Please note that you are using an outdated version of Internet Explorer which is not compatible with some elements of the site. We strongly urge you to update to a newer version for optimal browsing experience.

Selling property: Spot ‘fake buyers’ with these 8 red flags

12 Aug 2019

Fraud occurs in many industries across the world, and unfortunately real estate is no exception.

'Fake buyers'are typically well informed and extremely convincing, often have very specific requirements and express a level of urgency.

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, says Gerhard van der Linde, Seeff’s MD in Pretoria East.

Van der Linde 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 is wishful thinking, of course.

In many instances of ‘fake buying’, however, buyers know 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 from 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’,” says 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.”

It is difficult to determine exactly what these ‘fake buyers’ are trying to accomplish when making cash offers and don’t have cash, especially since the sale will never go through, nor will the property be transferred to the fake buyer, he says.

What it does do is 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,” he says.

“They are also typically very well informed and extremely convincing, which makes it difficult to spot a fake buyer as a scammer.”

Van der Linde provides the following advice to sellers, agents and agencies:

1. Is cash king?

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, for example 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.

2. Get a deposit ASAP

Sellers must insist on a sizeable deposit payable within a short period, for example within three to five days of acceptance of the offer.

3. Ask for proof of funds

A seller has the right to ask for proof of the existence of the funds before accepting the cash offer.

4. Do not undertake alterations without evidence

Do not make any changes to the property as required by the buyer until such time when the transferring attorney confirms that everything is in order, for example costs paid, guarantees received and all documentation signed.

5. Be wary of making an offer on another property

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.

6. Wait for guarantees before letting the buyer take occupation

Never give occupation to a buyer unless guarantees have been delivered. Obtain confirmation from the transferring attorney.

7. Choose the right transferring attorney

The seller has the right to appoint the transferring attorney who will then act on behalf of his or her client.

8. Continue marketing until the deal is final

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 says 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.

Print Print
Top Articles
These estate homes in George in the Western Cape offer comfortable family living in serene settings. With prices under R5m, take a peek…

La Lucia Mall has just undergone a major upgrade to modernise and reimagine its retail space, with new shopping options. Take a peek...

Popular for its blue flag beaches and outdoor lifestyle, KwaZulu-Natal’s Hibiscus Coast offers affordable three-bed rental homes from around R6.5k per month.

Loading

Your browser is out of date!

It looks like you are using an outdated version of Internet Explorer.

If you are using Internet Explorer 8 or higher, please verify that your Internet Explorer compatibility view settings are not enabled.

For the best browsing experience, update to the latest Version of Internet Explorer or try out Google Chrome or Mozilla Firefox.


Please contact our Property24 Support Team for further assistance. Tel. +27 (0)861 111 724