“To give real service, you must add something which cannot be bought or measured with money, and that is sincerity and integrity.”
– Douglas Adams, English writer, humorist and dramatist
My deepest apologies to the organizers of the 2nd South Metro Property Expo for being unable to deliver my presentation about “Common Real Estate Scams” due to high fever. This article is an excerpt of the said presentation supposedly made yesterday at the SMX Aura, SM Aura Premier, Taguig City.
As I searched the internet for the origin of the word “SCAM” the only conclusion that I found was none of the scholars really knows where the word scam came from, or how, or why. It is a mystery that at best remains unsolved.
In simple terms, a SCAM is a dishonest or fraudulent scheme. It is a gimmick or racket using dishonest methods to acquire something of value. Scammers, swindlers, hustlers, racketeer, con-artists – there are many names to call these people who prey on unwilling victims. And the real estate industry in the Philippines is not immune to the existence of these individuals.
In my experience, homeowners and real estate investors alike have been victims of real estate scammers since time immemorial. My advice to these people who consult me is always the same: “If the deal is too good to be true, it probably is. Therefore, walk away from it and never think of it again.”
So here are the 5 common real estate scams in the country today, based on my experience:
- Buying Property from Shady Real Estate Developers. Fifteen years ago, while I was a just a newly minted attorney under the leadership of a great legislator, I had the chance to come face-to-face with angry and discontented buyers of a now prominent real estate developer.
Their main complaints were paying reservation fees or amortization for subdivision project wherein the advertised facilities were not being built, or have remained unfinished for several years after the stated turnover, or worst, the project has been abandoned by the developer. Maceda Law (Republic Act No. 6552) does not really help buyers, who are often left holding an empty bag.
If the project developer refuses to return the money, the buyer-victims are faced with litigation at the HLURB which takes years to be resolved, if ever this avenue of redress is chosen. In the end, buyer-victims are at a disadvantage in this situation especially if the payments made are substantial already. The hard-earned money of the buyer is lost.
- Double sale of real property. In my law practice as a litigator, this is a common real estate case that I encounter from clients who fall victim to unscrupulous sellers. The reasons range from the negligent act of the first buyer not registering and transferring the title in his/her name, or the seller accepting a higher price for the property from another when a previous buyer has made an earlier payment. Either way, if things are not settled immediately, courts of law become the final arbiter between parties.
- Sale of Real Property with a Fake Title. I have had several clients that have purchased vast tracks of land and have given a substantial amount of down payment upon the presentation of copies of the supposed land titles covering the parcels of land. When the agent failed to communicate with the buyer for an extended period of time, it was the only time that the purchaser thought of conducting the proper due diligence.
Upon close scrutiny of the documents, it was found out that the titles were fake and/or non-existent in the records of the Registry of Deeds. Millions have been lost to this particular type of scam as investors are lured by the enormous discount and opportunity for the appreciation of the property in the future.
Don’t be blinded by such grandiose returns. Legal Due Diligence always comes before the real property is purchased, never at the end of the transaction.
- Sale with Assumption of Mortgage. The most often victims of this type of scam are Overseas Filipino Workers (OFWs) who are enticed by the low price of the property despite their absence in the country to verify all the documents and physically check the real property for sale. Still, there are eager buyers (homeowners and real estate investors alike) in the country, who are victimized by fraudsters due to the steep discount of the prices of the real property being offered.
The sellers of the property are owners who may be under foreclosure proceedings or merely representatives of the supposed owner – who may or may not be the perpetrator of the scam.
These charlatans succeed in getting a down payment from their hapless victims by sending the buyers documents that seem legitimate at first glance. But, upon closer scrutiny, the buyer parted away with his/her money without anything of value in return – just one big headache and heartache.
- Finally, “Too-Good-to-be-True” Real Estate Seminars. It has always been said that there is a gold mine in real estate investing. And, this is a very accurate statement. The returns an investor gets from investing in commercial real estate are oftentimes above and beyond the returns of the stock market trading and other investment instruments (except maybe investing in Real Estate Investment Trusts or REITs).
There are only few experts in the field of real estate investing who can give valuable and insightful pieces of advice. I can recommend Carl Dy, Noli Alleje and Dr. Ces Apostol as experts in their fields of real estate endeavors. All 3 give out regular real estate seminars.
Sadly, there are individuals who advertise themselves as experts or mavens in real estate. And, because of good marketing, these people are able to reach their target audience and sell themselves and their seminars.
They promise quick returns and fail-proof strategies to promote and push real properties to unwitting investors or end-users. They promise the use of their schemes will lead you to immediate success and the fulfilment of all your dreams.
They are “flash-in-the-pan” gurus who use slick language and terminologies to come out as experts but after a while they fade into oblivion. As quick as they busted into the scene, they leave a lot of people scratching their heads and wondering why they ever fell into such a scam.
How to Protect Yourselves from these types of scams?
Make no mistake, there are great deals out there in the real estate universe. I have been a part of such transaction and it was worth every sleepless night. But, the success of that deal is the result of painstaking work.
Following these simple actions will fully protect you from all the types of scam mentioned above:
- Perform legal due diligence. In layman’s terms, do your homework. Inspect the property personally and all the accompanying documentation concerning it. Don’t be afraid to spend on a professional who can do the proper legal due diligence for you. The amount spent for hiring an experienced real estate lawyer is a wise investment towards making sure that all documents, title and the property are in order – free of fraud.
Because title insurance is still non-existent in the Philippines at this time, a competent and experienced professional conducting due diligence on the property is the best protection against fraud at present. Hire the best professional you can afford. Treat it as an additional investment on the property not as an expense.
- Seek out the help or assistance of a licensed real estate broker. Ask for referrals from friends or relatives. Check out the credentials of the real estate broker. The Professional Regulation Commission has an online registry of all licensed real estate service professionals in the country.
Not all brokers are the devil incarnate. There are numerous real estate brokers who serve their clients with honesty, integrity, fidelity and sincerity. They are highly trained professionals who know the law and all the intricacies of the real estate deal and its complex documentation.
The passage of Republic Act No. 9646 (otherwise known as the “Real Estate Service Act”) sought to professionalize the ranks of real estate brokers and curb the illegal practice of agents without a license, among other things. After 6 years of its implementation, unlicensed agents or “pseudo-brokers” (as I have come to call them) are still doing their thing.
In my experience, these individuals are the perpetrators of the most common real estate chicaneries. They have nothing great to lose (license or reputation) and can simply disappear out of the lives of their hapless victims.
However, despite the efforts to professionalize the ranks of real estate service professionals, there are still numerous pseudo-brokers out there victimizing unsuspecting homeowners and real estate investors alike.
When it comes to purchasing real estate for investment or other purposes, never scrimp on paying a professional you trust. This can mean securing and growing your money (capital) or losing it altogether on a particular deal. Of course, it is a wonderful bonus if the professional you can hire is a real estate broker and an attorney rolled into one.
- Always pay the property through a check or manager’s check. This is to provide written documentation of the receipt of payment. Avoid issuing a check in another person’s name or the representative of the registered owner of the property being purchased. The best evidence of payment is a check issued in the name of the registered owner coupled with a written acknowledgment receipt signed by the owner or his/her attorney-in-fact.
If ever the transaction fails and you need to go to court to seek redress, then you are assured that proper evidence is at hand to make your case against the seller solid. But, of course, litigation should always be the last option available.
- Arm Yourself with the Correct Information and Knowledge. The internet has made it very easy to learn numerous things at the least amount of time. Therefore, when faced with a deal that is too good to be true, pause first and gather as much information as you can. Then and only then, can you decide whether to give the transaction or seminar the green light to proceed or attend.
In conclusion, be on the lookout for these common real estate scams. And to be assured that you won’t fall prey to these swindlers or con artists, always seek the guidance of an experienced professional.
Be smart. Don’t be afraid to ask questions. Protect your hard-earned money all the time. If you want to know how to avoid falling victim to online real estate scams, check our previous post – 6 Important Tips to Avoid Falling Victim to Online Real Estate Scams.
If you know of other real estate scams in the Philippines that you have experienced or come to know from others, please leave your comments below. We greatly appreciate all inputs you may have about this topic.
See https://thebettereditor.wordpress.com/2012/10/12/is-the-origin-of-scam-a-scam-itself/, viewed last October 1, 2015 @ 3:20AM.