Just like there’s illegal recruitment in jobs, misleading advertisements on television and deceptive multilevel marketing schemes employed by unscrupulous individuals, real estate is not exempt of fraudulent schemes.
Scammers, swindlers, con artists, they come in various titles, but they all perform the same thing — prey on people who lack knowledge in order to gain something.
While it’s easy to say if an offer is too good to be true, then walk away, it’s often too tempting to take it. So it pays to be armed with knowledge to parry these scams.
Paying reservation fees for unfinished properties.
Victims are urged to pay a reservation for properties yet to be built or currently under construction. This is under the premise that once you pay the fee, you’ll be allocated a unit and reserved a key to its doors. The selling point is that reservation fees are often much cheaper than actual mortgage amortization so it’s easier to come up with the amount under the assumption that you’re reserved a unit.
This creates a false sense of security as long as the supposed property remains unfinished.
In some cases, promises are broken as developer fails to finish the project on time, or worse, abandons it without signing off as finished project.
A natural route is to raise a complaint with the HLURB which can take many years to resolve, should this approach be the first option. As a result, there is no guarantee money can be recovered.
2. Property is sold to more than one buyer.
A buyer fails to act and do not immediately transfer the title from the seller’s to his/her name could become a victim of this trick if the seller finds another buyer who makes another offer. The second (or any subsequent) buyer becomes entangled in the mess and could be another party in contention especially if the seller refuses to return the money of a duplicate purchase.
In such case, the court will settle the dispute and could mean costly litigation to the buyer.
Sale of real property using a fake title.
Buyers fail to check the authenticity of a property title. Due diligence should be made at the beginning of the price negotiation and this means checking of relevant documents not just whether they exist but also if they are genuine.
Related: How to spot a fake property title
A thorough check for records at the Registry of Deeds helps validate a claim of the seller. Should you notice something suspicious, money should not change hands unless it is settled, and no amount of seller coercion should prompt you to proceed with the transaction.
Sale of property to be forclosed at steep discount.
Filipinos working abroad are often bombarded with affordable offers of properties for investment at deep discounts. However, even those who are in the Philippines and can verify documents and check out the property can also fall victim to this scheme.
A property in question is made to appear as for sale, but is actually under forclosure proceeding which means the supposed owner will soon lose the right to the property. Yet, in an effort to cash-in on the property, the owner or a representative presents documents that appear valid. A further check later reveals the true state of the property. The buyer parted with his ir her money but did not get something valuable in return.
Real estate investment seminars run by unethical parties.
By organizing an event related to real estate subject, some unscrupulous individuals or groups can easily attract interested parties to attend such seminars and become captive audience to the sweet talks and false promises. Gifted with the talent of persuasion and using slick language, they sell themselves as experts in property investment backed up by good marketing and flashy presentation.
They often promise quick returns of investment and dropping names of notable brands in the industry. And just like multilevel marketing, many buyers are drawn into their offers. But soon as commitments to invest pile in and money changing hands, these so-called experts start to disappear without a trace.
How to Avoid Becoming Scam Victims?
Perform a due diligence
This means you have to do legal due diligence. This includes inspecting the property personally and checking the accompanying documentation thoroughly. It is also a good idea to hire a seasoned lawyer to do the job for you, even if it means adding extra expense just to ensure that all documents, title and property are all in proper order and fraud-free.
Seek help from licensed real estate broker.
While we described a number of scam tactics above, we believe many other real estate professionals work with honesty and integrity. It pays to transact any property purchase or lease through them. In case no one can refer you to a license real estate broker, the Professional Regulation Commission has an online listing of all licensed real estate service professionals in the Philippines which can help facilitate your selection process.