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Nobody likes to be fooled. But when it comes to property scams, you could lose a lot more than just your good mood. You see, property fraud is a serious concern for buyers and sellers alike.
While the majority of property transactions are undertaken by honest and trustworthy individuals and professionals, it’s important to take note of the common types of fraud which you should keep an eye out for.
Here are some major types of property scams and how to avoid them.
1) The Upfront Payment Scam
Ever seen an offer that’s so good you’re afraid of missing out? That fear of missing out is a powerful tool used by scammers to separate you from your hard-earned cash.
This type comes in different forms, but often revolve around getting you to pay rental deposits or upfront down payment on property that isn’t owned by the supposed ‘owner’ at all.
Case in point is this devious conman who wanted to rent out his "aunt's" apartment unit in Bandar Sunway for a price that's below the market average.
You might be wary at first, but then you meet the guy showing the flat, he seems legit, and he shows you around just like any other landlord/owner.
The sting comes when you’re asked for something like the first month’s deposit or rent to secure your unit upfront.
A common excuse used would be, "There have been HUGE interest in this unit so you'd better secure this golden opportunity!"
Never pay up for property when you don’t have a legal contract in place, especially through an anonymous online platform.
When it comes to a rental or sale, this is why professional help and legal sign-off is so essential.
Above all, don’t be so desperate for a supposedly great deal that you don’t do all the normal checks or completely ignore your gut instinct. If it’s too good to be true – it probably is.
2) Ponzi Investment Schemes
Fake investment schemes are one of the more prominent types of fraud to be aware of when it comes to big value property investment.
The case in Sabah in 2015 highlights how these highly-polished schemes can operate.
Slick operators lure investors, both within Malaysia as well as international speculators, to sink their money into a scheme with promises of great returns and a fool-proof development strategy.
Often, this includes well-funded mechanisms of fraud such as showcasing a potential site and its masterplan, or revealing the emerging architectural designs.
The reality is these schemes often lack development permission, or in many cases the so-called developers don’t intend to develop property at all.
They’re just slick window dressing to encourage investors to transfer their money to benefit the scam artist.
Those participants looking for a good return on their investment, will instead find they receive no returns at all.
3) The ‘Back Door’ Benefits Scam
The PR1MA housing scheme is designed to provide affordable housing for middle-income households in Malaysia.
That means integral to the scheme are eligibility criteria to ensure that it benefits the demographic it’s targeted to help.
But some scammers are duping victims out of cash by claiming to be able to avoid those restrictions.
A case in 2015 saw a number of individuals, including high-profile VIPs, scammed out of cash by fraudsters claiming to be representatives of the PR1MA scheme.
Using their ‘connections’ to the scheme, they promised investors they could purchase property through a ‘back door’, collecting substantial deposits for these houses.
Predictably, the scammers vanished with the money, with investors receiving no refund, and no PR1MA house at the end of it all.
How to protect yourself against scams
Protecting yourself against property scams is about employing common sense and some sensible due diligence. Here are several steps to take in order to protect you and your finances:
- Ask is it too good to be true? If it sounds too good to be true, it probably is – your gut instincts rarely lie! Asking this question might get the alarm bells ringing, and that you’re prepared to undertake the steps to keep your money safe.
- Be aware of Ponzi/pyramid schemes: Any return on investment that relies on you recruiting other family members, friends or investors is almost certainly a Ponzi/pyramid scheme. That basically means a fraudulent structure which is built on you helping the scammers do all their dirty work for them.
- Be careful of transferring money: No matter how tempting it might be to ‘secure’ your dream home, you should be extremely wary of transferring money directly to an individual, especially one you’ve never met. Use respected third-parties for big value transactions, and follow the guidelines set out by financial institutions.
- Do your research: It’s hard to overestimate the value of good research. Check up on developers or individuals to verify their authority. The internet is a great first step, looking up credentials or accreditation for developers or landlords/owners. If they have a website set up last week with just a few five-star reviews from suspicious profiles, chances are, they aren’t legit. Don’t be afraid to do some real-world investigation too. That means things like asking the neighbours, or management in a high-rise condo complex, to ensure the people you’re dealing with are trustworthy.
What to do if you fall for a scam?
The first step when you fall for a scam is report it to the relevant authorities. Fraud is illegal, so the police should be the first people you consider when you realise you’ve become a victim of scam artists.
Don’t forget that financial institutions are also a powerful weapon against scams, and in some cases can even help you retrieve your money.
Contact your bank or any relevant financial institution and inform them of what has happened.
They will have processes in place to ensure you don’t fall further victim to financial fraud, and can potentially help recoup your losses.
If the scam has an online element to it, it may well be that you should also report it to the Malaysian Communications and Multimedia Commission. You can contact them to report online scams on their website.
Don’t forget that others are likely caught up in the scam too, so the sooner you report a scam, the more likely you are to stop other people becoming victims!
Purchasing property is a serious decision, that means you should seriously consider how you go about investing your finances. The vast majority of property transactions are safe, secure, and provide an exciting step for buyers and sellers alike. If in doubt, follow our guide, and ask the right questions. And if you’re ready to take your next exciting step, you can find thousands of properties here ready for you to explore.