File picture: Richard Vogel/AP File picture: Richard Vogel/AP
JOHANNESBURG – Fraud occurs in many industries across the world and unfortunately Real Estate is no exception.
Besides rental scams and other illicit activities, agents and sellers occasionally fall victim to “fake buyers”. These scammers make cash offers on properties they know they can’t buy and then disappear without a trace in most cases.
Gerhard van der Linde, Seeff’s MD in Pretoria East, says there are probably some fake buyers who believe that the money for their transaction will somehow magically appear before they are found out, but this wishful thinking of course.
In many instances of “fake buying” however, buyers know full well from the onset that they don’t have the financial means to make a cash offer, nor will they be able to raise the funds to conclude the deal, but this does not stop them of making a cash offer.
“We often see this with regard to buyers who are reluctant to disclose where the money for the transaction is coming from. When the time comes for the money to be transferred to the attorneys, the “buyer” then discloses that the money is coming from abroad," said Van der Linde.
A situation like this is not only extremely time and cost consuming, but it is also fraudulent and puts everyone involved with the potential sale in an unfortunate position – including the estate agency, estate agent, seller and the transferring attorneys.”
Van der Linde says it is difficult to determine exactly what these “fake buyers” are trying to accomplish when making cash offers when they don’t have cash, especially since the sale will never go through, nor will the property be transferred to the fake buyer.
“What is does is to cause a logistical and administrative nightmare, also for sellers who will regularly base the successful sale of their current property on the acquisition of their next property.
When the deal then eventually falls through due to the non-performance of the fake buyer all other parties are negatively affected.”
Van der Linde says he has experienced the following patterns with regard to “fake buyers”.
“They are willing to pay the full price for the property and will frequently show interest in buying a second property at the same time. There is also a trend where fake buyers become extremely specific in terms of their requirements and where they always express a great level of urgency to conclude the transaction.
They are also typically very well informed and extremely convincing which makes it difficult to spot a fake buyer as a scammer”.
- While it is often said that “cash is king” this is not necessarily true in this instance. Do not believe that a cash transaction is better compared to a transaction where a bond has to be applied for. In essence a bondable transaction requires milestones that need to be achieved, i.e. the loan has to be applied for, the loan must be accepted by the client and documentation must be submitted by the buyer in order to apply for the loan. With a cash transaction there are no guarantees until the day the money is due.
- Sellers must insist on a sizeable deposit payable within a short period, i.e. within three to five days of acceptance of the offer.
- A seller has the right to ask for proof of the existence of the funds before accepting the cash offer.
- Do not make any changes to the property as required by the purchaser until such time when the transferring attorney confirms that everything is in order, i.e. costs paid, guarantees received and all documentation signed.
- Should the seller wish to proceed with the purchase of another property, make sure that the transaction is linked to the successful conclusion of the sale of the first property.
- Never give occupation to a buyer unless guarantees have been delivered. Obtain confirmation from the transferring attorney.
- The seller has the right to appoint the transferring attorney who will then act on behalf of his/her client.
- The parties can contractually agree to continue with the marketing of the property until guarantees have been delivered. This possibility can be discussed with the agent or the attorney who will be attending to the transfer.
Van der Linde adds that most cash transactions are above board and are concluded successfully, but sellers and agents should be aware of the risks and should not make any commitments until such time that the attorney has confirmed that guarantees are in place.
