Property scams and fraud are on the rise in South Africa, especially as the market continues to heat up and buyers, sellers, developers and other professionals become more vulnerable. Experts agree that while property scams are not uncommon in general, they are becoming more and more sophisticated and difficult to detect. This increases the chances of you being tricked into buying something that does not exist or losing your money entirely to an elaborate real estate fraud scheme.
In this article, we will cover the most common types of property scams that you may encounter and how to identify and avoid them in future.
Detecting False Estate Agents
When renting, selling or buying a property, dealing with an estate agent becomes an integral part of the process, as they can assist you with sourcing potential properties or finding potential buyers. However, how will you be able to identify if the estate agent you are working with is legitimate?
Here are a few warning signs to look out for:
- The estate agent delays or avoids meeting you in person at their offices
- The estate agent delays or refuses to give you a physical walkthrough of a property
- The estate agent changes banking details for deposits
How to verify an estate agent
You can verify an estate agent by running their name through the Estate Agency Affairs Board, to see if they are registered. You also need to ensure they have a valid Fidelity Fund Certificate, which is issued annually and, therefore, their certificate needs to state the current year for them to be actively practicing.
Preventing Intercepted Emails
As most communication is done electronically, it has become easier for hackers to intercept emails or spoof email accounts. The hackers can pose as the seller, agent or lawyer, in order to trick the buyer into wiring funds to them instead of the appropriate party’s account.
Here are a few warning signs to look out for:
- The seller makes changes to the payment details without any direct communication
- The seller requests payment for credit checks or security deposits
- The seller adopts a high-pressure tactic, forcing you into finalising the payment transfer
- The seller is using a different tone in their email correspondence than before
- The seller has changed their email account details
How to avoid falling victim to intercepted emails
It is strongly recommended that you double-check everything; verify all emailed instructions, especially when it comes to making a purchase, verify banking information and request bank account verification certificates, double-check suspicious emails, etc. Also be vigilant of new parties being introduced into email correspondence without prior discussion, and do not let a seller, agent or lawyer pressure you into making payments.
If you discover that an email was intercepted or someone is impersonating a property professional, it is important to take note of these details for later reference. Immediately end all communications with that party, but be mindful of any further emails they may send out to your network. Keep copies of all correspondence between yourself and the fraudulent seller, agent or lawyer and pass it onto law enforcement officers once reporting has been done.
Identifying False Buyers and Sellers
You might find yourself lured by fraudulent deals during the sale of a property and one way for this to happen is for criminals to pose as interested buyers. They will show interest in the property and put an offer in to purchase. Then after a few days, they will contact the seller to sign a document which will help the buyer get a home loan approved.
The seller being keen to close the sale may not read the document carefully before signing it and, soon after, will discover that a third-party claims to have bought the property. Their method? Duplicating your listing on other websites and acting as the estate agent, requesting deposits from interested parties.
Here are a few warning signs to look out for:
- The buyer makes a cash offer to purchase the property
- The buyer is willing to make a full price offer on the property
- The buyer shows interest in multiple properties at the same time
- The buyer expresses urgency to conclude the sale of the property
How to protect yourself against false buyers and sellers
If you are selling a property, be sure to carefully read all documentation given to you or, better yet, review it with a licensed lawyer. Be wary of cash offers and do not be afraid of asking questions or running a credit check on any prospective buyers.
If you are a buyer, you should be wary of estate agents that refuse to meet face to face or ignore your requests to view a property. If an estate agent tries to push you into paying a deposit, they may be trying to get the transfer before suspicions are raised. You should also never pay a deposit for a property you have yet to view, always confirm the property is legitimate and walk through it before making any decisions.
Be sure to visit any property yourself or ask a trusted friend in your community to go see it in person. Make sure you can trust any third-party vendors involved with facilitating property deals on behalf of real estate agents and lawyers; do some research into their reputation by asking friends and family if they would recommend them, as well as checking online reviews.
Avoid Bargain Deals
Fraudulent estate agents copy legitimate property listings and advertise them across multiple websites at reduced costs. This is to drive buyer interest and, in some cases, many commit to paying a deposit to secure the property without even viewing it in person.
Here are a few warning signs to look out for:
- The cost of the listing mentioned in the advert is much lower than market value, especially for properties in a specific high-value area.
- When submitting an email query, you receive a weird response that comes from a generic email address, contains minor spelling errors or appears to be automated.
- If the fraudster denies in-person meetings, ignores requests to view the property or has constant excuses for why they cancel meetings at the last minute.
How to protect yourself against suspicious property bargains
If you found a property online, be sure to do your research and if possible, work with a reputable estate agency or licensed agent. Be well informed about market prices for properties within the area you are interested in renting or buying. If a property is well below market value, this should raise a concern. If an advert lists an estate agency, try Google the agency and call the number listed on their website or Google My Business profile to enquire about the listing. Phoning the number on the advert could be false and lead to a fake office.
Verifying Possible Identity Theft
Identity theft is becoming a huge concern to many South Africans, especially since the SAFPS confirmed that fraud listings had increased by 62% in 2020, with impersonation fraud increased by 337%. With this being a reality in the property game, potential property sellers and buyers need to pay extra close attention.
Here are a few warning signs to look out for:
- The buyer or seller only provides an email address and phone number as contact information
- The seller does not live on the property they are interested in selling
- The buyer or seller is reluctant to answer any questions
- The buyer or seller expresses urgency to conclude the process without explanation
- The property is listed at below market value
How to verify identity fraud
If you suspect a buyer or seller of fraud, you should consider running a credit check or bank verification check to confirm the legitimacy of that account holder. You can also run a background check or an ID verification check to ensure you are working with the person registered to the ID that was provided for the transaction.
Watch Out for Bait-and-Switch Schemes
The bait-and-switch scheme when applied to real estate occurs when a potential buyer makes an “above market value” offer on a property to a seller. As this is often the case, the seller is eager to close the deal and proceeds to sign a contract that has not been properly viewed by a licensed lawyer or estate agent.
Once the contract has been signed, the seller is locked into selling their property to that buyer within a set period. When the time ends, the deceitful buyer requests an extension under the guise that they are getting the paperwork or money in order.
Meanwhile, the property is still being paid for and maintained by the seller, when finally, the fraudster comes back and advises the original offer is no longer applicable or requests a reduction in the cost, with the new offer being well below market value. Feeling pressured by the time taken and costs accumulating, the seller agrees to the reduced price in fear of losing the sale all together.
Here are a few warning signs to look out for
- The buyer places a cash offer well above market value for the property
- The buyer makes excuses as to why payment has not been made, requests extensions or is difficult to contact via phone or email
- The buyer rushes to sign the contract and avoids answering specific questions
How to avoid falling victim to bait-and-switch scams
As exciting as it may be to get an offer that is above market value or your asking price, you should not rush into signing any legal documents without verifying the buyer’s intensions and background. It is also important to be wary of estate agents that offer guarantees of selling your property at a higher value for reduced commission or request that you sign an “Exclusive Listing Agreement”.
Conclusion
Buying or selling a property can be a mine field of quick scams, fraudulent or phony estate agents and, if that is not enough, there are legal and advertising processes that also need to be followed. This why you should always do your research when looking to rent, buy or sell a property. If you are looking to hire a professional, ensure they are certified and listed and check their reviews as an extended part of your research, alternatively ask around or ask the agents questions when unsure.
With AvenirProperties, we strive to provide our clients with helpful information at all times, ensuring transparency at every step when it comes to your property rental, sale or purchasing processes. Contact us today at +27 (0) 10 541 1788 or visit us at www.avenirproperties.co.za for more information on how we can help you.
