Real estate scams are unfortunate realities in the Philippines and other parts of the world. In countries like the United States, homebuyers and renters are offered better protection through regulations like mandatory escrows and title insurance.
For the most part, similar stringent laws in the Philippines are still being formulated. This leaves you, the buyer or renter, largely responsible to conduct due diligence and make sure your hard-earned money is protected when entering into a real estate deal. Be aware of real estate scams and how you can protect yourself against them.
The scam: Pre-selling fraud
Buying a pre-selling property can be a wise move, as the price is usually much lower compared to a ready for occupancy home.
Sadly, unscrupulous developers have been using pre-selling as an opportunity to trick unsuspecting buyers. Common scams include long delays in turnover and inferior quality homes. In worst cases, the project is stopped in the middle of construction, leaving buyers without their money and the property they paid for.
How to avoid:
- When looking into pre-selling properties, always keep in mind that if the deal sounds too good to be true, then it most likely is.
- Make sure the developer is reputable with a proven track record. Even a new company must possess good credentials within the industry or community.
- Check with the Housing and Land Use Regulatory Board (HLURB) if the development has a License to Sell, and if the materials and specifications used in the construction conform to HLURB standards.
- Check the agent’s background and credentials with the HLURB and the Philippine Regulation Commission (PRC), and work only with agents you can trust, preferably those referred by people you know.
The scam: Unauthorized selling
This involves real estate agents posing as representatives for a property, without authorization from the owner. These agents copy legitimate listings and advertise them on different sites, naming themselves as representatives. They then ask the buyer or renter for a down payment, security deposit or outright broker’s fee, and once they get the money, they’re never heard from again.
In less harmful cases, the agent might tell a responding buyer that the advertised property has been sold and offer a property that they legitimately represent instead.
How to avoid:
- Check the broker’s or agent’s credentials with the HLURB and PRC.
- Insist on viewing the property and meeting the owners before paying anything.
- Watch out for repetitive listings, or the same listing posted in various – often questionable – sites, including blogs.
- Avoid paying in cash and always ask for receipts. Check payments will give you better protection as it leaves a traceable transaction trail.
The scam: Double sale or fraudulent titles
Double sale involves selling a property that has already been sold to another buyer. This type of scam was the subject of the massive Globe Asiatique scandal in 2014, and usually happens when the title has not yet been transferred to the first buyer.
This scam is similar to selling a property with a fraudulent title. Often, the seller or agent would present a fake title to a buyer and disappear after receiving a down payment. In many cases, the buyer discovers the title is fake only after the seller has taken off with their money.
Other title frauds consist of not disclosing encumbrances or liens attached to a property.
How to avoid this scam:
- Before paying anything, check with the Register of Deeds if the property has a clean title, free from encumbrances, claims or liens.
- Check the original title with the Register of Deeds and compare against the seller’s copy.
- If the purchase is to be financed through Pag-IBIG, check with the agency if the property already has an existing mortgage.
- Inspect the property personally to make sure the seller has not misrepresented anything, including the property’s occupancy.
- Consult with a lawyer who can do due diligence for you.