Frauds in Real Estate market

Different types of frauds are happening in property selling and buying. It is important for buyers to know for effective counter measures and precautions to ensure transparent deals and safe financial transactions.  

A.     Different types of Frauds:

1.      Property is defaulter in paying Electricity Bill Payments and Meter Disconnected.

A buyer purchased a property whose electric connecting was disconnected. Once he approached the electric company he found the default amount is PKR 1 million.

2.      Online registration Forms

The agents take information online, reach the potential buyers to explain the property those have no existence of they are not responsible to sell. This way they try to grab an initial deposits from the buyers and then they change their contact and even the websites are found to be fake.

 3.      Fake registry papers of the property

Seller prepares fake documents about the property and take advance payments from buyers and disappear from the market at the time of transferring the property to buyer.

4.      One property is sold to many buyers

Some real estate agents fraud by selling the same property many buyers at the same time. They grab a huge amount money from the buyers and then disappear and change their contacts.

5.      Sold land or plot of good locations to many buyers

Some real estate offices fraud with buyers by selling them a plot on the society plan which is of good location. When it will come to allotment they will say oh! It was mistake of our agent whereas plot is owned by someone else and the agent was not aware of this. The buyer then will left with no option to take another plot of rare location or at odd locations, else money payment will remain block of the estate office will delay him for many months.

6.      Selling a Villa, house on low cost due to Urgent needs of the Owner

Some tenants sell the house pretending as they are owner, and ask for a less price from the market to make it urgent deal. Some buyer invest in such deal and found the property is litigated or not owned by the seller.

7.      Dealer do not give the breakup and details of the hidden Charges and Fees

Sometimes the actual cost of that a buyer has to bear reaches 10% more than the deal amount, which is due to some extra and hidden payments like commission, taxes, utilities connections, development charges, corner properties, society charges which were not told at the time of making the deal

8.      Buying & Renting Unseen property,

Some online real estate office those market the properties for overseas to invest in them have dark sides. They sell them unmarked spaces/property units to them and take them back on rental basis. The buyers bought from the developer without having to know the exact location of the property and when it come to their inheritors, then developers trap them with the low cost area that has less value and cheaper location compare to the amount their parents have paid. It happened because such buyers could not come to see the properties they are buying or investing in. 

9.      Listing same property in different prices,

The real estate offices are playing wisely through social media these days and try to sell a property on a good price even more than the market value sometimes. This is done by running advertisement of the same property by placing different elevations and picture, asking for different prices so that the buyer looking for similar property in an area can attract to the lowest price which in fact is more than the market value.

 B.     Corrective measures to avoid frauds and traps in property buying:

 1.      Buyer must ask all the document those establish the ownership of property like registry and transfer letters from the seller before to make any commitment or down payment.

2.      Investigate the real estate agency is they are trust worthy

3.      Hire a professional in real estate sector and pay him for his services to help you make you a wise and better decision.

4.      Make sure land is register and legal

5.      Property and land shall not be occupied by anyone

6.      Don’t make cash transactions

7.      Investigate the owners representative thoroughly and their power of attorney,

a.     Some people will say that they are legal representative of the owner who lives abroad and authorize to sell their property as the owner have given then authority. But usually this authority is to collect the payments not to sell.

                                                                          i.     Buyer shall ask the affidavit that make him legally allowed to represent the owner

                                                                        ii.     Affidavit does not make someone eligible to take payment under his name by to agree on the deal only.

                                                                      iii.     The payment shall be made to owner of property only through Demand Draft (DD), never pay in cash.

8.      Ask for final payment agreement that shall be with buyer and seller. FBR sometimes ask to show when some seller have huge amount coming into his account to justify where it has come from. Usually the registry of the property is done on DC rate which are far less than the market price. It is therefore important to keep trail of original receipts that show the bank transactions of buy/selling amount equal the property.

9.      Ask the below documents before making a deal

a.      All Approval of the Society, like LDA, CDA,

b.      CNIC and ownership document proof of the property owner

c.      Review and check Farad (now its computerized) for open or agriculture land

d.      Sale Deed and transfer letter in societies

e.      Society plans and drawing, if approved from related authority or no especially for new societies.

f.       NOC issued from Excise to ensure if all the applicable Property Taxes on this property are paid by the seller already.

g.      Utility bills are paid for property prior to sale.

h.      There is no illegal activity in the building like operating a factory etc. that can link to outstanding payment due for property to pay before to use.

i.        Keep all the receipts of Tax payments (Challan), to claim all such taxes while completing the annual tax returns. There are such cases of taxes like Advance income Tax, TMA paid taxes etc. those can be adjusted in you’re the Tax return.

A real estate agent shall understand that; “Trust is not gifted, it is earned”

It means, the trust is earned to make people believe in you not the people should believe that you are trustworthy.