Like illegal recruitment in jobs, misleading advertisements on television, and deceptive multilevel marketing schemes employed by unscrupulous individuals, real estate scams are also common in the property market.
Scammers, swindlers, and con artists come in various titles, but they all perform the same thing — prey on people who lack the knowledge 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 the knowledge to parry these scams.
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Some developers may promise to build a property, take the buyer’s money, and then disappear without building the property. It is, therefore, prudent to do a background check about the developer.
- Verify their license – You can check with the Housing and Land Use Regulatory Board (HLURB) to see if the developer or agent is licensed to operate in the Philippines.
- Check their reputation – Look for reviews, testimonials, and feedback from previous clients to gauge their reputation. You can also ask for references to speak to prior clients directly.
- Verify their physical address and contact information – Ensure the developer or agent has a physical office and working telephone number.
- Check their track record – Ask for details about their past projects, completion rates, and any complaints or disputes that have arisen.
- Research their background – Look for any history of legal issues, bankruptcy, or criminal activity.
- Ask for proof of ownership – If you are interested in a specific property, ask for proof of ownership and ensure that the property is not subject to any legal disputes.
- Get everything in writing – Always ensure that all agreements and transactions are in writing to protect your rights and interests.
One common real estate scam in the Philippines is scammers providing fake documents to unsuspecting buyers or investors. These counterfeit documents can include fake titles or land surveys that appear legitimate but are fabricated. This allows scammers to sell or lease properties they do not truly own or have legal rights to.
Buyers who fall for this scam may lose their investment, as they cannot legally claim property ownership. It is vital for buyers to verify the authenticity of any documents provided by the seller and to conduct thorough due diligence before making any real estate transactions.
Advance fee scams
This scam occurs when scammers ask for an advance fee for services, such as processing fees, documentation fees, or down payments, but never provide the promised services or transfer of ownership. They may promise to expedite the transaction or secure a good deal, but once they receive the payment, they disappear and cannot be contacted. Victims of this scam may lose a significant amount of money without any return on investment or even the possibility of legal recourse.
To avoid this scam, buyers should be wary of any upfront fees and only transact with reputable and trustworthy sellers or brokers. It is also advisable to conduct due diligence and verify the credentials of the seller or broker before making any payments.
Another real estate scam in the Philippines is the rent-to-own scheme. Scammers offer a property under a rent-to-own system where the renter pays a deposit and monthly rent, promising to own the property in the future. However, the scammer never transfers the ownership, leaving the renter with no legal rights to the property even after fulfilling all their obligations under the agreement.
This scam can result in significant financial losses for the renter, who may have invested substantial money in the property without getting anything in return.
To avoid this scam, renters should verify the property’s ownership and the seller’s legitimacy before entering any rent-to-own agreement. It is also advisable to have a legal expert review the contract before signing to ensure the deal is legally binding and in the renter’s best interest.
In the Philippines, unlicensed people pose as real estate brokers and take buyers’ money without providing services. Scammers pose as legitimate brokers and offer services like property search, negotiation, and documentation, but they don’t have the right qualifications, licenses, and permits.
They might also collect fees or commissions from buyers without telling them they’re not licensed. The victims of this scam might end up losing money and time without getting the results they expected. Buyers should verify the license and credentials of the broker and make sure they’re registered with the Professional Regulatory Board of Real Estate Services (PRBRES). You should also check the broker’s reputation and track record before you deal with them.
It’s also common for scammers to buy a house, make a few cosmetic changes, then sell it at a higher price without revealing its condition.
Often, this is done to hide significant problems with the house, like structural damage, plumbing problems, or termites. A buyer who falls for this scam might get stuck with a property that needs expensive repairs and maintenance or, worse, is unsafe.
Buyers should conduct a thorough inspection of the property and have it inspected by a reputable home inspector to avoid this scam. Be sure to ask the seller for a disclosure statement and read it carefully to ensure no hidden defects. Watch out for sellers who pressure you into making a quick decision or won’t let you inspect or evaluate the house.
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 because 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. Hence, it’s easier to determine the amount assuming you’re reserved a unit.
This creates a false sense of security if the supposed property remains unfinished.
In some cases, promises are broken as the developer fails to finish the project on time, or worse, abandons it without signing off as a 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, no guaranteed money can be recovered.
Property is sold to more than one buyer.
A buyer who fails to act and does not immediately transfer the title from the seller 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 a mess and could be another party in contention, especially if the seller refuses to return the money of a duplicate purchase.
In such cases, the court will settle the dispute, which 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 the seller’s claim. 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 foreclosed at a steep discount.
Filipinos working abroad can be bombarded with reasonable 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 for sale but is under foreclosure proceedings, meaning the supposed owner will soon lose the right to the property. Yet, the owner or a representative presents valid documents to cash in on the property. 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 audiences 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 on investment and drop names of notable industry brands. And just like multilevel marketing, many buyers are drawn to their offers. But soon as commitments to invest pile in and money changes hands, these so-called experts disappear.
How to Avoid Becoming Scam Victims?
Perform 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 to ensure that all documents, title, and properties are all in proper order and fraud-free.
Seek help from a licensed real estate broker.
While we described several 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. Suppose no one can refer you to a licensed real estate broker. In that case, 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.
- Research the developer and property: Make sure to research the developer’s reputation and the property’s history. Look for any red flags, such as a history of unfinished projects or negative reviews.
- Verify documents: Always verify the authenticity of any documents the developer or seller provides, such as the title or land survey.
- Use a reputable real estate agent: Consider using a reputable and licensed real estate agent to help you navigate the buying process. They can provide valuable information and help ensure all transactions are done legally and properly.
- Beware of unrealistic offers: Be wary of offers that seem too good to be true. If a deal seems too good to be true, it probably is.
- Never pay in advance: Never pay any advance fees or down payments before the property is transferred to your name.
- Don’t rush: take your time to research and evaluate the property and the offer, do not rush into signing any contracts or agreements.
- Get legal advice: Before finalizing any deals, consult a reputable lawyer to review any contracts or agreements to protect your rights.
Where can victims file complaints?
In the Philippines, you can file a complaint against a real estate scam with the following organizations:
- Department of Trade and Industry – They protect consumers from fraudulent business practices.
- Housing and Land Use Regulatory Board – They regulate the real estate and housing industry in the Philippines.
- Philippine National Police Anti-Cybercrime Group – They handle online scams and fraud complaints.
- Securities and Exchange Commission – They regulate and supervise the activities of companies and individuals in the securities industry.
You can also contact the local barangay (village) council or seek a lawyer’s assistance to file a court complaint. You should gather as much evidence as possible to support your claim.