10 Ways to Get Scammed in Real Estate

Everyone wants to find that diamond in the rough. That deal that nets you double digit returns in short order. The deal that noone has found until you came across it.

But you know what? That deal has probably already come across another investor, and there are usually some very good, and scammy reasons why they passed, and why you should as well.

Real estate is 99% a long game. Don’t expect to be earning 20+% returns per annum without some serious blood, sweat, tears and risk. I will never say that you can’t get lucky, but how do you know whether you’re being taken for a ride or not?

  1. 99% Financing

Most financing is done through legitimate institutions such as traditional banks and co-operatives. Sometimes a close family member or friend may spot you some cash to buy into a property. We don’t recommend this route due to all the interpersonal issues that can arise.

It’s not uncommon, but sometimes you can also get financing, either from a seller, or another lender with little to no downpayment. It may seem like a sweet deal, but often these people are little more than loan sharks. They can charge interest at a monthly rate that can compound to over 60% interest per annum. They sometimes employ brutal means of collection, and often you will be using money that are the proceeds of crime, unwittingly acting as a means of laundering.

It’s better to save up some money or use your existing equity to finance a property purchase. If you need it to go faster, partner with someone you trust. If you’re unable to pitch it to them as a favorable investment, maybe it wasn’t that amazing in the first place.

  1. Upfront Fees

This is often a problem with less than scrupulous real estate agents. Rarely is this the fault of an owner or seller. In every real estate transaction there will be fees and taxes that need to be paid to the government, your agent and a lawyer.

These fees shouldn’t be paid until a contract and/or deed has been executed, and you’re legally bound to purchase. Be very wary of any real estate agent, lender or seller asking for upfront moneys beyond a deposit to lock up the purchase. Make sure you receive an acknowledgment receipt and a copy of the receiver’s ID to document the payment.

It is not uncommon to have heard of cases where a party to a real estate transaction has run off with money not rightfully theirs.

  1. Introductory Interest Rates

You’ve probably seen many a bank advertising extremely appealing rates for home loans in the sub-6% per annum range, tagged as “special”, “for new customers” or “introductory”.

Here’s the thing. A bank will never lose money on a loan. Make sure you read the fine print. Often these introductory rates will reset after 6 or 12 months to a more exorbitant rate to account for the lower introductory rate. The lower upfront rate is purely to get you in the door, in the end, the bank will end up making more money from you than if you had entered a standard loan.

  1. Bad Engrish

You’ve probably come across more than a few of these advertised properties. They’re usually described in 5 or fewer lines, either in broken English or Bisayan/Tagalog, with very little information beyond “I want to sell my place”.

Our advice is to avoid this as there can only be 3 possible reasons for this: Either the person (or agent) advertising the property has no idea what they’re doing, is exceptionally lazy, or it isn’t a legitimate property for sale in the first place. None of these reasons bodes well for a smooth transaction.

A property is often the biggest purchase one can make in their lives. You are going to want to make sure you dot your i’s and cross your t’s when dealing with it, so why wouldn’t everyone else?

  1. Google doesn’t know them

You don’t need to be a super spy to do some basic background checking. People usually leave traces of their lives online. Just glancing at a person’s social media presence is enough to give you an idea of how legitimate a person is. If someone is telling you they’re the owner of a property and need to sell it for some emergency reason, then you check their Facebook profile to find out they work as a sales lady in a supermarket, you probably want to double check your papers. Remember 98% of all Filipinos are on Facebook.

Another possibility is that you simply can’t find them online with the details you’ve gotten, at all. Google knows and sees all. Google is omnipresent. If Google doesn’t know who you’re dealing with, run.

  1. Western Union or Moneygram

While Western Union and Moneygram are handy, though pricey, ways to send money across the world, they is meant for small one-off purposes. Send a gift to your relative, spending money, traveling money etc. It is NOT meant to be used for large unit investments.

Remittance transaction are fast, nigh untraceable and have no safeguards against fraud. Once they’re cashed out, that’s it, your money’s gone. There’s a reason why all email scams involve either Western Union or Moneygram in some way.

Someone asking you to use a remittance service to pay? Again, run.

Contact us for large movements of capital, and plan at least 3 days for your money to clear.

  1. Can’t Get Inside

When a client asks us to visit a property, we always confer with the property’s owner and, if necessary, tenants, to make sure it’s available at a scheduled time.

This is much different to simply being unable to get inside at all.

A well known scam around the world is to be shown a property that, for one reason or another, you cannot ever get inside. In these cases it may be that the “owner” doesn’t really own the property you’re looking at, or simply doesn’t have the right to sell it.

If you really want to go ahead with it, make sure any contract you sign is contingent upon viewing the interior of the property, as well as provision of full documentation.

  1. The returns look RIDICULOUS

3 Bedroom house and lot for P800,000! Earn P40,000 per month in returns!

Wouldn’t we all want our investment properties to give this kind of return. But the reality is that, while you can never say this would never happen, it is extremely unlikely that you simply come across such a ridiculous deal. Good deals are hard enough to find as is.

If an owner is desperate to sell, there’s usually a reason why that is the case. If it seems too good to be true, it probably is. Proceed with caution.

  1. High Pressure Sales

It’s to be expected that the best agents out there will nudge you a little to buy the property they’re selling. The problem is when it seems to be overbearing. An attractive property will sell itself. If you’re dealing with someone, either an owner or and owner’s agent who seems intent on shoving their property down your throat, there’s probably a reason for it.

Either there is an impending development that will seriously degrade it’s value, or someone is receiving a larger than normal kick back somewhere, so you’re not really getting value for money.

  1. Documentation

These are the basic documents you need just to process a real estate transaction. These are a non-negotiable. An owner (or their lawyer) should be able to at least provide an owner’s copy of the title.

Proceed with caution if it’s not under the owner’s name, or has complicated liens attached to it. Make sure you see all pages attached and for good measure, make sure you get a certified true copy from the Registry of Deeds.

If you need this kind of due diligence done, a property specialist such as Jobelle from Cebu Home Properties will be able to provide the security that you need, as well as facilitate a seamless transaction.

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