Let’s face it: while investing in real estate can be one of the best financial decisions for your portfolio, it’s also one of the most common ways to get scammed.
Millions of pesos are required to make any worthwhile real estate investment. For scammers, the opportunity to steal just a fraction of that is highly motivational.
Imagine your standard rate for a 1-bedroom condominium in Bonifacio Global City worth around Php7,000,000. Earnest money or down payments are usually about 10% of the asking price or at least Php1,000,000, whichever is higher. That’s an easy Php1,000,000 for scammers who can convince you that the unit is theirs to sell. Scammers can pretend to be the seller or even the broker/sales agent!
Now, I’m going to be honest with you. Nobody, not even brokers like myself, are immune to the creativity and craftiness of scammers. Knowing the law and researching who you’re dealing with is an absolute must.
But if you’re new to the real estate investing world, everything can feel unfamiliar. So here are the top 8 things to watch out for during the purchase process so that you don’t have to suffer the same way others have:
- Properties that are priced extremely lower than the market price. The saying, “it’s too good to be true,” should always be top of mind. If it’s such a good deal, why hasn’t anybody bought it yet? You can even ask the seller this question. Gauge their reaction and answer. Defensiveness or avoiding a direct answer is a red flag.
- The property documents differ from those filed with government offices. Always cross-check ownership documents with the government’s. For example, it’s possible that the copy of the Title that’s provided to you doesn’t show any lien but the certified true copy from the government does. Your broker can do this for you, but remember that sometimes they are in on the scam. Check the documents with your own eyes too.
- You’re being rushed to pay because you might miss out on a “fantastic deal”. Conducting due diligence is the only way to make sure nobody gets scammed. Scammers typically use the fear of missing out to bait buyers to skip the due diligence part and pay the downpayment immediately.
- Check that payments from the Seller are made to people other than the Developer or those listed as owners in the certified true copies of the Title. If there are multiple owners in the Title, multiple checks in equal amounts should be prepared (unless there’s a written and notarized authorization to allow somebody else to receive their share).
- If your brokers/agents can’t show an Authority to Sell or Authority to Lease agreement from the owner of the property. These documents are supposed to be shown to the buyer to avoid an event wherein the broker/agent “pads” (or increases) the selling price to earn more from the transaction. The industry standard for professional fees of brokers/agents is 3% to 5% of the total contract price, and is shouldered by the seller.
- Sudden change in schedules for important events. I’ve heard a lot of kinds of excuses such as hospitalization, death of a relative, dramatic fight with their spouse, etc. While these events can be true, it is prudent to be extra cautious when these are brought up.
- Not all listed owners listed in the Title show up for the signing of the Deed of Absolute Sale. The one thing you have to make sure that all listed owners are alive and have given their consent to the sale of the property. In case the seller is legitimate, it’s still necessary for all the owners to be alive and consenting to the sale, unless you’re ready for months or even years of legal troubles later on.
- Use of prepaid mobile accounts – I don’t mean to discriminate but, it’s hard to imagine that somebody who owns or who is buying a multi-million peso property can’t subscribe to a post paid line. I feel more comfortable working with people who have postpaid lines because these can be traced if something bad happens.
So, now you’re wondering: Then what’s the best way to stay safe while shopping for your next real estate investment?
The easiest way is to be guided with a trusted and knowledgeable licensed real estate broker.
DISCLAIMER! The list above is not all the signs to watch out for. Scammers learn from the mistakes of their peers as well, so every new scam is probably better than the last. Always be cautious with your investments and don’t let your emotions, like excitement, get the better of you.
Listen to the advice of your broker when they say they have a bad feeling about a property or a seller. They have more experience and exposure to the traps within the industry, so they have a better trained “gut feel” of the situation.
Oh, and one last thing. Sometimes, it’s your broker who’s going to try to scam you. Sad, I know, but it happens. So like I always say, go with a licensed broker you can trust. Make sure they are licensed by the PRC, have a public track record of success, and have a positive reputation. Being associated with a real estate group like RE/MAX also helps because these companies do extensive background checks before allowing brokers to use their brand name. And, if one slips through their cracks, you can report them to the Head Office for support.
This material, which is strictly for information purposes only. The views and opinions expressed in this article are those of Juan Patag’s and do not necessarily reflect the position of RE/MAX Capital, or any other RE/MAX franchise. Any information is subject to change without prior notice. No liability whatsoever is accepted for any loss that may arise (whether direct or consequential) from any use of the information contained herein. Information Each RE/MAX franchise is independently owned and operated.