time? doesnt make sense leh.
Sellers only get the full amount of money on the day the lawyer execute the transfer of ownership. (completion) by then the money which you need to pay to the sellers is already with the lawyer a few days earlier. How to back out?
The bank will not allow valuation above and beyond "Market Price"..
the reason is because of COLLATERAL.
When bank gives you the loan, they are taking your titles as collateral. It is in their interest to mark the collateral down to a level which is as conservative as possible. For land, the mark downs can be as much as 50% (because land cannot be rented out). For Landed Stuff / Condos, it is usually as much as 20% versus the market depending on current regulations and also age of the place.:banghead: :banghead:
Hence, for bank financed real estate transactions, bank valuation is a dead stopper for such an arrangement.
There is a unit at Hamilton Scotts that was sold recently at 5000psf, prior to that all transaction was below 3500psf. How is the bank going to justify on the valuation for this one?
The buyer took a very small loan. FYI
I believe u, I kena called before also.
I am slightly better, they didn't call me. They wrote me letter to demand proof. Hahaha
The buyer took a very small loan. FYI
anymore details?
Actuually what does tHe V of LTV stands for? Is it valuation price or just purchase price?
V = Market valuation price or purchase price, whichever is lower..:banghead: :banghead:
http://www.moneysense.gov.sg/life-events/buying-a-home.aspx
:banghead: :banghead:
Condo Kaiser
11-07-13, 00:08
Can't believe we are still at this topic.. thought I was sufficiently clear in my previous explanation....
The bank will not allow valuation above and beyond "Market Price"..
the reason is because of COLLATERAL.
When bank gives you the loan, they are taking your titles as collateral. It is in their interest to mark the collateral down to a level which is as conservative as possible. For land, the mark downs can be as much as 50% (because land cannot be rented out). For Landed Stuff / Condos, it is usually as much as 20% versus the market depending on current regulations and also age of the place.:banghead: :banghead:
Hence, for bank financed real estate transactions, bank valuation is a dead stopper for such an arrangement.
Agree with you, to mark up by 5-10% maybe still possible, anything more than that, the bank will ask you to go next door. The scariest part is the seller play punk, then the buyer is in deep shit...super deep. But the buyer can always protect himself by asking the seller to sign an IOU of XXXX together with the S&P.
Haha, 6 pages on and TS is still unclear about what LTV means.
The valuation ultimately determines the amount of loan u can take. Purchase price has no bearing UNLESS it is lower than the valuation.
The bank is supposed to go out there and get 3 valuations from 3 different valuers which must be on their approved panel. Those who suka suka anyhow give valuation will get kicked out of the panel faster than you can type LTV.
Where got so easy to kelong one? :D
smellyfish
11-07-13, 16:14
previously there was indeed some "stretchability" in valuation. MAS did step in and impose a whole host of valuation guidelines on the Bank, so these days quite impossible.
any way, in the case of residential properties, esp. popular developments, the market value is all quite transparent. In case of commercial properties, maybe more subjective.
it is like exchange traded vs OTC
To be frank, this is not worth a discussion. This is an old trick where MAS or banking system still in their 60's-70's. Now is already 2013 and we are still looking at this old trick? can recommend some 21's century trick?
Hmmm.....can pm me...also want to up my monies so can buy my dream house:D
Can't believe we are still at this topic.. thought I was sufficiently clear in my previous explanation....
you are not dealing with intelligent life
Powered by vBulletin® Version 4.2.2 Copyright © 2024 vBulletin Solutions, Inc. All rights reserved.