Property scams are on the rise in Australia and the perpetrators are constantly finding new ways to get around laws and avoid being brought to justice.
In the current climate of economic uncertainty, you might be looking for anything to give you a jump start towards eventual financial security. Scammers know this and, being very well practiced at manipulating people, will play on your emotions to coerce you into parting with your savings.
Awareness and prevention are the best weapons against scammers, so it is important to know what you are up against.
Scam 1: Shady American properties
These scams usually involve properties being bought from desperate sellers in the US at deflated prices, then on-sold to foreign investors at much higher prices.
The US scammers use Australian property marketers to source potential investors. You might be told you can pick up a house for $50,000, but what you are not told is that the house is on a street where all the other houses have been abandoned. The house can actually be worth less than $10,000 and have no avenue to improve in value. You are then left with a useless property on the other side of the world and no one to help you deal with it.
Property consumer researcher Steve Butcher says you should be suspicious if you are offered a chance to buy overseas.
“If you’re not prepared to go over and source your own properties and property managers, you run the huge risk of discovering that when things go wrong, you are a long way away,” he says.
“People end up paying for numerous overseas trips to sort problems out. Sometimes they have bought into areas that are slums and will be for a long time, but when they saw the photos of the property, it was photo-shopped and looked really nice.”
Butcher says it is a mistake to put faith in the research and follow-up services that property marketers promise.
“They are just after commissions and don’t care what happens to you after they’ve sold the property. As soon as things go wrong they ignore you and won’t return calls or emails,” he says.
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Scam 2: Dodgy real estate agents
A rort that Butcher believes is common but is rarely uncovered is the buying and on-selling of properties by real estate agents for their own gain.
Butcher says this is essentially insider trading and if you did it as a shareholder, you would go to jail.
“Basically what they do is get a listing, usually an elderly person who doesn’t really know what the property is worth, and then they convince them it is worth a lot less,” Butcher says. “They then get a family member to buy it or buy it themselves through a company name that they control. The person selling the property doesn’t realise the connection. In one case, an agent bought a client’s house out from under them for less than it was worth, then on-sold it the same day and pocketed $50,000. The original owners had no idea.”
On-selling is illegal, but most of the time the original owners are unaware of what has happened and no one pursues the matter.
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Getting a case of investor jitters? Unsure how to proceed next? Why not attend the Melbourne Property Investors Forum and soak up some of the wisdom of Australia’s most reputable property professionals
Scam 3: Nigerian style scams
Two Western Australian home owners had their properties fraudulently sold without their knowledge in 2010 and 2011, in scams believed to have originated in Nigeria.
Both owners were overseas when scammers sold their properties using forged documents and details they had obtained by hacking email accounts and stealing mail. The scammers then conducted the transactions via email, fax and mail, without appearing physically to the agent or buyer.
In the first instance, Roger Mildenhall was in South Africa when he was alerted by a former real estate agent that his $485,000 Karrinyup property was sold. The money from the sale was tracked overseas, but authorities say there is little hope the scammers will be found. Mr Mildenhall is still exploring his legal avenues for compensation.
“These scams are not very common, but they come up from time to time,” says Butcher. “It’s taking it to a whole new level of fraud and it takes a special kind of person to do that.”
The Western Australian government is currently looking into tougher guidelines for proving identity before properties can be sold.
Getting a case of investor jitters? Unsure how to proceed next? Why not attend the Melbourne Property Investors Forum and soak up some of the wisdom of Australia’s most reputable property professionals
