purchasing a home in China

[chilton747]

Bill my wife bought her current home outright in 1995. She has shown to me the red book that has the ICBC bank logo on the book. Could this be fake or real?

[GZBILL]

Bill my wife bought her current home outright in 1995. She has shown to me the red book that has the ICBC bank logo on the book. Could this be fake or real?

 

I'm not sure what you mean by ICBC bank logo. Are you talking about the small red book that is your bank book / savings account passbook?

 

The title is a green or a red book the size of an A4 (approximately 8 1/2" x 11") piece of paper. On the front is the Chinese logo.

 

I'll scan one for you before the end of the week and send it to you via e-mail. Maybe Don can also post a copy here for others to see.

[chilton747]

Bill my wife bought her current home outright in 1995. She has shown to me the red book that has the ICBC bank logo on the book. Could this be fake or real?

 

I'm not sure what you mean by ICBC bank logo. Are you talking about the small red book that is your bank book / savings account passbook?

 

The title is a green or a red book the size of an A4 (approximately 8 1/2" x 11") piece of paper. On the front is the Chinese logo.

 

I'll scan one for you before the end of the week and send it to you via e-mail. Maybe Don can also post a copy here for others to see.

 

I will ask her about this again. It is possible that she was confused with what I wanted to see. What she showed to me was not an A4 sized book. I had asked her if she knew the title was for sure legit but she said she wasn't certain.

[GZBILL]

Bill my wife bought her current home outright in 1995. She has shown to me the red book that has the ICBC bank logo on the book. Could this be fake or real?

 

I'm not sure what you mean by ICBC bank logo. Are you talking about the small red book that is your bank book / savings account passbook?

 

The title is a green or a red book the size of an A4 (approximately 8 1/2" x 11") piece of paper. On the front is the Chinese logo.

 

I'll scan one for you before the end of the week and send it to you via e-mail. Maybe Don can also post a copy here for others to see.

 

I will ask her about this again. It is possible that she was confused with what I wanted to see. What she showed to me was not an A4 sized book. I had asked her if she knew the title was for sure legit but she said she wasn't certain.

 

Then again it was 1995. Maybe things were different then. I didn't buy my first house here until about 1999.

[jemmyell]

My wife and I want to buy an apartment in her home town where her family lives. The sellers have just finished the inside of a new apartment and are living in it while they wait for it to be sold. My wife says they have NOT 'registered the title' since this costs 'extra money' and we can register the title together after we pay them. Any idea if this is at all normal? Will getting a mortgage guarantee this sort of deal also? What does a mortgage usually cost (we will be in NE China, Jilin province).

 

-James

 

Unless the seller has an actual title in the form of either a red or green A4-sized book which is stamped by the provincial land bureau, they cannot legally pass title, period. There are scores of verified reports of people who have other forms of titles issued by local or city governments that, in the end, have their property paved over for a parking lot and get zero compensation.

 

Even if you are lucky and the government doesn't try to take the property away from you because you don't legally own it, noone elese would be foolish enough to buy it from you should you later want to sell it. Even in big cities like Guangzhou, there are complexes on the fringes of the city where they haven't legal title to pass to owners and when these people try to sell their homes nobody will pay them even 1/2 of the original purchase price -- if even that.

 

Golden Rule #1: If there is no title in the form of an A4 sized green or red book sealed by the provincial land bureau, you are going to get screwed.

 

I will scan one of mine and maybe Don can post it so people know what they must have in order to actually own the property.

 

Now, getting a mortgage will ensure you don't get taken. The bank will never approve a mortgage where they cannot perfect a lien on the property through the provincial land bureau.

 

I'm not sure what you mean by the cost of a mortgage, but I assume you mean closing costs. Getting a mortgage in China is nothing near the nightmare of getting one in the States. The only costs involved are the bank's lawyer's fees (the bank's lawyer also acts as your lawyer) and these will be no more than $200 (US) and usually just slightly more than $100.

 

You must, however, have property insurance that lasts for the life of the mortgage and that depends on the mortgage amount. The insurance coverage may cost you about 10k RMB or likely less.

 

There are no other costs associated with obtaining a mortgage.

 

Thanks, this helps a lot. My wife is unsure about what the story on the title is. The bottom line is I can afford to buy one house in China and we can't afford to lose our money.

 

What is the property insurance? If we pay the mortgage early will the insurance still persist for the original term?

 

-James

[GZBILL]

Thanks, this helps a lot. My wife is unsure about what the story on the title is. The bottom line is I can afford to buy one house in China and we can't afford to lose our money.

 

What is the property insurance? If we pay the mortgage early will the insurance still persist for the original term?

 

-James

 

Sure. Nobody wants to lose their money.

 

There are many kinds of titles used in China and all serve a different function. There is the title issued for farm land which sometimes farmers will use to try and sell off part of their land to others. Title issued for farm land is not passable to anybody, period. Then there is a kind of title issued for commercial property. While this title can be passed freely, it is not valid for residential uses. Then there is title issued for a commune. This is used sometimes for residential purposes but the title remains for the commune as a whole and cannot be issued in names of individual members / buyers / owners. This is a very risky title for buying residential property unless you are a member of the commune and expect to be so until you die. We also have titles of various sorts and shapes (which may also include some of those above) issued by any entity other than the provincial land bureau. Any title issued by other than a provincial land bureau is useless. Any of the above titles issued by the provincial land bureau are virtually worthless.

 

The only property you can really own (inasmuch as any property can be owned in China) is the residential property title issued by the provincial land bureau. It's always an A4-sized green or red book. This title is issued to the owner and any co-owners. So, if you buy with, say, your wife, and your name is also on the contract as a purchaser, you guys will get two titles: one for the owner and one for the co-owner. SOmetimes they are the same color (i.e. both red or both green) or sometimes one is red and the other green. Both are legally valid documents. The only difference -- other than possible color -- is that one has the extra character that means "co".

 

By property insurance you mean that which is required if you obtain a mortgage, right? This insurance is mandatory and only covers the outstanding debt to the bank should the property be destroyed by fire or other similar disaster. It is not what we would think of as homeowners insurance. So, should you pay off the mortgage early, the insurance is of no value and the unearned premium is usually refunded.

 

You can buy homeowners insurance on a separate basis if you'd like, but few people in China do that. I am one of those few and found that the cost is quite cheap.

[GZBILL]

First of all, I'm sorry about saying the title was an A4 size book. In fact, it is B5 -- approximately 7" x 10".

 

I have scanned some examples, but I don't see how I can post them here for all to see. If anybody would like, I can e-mail them to you. Just drop me an e-mail to my gmail account. My username is "gdbill".

[david_dawei]

I've put the documents as links in the other Pinned topic on Applications... I put a link in the pinned topic so people can find this again..

Edited August 16, 2007 by DavidZixuan (see edit history)

[chilton747]

This is really amazing Bill. I am chatting with my wife now and we are talking about the very things that you are posting. She says that you are very smart with this. I have to agree. She tried to tell me ago not to give all the money up front but I did not understand why. She wants to go with 50% down. Then after receiving the red book then we can quickly pay the other 50%.

But I have a question. Does the bank require that she be employed in order for us to qualify for the loan?

 

You know, when I first came to China I had the idea that everything a Chinese person told me was stupid because what they'd usually say was just so alien to what we have come to know in the States. Now, after many years, I have learned that Chinese people do most things differently for a perfectly valid reason. Trust your wife on this one.

 

Still, it doesn't matter what percentage of the purchase price you mortgage, since even if it is just 1% the bank will never grant the mortgage unless you are 100% certain to get clear provincial title.

 

When you buy a new home, the maximum mortgage amount is 70% for Chinese purchasers and 50% for foreign purchasers. If you buy together with your wife, you fall under the 70% maximum. There are, however, banks who will allow a mortgage up to 70% for sole foreign buyers even though this is against People's Bank of China (PBOC) rules.

 

The general process goes like this: You identify which house you want to buy and make a purchase offer with an initial deposit of a few thousand RMB. Within a few days you must return to increase that initial deporit to 20% of the purchase price. I cannot stress this enough: Read the purchase documents carefully! This is the one time in your life where being anal retentive is a virtue! Oral agreements / promises are worthless.

 

Then you apply for the mortgage and, once approved, you pay the developer the remaining difference between the mortgage amount and the home purchase price.

 

The mortgage application process is light years easier than in the States. The purchaser(s) presents ID / Passport, hukou book, proof of employment and income statements from their employer. The bank's attorney will give you an appointment to come in and sign a bunch of documents and then you just go home and wait until it is approved -- generally in a couple of weeks. The fees for mortgage application and bank's attorney fees are about RMB 800. You need tio purchase obligatory fire insurance through the PICC and that depends on the value of your home. For example, on a RMB 1,000,000 home that would cost you less than RMB 20,000. This is a one-time fee for the life of the loan.

 

Regarding whether or not you or your wife need to be employed, the answer is no. As long as you can prove that you have either a steady income or else liquid assets (i.e. cash, local bank deposits) that can guarantee your ability to pay the mortgage, you are ok.

 

Choosing which bank to use for the mortgage is also important. You need to check out the prepayment penalties, if any, and the interest rate. Banks are allowed to undercut the official PBOC rate by up to about 15%, but negotiating over an interest rate when you will be paying off the mortgage as soon as you get title may not be worth the hassle. It's up to you. Also, some banks have extra fees for prepayment. I have almost always used ICBC (Industrial & Commercial Bank of China) for my mortgages and they are good. The only catch is that any early payments must be at least 10% of the original mortgage amount, but there are no fees.

 

Another factor is that some banks make you jump through more hoops and give you the document run-around. ICBC, for example, only requires an official translation of your passport done locally at a cost of about RMB 75. Actually, the bank's lawyer will do it for you if you want. Other banks, such as China Construction Bank, will require you to obtain documentation from the Chinese embassy in the US that your passport is valid. That can be a major pain in the neck! Bank of China is also a pain in the neck in that regard.

 

Which city will you purchase your home in? Will it be a new home?

 

 

Bill wouldn't you think that it would be wise to get a pre-approval for a loan before actually giving the builder any kind of deposit? I would be afraid that if we did not qualify for the loan then the builder would keep the deposit. Of course my wife is certain that we will be approved but I still like to err on the side of caution. As far as my passport being translated, my wife tells me that along with this I will have to have the translation and my signature notorized in China.

The plan is to purchase the house at 30% down and rent the house out until we decide to retire. Could be another 15 years before retirement.

[GZBILL]

Bill wouldn't you think that it would be wise to get a pre-approval for a loan before actually giving the builder any kind of deposit? I would be afraid that if we did not qualify for the loan then the builder would keep the deposit. Of course my wife is certain that we will be approved but I still like to err on the side of caution. As far as my passport being translated, my wife tells me that along with this I will have to have the translation and my signature notorized in China.

The plan is to purchase the house at 30% down and rent the house out until we decide to retire. Could be another 15 years before retirement.

 

Sure, it would be wise to get pre-approval, but, unfortunately, that is virtually impossible in China. As long as you can supply the documentation the bank requires, you will be approved unless you are on the People's Bank of China's (PBC's) blacklist. There is no pre-approval process or even concept.

 

Yes, giving the developer 30% down can be a little nerve-racking especially since the developer reequires this within, usually, two weeks of signing the purchase agreement. If the mortgage application is denied, the developer is supposed to refund your deposit. Needless to say, that is why I suggest that you go over the purchase agreement with a fine-tooth comb and, equally important, buy from a very long-established developer.

 

If you are buying a pre-owned home, things are even more complicated and the mortgage approval process more stringent. And you need to be that much more careful.

 

When buying a house in China (or even in the US), being anal retentive is one of your strongest virtues. I have personally seen people get swindled out of their money and / or property in real estate transactions involving both new and pre-owned properties. It is not a pretty picture and it is laughable to think that the police will help recover either your money or property. I was lucky; I had some very capable Chinese friends hold my hand through my first couple of property purchases while I learned the ropes. You should try and do the same. Find some people who are young, trustworthy and have experience in buying property in the area where you want to buy and ask for their help. Family connections will help you find these people, but the people you find should not be family members unless they have worked in real estate a long time.

 

Depending on whose name is on the title, you may not be able to rent out the house you purchase. A foreigner can only buy one home which must be their principal place of residence. If your name is the only one on the title, technically you cannot rent out the property. Of course, I imagine that you'd probably be able to get away with it if you do. If your spouse is also a co-owner, you can do whatever you want with the property as the restrictions on foreign property owners would not pertain to you.

 

Regarding the passport translation, this is something the bank's lawyers will do for you after you sing the mortgage contracts and the bank is processing your mortgage application. You shouldn't have to worry about it to any extent other than giving the bank's lawyers the extra 150 RMB for the translation fees.

 

Should the bank's lawyer not do this for you, then you'll take your passport to the same place that they do. Each city is different, but it is always a government office that does it. Sometimes you must use the actual provincial or municipal notary public and sometimes there is just a special little municipal office which is the official government translator. Find out from the bank exactly where they want you to go (or better yet, pay them to do it).

 

In each property I bought I had the bank's lawyers do the passport translation but for one pre-owned home I bought. In that case I did it myself. You just take the passport to the appropriate place and tell them you need an official translation. They will not notarize your signature. They will translate the passport and assign you a Chinese name based on the pronunciation of your English name. This is VERY important because even though you are not Chinese, you must have a Chinese name on your property title. They will tell you to come back in in a few hours (or the next day) and you pay them about 150 RMB. Give the documents they give you along with passport copies to the bank's lawyers. Finished.

[chilton747]

Bill wouldn't you think that it would be wise to get a pre-approval for a loan before actually giving the builder any kind of deposit? I would be afraid that if we did not qualify for the loan then the builder would keep the deposit. Of course my wife is certain that we will be approved but I still like to err on the side of caution. As far as my passport being translated, my wife tells me that along with this I will have to have the translation and my signature notorized in China.

The plan is to purchase the house at 30% down and rent the house out until we decide to retire. Could be another 15 years before retirement.

 

Sure, it would be wise to get pre-approval, but, unfortunately, that is virtually impossible in China. As long as you can supply the documentation the bank requires, you will be approved unless you are on the People's Bank of China's (PBC's) blacklist. There is no pre-approval process or even concept.

 

Yes, giving the developer 30% down can be a little nerve-racking especially since the developer reequires this within, usually, two weeks of signing the purchase agreement. If the mortgage application is denied, the developer is supposed to refund your deposit. Needless to say, that is why I suggest that you go over the purchase agreement with a fine-tooth comb and, equally important, buy from a very long-established developer.

 

If you are buying a pre-owned home, things are even more complicated and the mortgage approval process more stringent. And you need to be that much more careful.

 

When buying a house in China (or even in the US), being anal retentive is one of your strongest virtues. I have personally seen people get swindled out of their money and / or property in real estate transactions involving both new and pre-owned properties. It is not a pretty picture and it is laughable to think that the police will help recover either your money or property. I was lucky; I had some very capable Chinese friends hold my hand through my first couple of property purchases while I learned the ropes. You should try and do the same. Find some people who are young, trustworthy and have experience in buying property in the area where you want to buy and ask for their help. Family connections will help you find these people, but the people you find should not be family members unless they have worked in real estate a long time.

 

Depending on whose name is on the title, you may not be able to rent out the house you purchase. A foreigner can only buy one home which must be their principal place of residence. If your name is the only one on the title, technically you cannot rent out the property. Of course, I imagine that you'd probably be able to get away with it if you do. If your spouse is also a co-owner, you can do whatever you want with the property as the restrictions on foreign property owners would not pertain to you.

 

Regarding the passport translation, this is something the bank's lawyers will do for you after you sing the mortgage contracts and the bank is processing your mortgage application. You shouldn't have to worry about it to any extent other than giving the bank's lawyers the extra 150 RMB for the translation fees.

 

Should the bank's lawyer not do this for you, then you'll take your passport to the same place that they do. Each city is different, but it is always a government office that does it. Sometimes you must use the actual provincial or municipal notary public and sometimes there is just a special little municipal office which is the official government translator. Find out from the bank exactly where they want you to go (or better yet, pay them to do it).

 

In each property I bought I had the bank's lawyers do the passport translation but for one pre-owned home I bought. In that case I did it myself. You just take the passport to the appropriate place and tell them you need an official translation. They will not notarize your signature. They will translate the passport and assign you a Chinese name based on the pronunciation of your English name. This is VERY important because even though you are not Chinese, you must have a Chinese name on your property title. They will tell you to come back in in a few hours (or the next day) and you pay them about 150 RMB. Give the documents they give you along with passport copies to the bank's lawyers. Finished.

I have well noted your advice. I will discuss this with my wife and pay special attention to obtaining help. She has a doctor friend that has just recently bought a house in ZS. Although he has a lot of money, he still had to get someone living in ZS to give him a letter of employment to satisfy the bank's needs. My wife has told me of this notarization and now I can understand some of what you are saying.

Thanks again Bill. I owe you big time buddy.

[GZBILL]

I have well noted your advice. I will discuss this with my wife and pay special attention to obtaining help. She has a doctor friend that has just recently bought a house in ZS. Although he has a lot of money, he still had to get someone living in ZS to give him a letter of employment to satisfy the bank's needs. My wife has told me of this notarization and now I can understand some of what you are saying.

Thanks again Bill. I owe you big time buddy.

 

You should do OK in ZS. It's not a metropolis, but it's not some small backwater hole in the ground either. Besides, it's close enough to the provincial capital that it's not lawless.

 

When buying a new house the actual process goes like this:

 

1. Sign a purchase agreement and give them a 10% downpayment.

2. Come back within a certain designated time frame (usually 1 or 2 weeks) with the remaining 20%. They will give you a receipt and paperwork and set you up with an appointment with the developer's lawyers to sign the actual purchase contract.

3. After getting the purchase contract, you set up an appointment with the bank's lawyer to sign the mortgage application and contract.

 

Be careful which bank you go through. Many have really apin in the neck requirements and have bad early payment terms. Contrary to what you'd think, China Construction Bank was the worst and Bank of China was a very close second. They make it really difficult to pay off the mortgage early.

 

The best was ICBC, but they do have one little requirement that any early payment amounts must be at least 10% of the original mortgage amount.

[chilton747]

I have well noted your advice. I will discuss this with my wife and pay special attention to obtaining help. She has a doctor friend that has just recently bought a house in ZS. Although he has a lot of money, he still had to get someone living in ZS to give him a letter of employment to satisfy the bank's needs. My wife has told me of this notarization and now I can understand some of what you are saying.

Thanks again Bill. I owe you big time buddy.

 

You should do OK in ZS. It's not a metropolis, but it's not some small backwater hole in the ground either. Besides, it's close enough to the provincial capital that it's not lawless.

 

When buying a new house the actual process goes like this:

 

1. Sign a purchase agreement and give them a 10% downpayment.

2. Come back within a certain designated time frame (usually 1 or 2 weeks) with the remaining 20%. They will give you a receipt and paperwork and set you up with an appointment with the developer's lawyers to sign the actual purchase contract.

3. After getting the purchase contract, you set up an appointment with the bank's lawyer to sign the mortgage application and contract.

 

Be careful which bank you go through. Many have really apin in the neck requirements and have bad early payment terms. Contrary to what you'd think, China Construction Bank was the worst and Bank of China was a very close second. They make it really difficult to pay off the mortgage early.

 

The best was ICBC, but they do have one little requirement that any early payment amounts must be at least 10% of the original mortgage amount.

Got it The early payment requirements are right up my alley.

[GZBILL]

Got it The early payment requirements are right up my alley.

 

Yeah, I paid all of my mortgages but the last one off very early.

 

The last time I checked, China Construction Bank has some unattractive fees for any early payments and also they only allow you to make them once per year.

 

Bank of China makes you jump through hoops and sign not only a lot of paperwork, but also charges an early payment fee and also limits when you may make them.

 

ICBC makes it just about as simple as anything can get in China. You just go to the mortgage office and fill out a form. They'll tell you when to deposit the money by and also what your new mortgage payment will be once you make the early payment. There are no fees and you can make early payments as often as you like. However, each time the amount of the early payment must be at least 10% of the original mortgage amount.

 

Unfortunately, no bank will let you change the length of the mortgage. If you get, say, a 20 year mortgage, you cannot change it to a longer or shorter term regardless of any early payments you make. The only way to make it shorter is by just paying off the entire balance.

[chilton747]

Got it The early payment requirements are right up my alley.

 

Yeah, I paid all of my mortgages but the last one off very early.

 

The last time I checked, China Construction Bank has some unattractive fees for any early payments and also they only allow you to make them once per year.

 

Bank of China makes you jump through hoops and sign not only a lot of paperwork, but also charges an early payment fee and also limits when you may make them.

 

ICBC makes it just about as simple as anything can get in China. You just go to the mortgage office and fill out a form. They'll tell you when to deposit the money by and also what your new mortgage payment will be once you make the early payment. There are no fees and you can make early payments as often as you like. However, each time the amount of the early payment must be at least 10% of the original mortgage amount.

 

Unfortunately, no bank will let you change the length of the mortgage. If you get, say, a 20 year mortgage, you cannot change it to a longer or shorter term regardless of any early payments you make. The only way to make it shorter is by just paying off the entire balance.

 

Bill what is the interest rate that ICBC charges? I have also heard that a sales tax is paid at the time of purchasing and then no more tax afterwards. Is this true and if so how much tax is paid?