Buying a property is one of the biggest transactions you’ll ever make.
It’s one that you’ve probably saved and prepared for a long time and are eager to make happen.
The problem is, among all the activity, buyers are unaware that scammers are out there, lurking and waiting.
Real estate scams are commonly related to, or even originate from, non-real estate scams.
And as scammers become more familiar with the real estate industry and the property selling and buying processes in Australia, they are increasingly exploiting loopholes and weaknesses to their advantage.
Generally, it’s best to keep in mind that scammers are after 2 things: your money, and your identity.
Money is generally the ultimate goal, although they often steal identities to use as a front in order to avoid getting caught.
Real estate scams take on many shapes and forms, and some are more obvious than others.
Here’s a rundown of the 4 most common real estate scams, and how to avoid falling victim to them.
1. Rental listing scams
Australia is in the midst of a rental crisis, so it’s not surprising that scammers are taking advantage of the more vulnerable and, in some cases, desperate renters looking for somewhere to live.Rental listing scams advertise a fake rental listing or advertisement, usually with a real address, for a property that isn’t available for rent.
These criminals then convince would-be renters to sign a forged tenancy agreement and hand over money for a bond for a property sight unseen.
It’s common that these scam ads are on free listing sites like Facebook groups, Facebook forums, Facebook Marketplace, Gumtree, Whirlpool, etc.
Tips: Renters looking for a new rental property have been warned to be wary of ads on social media pages and to make sure they see the place in person before handing over any money.
You can also search the address online to see if the property listing is legitimate, and you can contact the real estate agency to verify the information.
Renters should never pay a bond or advanced rent until they’re certain the property (or room) is legitimate.
And when you make any payments, whether they are rental or a bond, ensure they go into the real estate agencies' Trust Account, not to any other bank accounts or even the person's personal account.
2. Sales listing scams
A sales listing scam works similarly to a rental listing scam - the scammer creates a fake listing for a property that either doesn’t exist or isn’t for sale.
In some cases, the property is available for sale, but the scammer has duplicated the details to try to take advantage of eager buyers.
These criminals then convince would-be buyers to sign forged paperwork and hand over money ahead of viewing the property.
Tips: Keep an eye out for warning signs such as refusing to allow property inspections, a low large price or asking for payment ahead of viewing the property.
Always check to ensure the person listing the ad is real and check if the address exists and is for sale (by the person trying to sell it to you).
Don’t make any payments before you inspect, and don’t make any offers or payments until you receive the contract of sale for the property.
If you have to make any payments, ensure it goes into the real estate agencies' Trust Account, not to any other bank accounts or even the person's personal account.
3. Payment redirection scams
Payment redirection scams are where scammers get into the email database of official and legitimate businesses (such as a real estate agent, broker, or conveyancer) and use it to target clients.
They can intercept emails, edit bank details and send them on to you, the client so that you unwittingly send over funds to the scammer's account instead of the legitimate account.
It usually involves the victim receiving a notice for payment or an invoice, usually from a legitimate source that they were expecting, but the communication has been intercepted, and the banking details changed to the scammer’s details.
Sadly, these scams often involve very large sums of money and are nearly impossible to recover.
Tips: These scams are difficult to spot but always keep an eye out for poor language and spelling mistakes.
The best way to protect yourself from becoming a victim is to contact the agent directly and verbally confirm the payment details, do not use the number on the invoice.
This helps to ensure that the banking details are correct ahead of making the payment.
4. Property investment scams
This is, by far, the most common scam.
These scams (or misinformation, as I also call it) masquerade as investment planning advice but are nothing more than marketing bluffs.
I’m sure you have received an invitation like in the past: Come to our ‘free’ seminar or attend our free webinar and hear about how they can deliver you financial freedom in six easy steps.
They’re often highly sophisticated sales operations with everything conveniently available to tempt inexperienced investors to buy on the spot.
You may even find they have mortgage brokers ready and waiting in-house to assess your financial situation and approve your loan, pressuring you to make a decision instantly on the spot.
These scams promise financial freedom through property investment, usually with the added promise of extremely high yield, zero deposit and guaranteed returns.
But these scammers are no more than property salespeople (usually unlicensed also) who are simply selling properties that developers can’t offload - usually substandard properties in over-supplied locations.
Tips: These scams are usually more elaborate, but remember, if something is too good to be true, it usually is.
Give these schemes a wide berth – often, these seminars or webinars on residential property are fronts for developers wishing to offload stock to investors.
Sure, they may promise huge rental returns and great properties, but you have to ask yourself the question: if the properties are so great, why are they not brought to market where more people can fight over them and potentially up the sale price?
The truth is, that many properties sold this way are often priced well above their worth.
Make sure you ask for their financial planning licence if they claim they can build a plan for you. if they cannot show it, they are just salespeople or scammers selling properties.
Also, do your own due diligence and verify the information provided to you and separate facts from fiction.
Other scams to be aware of
While these are the 4 most common scams, it's certainly not an extensive list of the scams doing the rounds in Australia’s real estate market.
Here’s a few other scams you need to keep your eyes open for:
- Overseas buying scams: It is hard enough to get your due diligence right in a familiar culture, let alone in a foreign country with a foreign residential property market. You may be tempted to buy that run-down home in Sicily, which is worth a car space in Sydney, but if something seems too good to be true, it generally is.
- Bait and switch scams: A prospective buyer will make an offer on a home that's much higher than market value, agreeing to pay after a designated amount of time, but once the period ends, the buyer asks to extend. When the second wait is over, the buyer comes up with an explanation of why the initial offer won't work. Frustrated and eager to complete the purchase, the seller agrees to a lower price.
- Phishing scams: Here, a scammer hacks a legitimate business or businessperson (such as a real estate agent) and then steals sensitive personal information from their clients. Confidential information, such as online banking logins, credit card details, business login credentials, or passwords/passphrases are at risk from these criminals.
- Superannuation scams: These scams offer to free up your super fund in order to buy real estate. Early superannuation access is illegal, so scammers often coerce you into agreeing to a fraudulent story to release the fund. Once the money is available, the culprit will take exorbitant fees or even leave you with nothing at all.
I think I’ve fallen victim to a scam, what do I do now?
If you notice something is amiss on your credit card statement, bank statement, or even your credit history, report it immediately.
It’s important to notify the appropriate agency (this will depend on the type of scam - it could be your bank, the ACCC Scamwatch, ASIC, Centrelink/Medicare, or the Police) so they can investigate and warn others who might fall victim to the same scam.
Note: When it comes to property investment, it's important to be aware of potential property scams.
Before passing over money, make sure to verify the person you are sending it to, verify what it is for and that the bank details are correct.
Failure to do so can see you lose your hard-earned money forever.
At the same time, before making any investment, make sure that you get independent advice from someone who takes a holistic approach and who has nothing to sell other than advice.
After all, knowledge is power and while it’s often said that experience is the best teacher, in my mind you have too much to lose getting it wrong in property investment.
