Red flags to look for in a real estate transaction
Category Newsletter: Article
Although property scams have become prevalent in recent years, many South Africans still only realize they've been a victim of a real estate scam after the fact. Unfortunately, everyone is susceptible, as scammers target buyers, sellers, renters, and even landlords with their antics, requiring greater vigilance when conducting real estate transactions. Therefore, you should look for these red flags when completing a real estate transaction.
Red Flags for Landlords
Most landlords won't be scammed instantly by tenants. Still, they could fall victim to predatory tenants who don't intend to pay their rent beyond the deposit and first month or who plan to sublet, dividing a home or apartment among several - likely unsavoury - tenants.
A straightforward way to avoid being a scam victim is to outsource the job to a real estate agent. Agents always have their fingers on the pulse regarding current scams. They also act as a deterrent to scammers. But if you decide to lease the property yourself, these are the red flags to remember.
Bulk Cash Payments
The most obvious red flag is when a tenant is eager to pay for more months upfront than is necessary. Typically, this is a warning sign that they won't pay any more once those payments run out.
Sympathy Baiting
When a tenant leads with sympathy as a reason for their move or the reason for urgency, be wary of that. If you think turning them away would be callous, ask the tenant for proof of their claims - medical records for medical issues, divorce papers, court interdicts or police case numbers in the case of domestic violence. While this may seem overreaching, they've opened themselves up to further scrutiny by sharing a sob story. A tenant wanting to scam won't be forthcoming with such information.
Incomplete Tenant Application
An incomplete application is the ultimate red flag, especially if it lacks information like tax reference numbers, employment address, references, or work address and phone number.
Red Flags for Renters
Rental property scams pop up frequently so frequently that most tenants looking for a place will have scrolled past one or two.
Most red flags are obvious in hindsight, but this list describing what to look out for in a property scam will guarantee you never give a scammer money.
Grammatical Errors
The first red flag is to look for grammatical or spelling errors in the ad.
This, accompanied by requirements like only contacting via WhatsApp, should cause your inner alarm bells to ring.
Pressure to Lease
If there's pressure to sign a lease and pay a deposit the day of the viewing to secure the apartment because there's "plenty of interest," walk away, this is a red flag.
No Credit Check
If ads include terms like "no credit check," "blacklisted welcome," or similar statements, this is a dead giveaway that the individual who've written the ads wants to attract tenants that may not meet the stringent criteria required by agencies.
Cheap Rental
If the rental is significantly cheaper than the market value for the area or size of the property, it's highly unlikely you're getting a deal and more likely that you're getting scammed.
Cash Payment Demands
When a "landlord" or "agent" demands that you pay cash to satisfy a deposit and rental, do not do this.
Cash deposits are untraceable and can be easy for rogue agents or scam artists to get money from unsuspecting tenants.
EFT payments should also be scrutinized, especially if they're required before a lease agreement is signed or with little knowledge about the landlord's particulars.
Red Flag for Buyers
Buyers are also a primary target for scams, as they can often get more cash from such schemes as fewer individuals are familiar with the buying process and may not be privy to the red flags.
No In-Person Viewing
While elaborate schemes may include an in-person or virtual viewing, most scams have elaborate excuses why an in-person viewing cannot be arranged.
The clearest example of this is an agent that purports to be residing in another province than the one he/she is selling and cannot make it to the location to offer a viewing.
Most sellers are not going to procure the services of a real estate agent that isn't in the vicinity of the property.
Cash Down Payment
All-cash transactions do not require any cash down payment to secure the property. If you're getting a bond, any downpayment you're making will be something you agree to with a lender after a rigorous screening to determine how much you can afford and the terms of the home loan.
Lenient Loan Terms
If a real estate agent promises to get you superior loan terms, better rates or expedite your home loan application, you should be wary of such agreements.
Typically, they require you to make some upfront payment, which isn't common when buying a home, as the process can take a month or two to complete.
Besides, if things are moving at a record pace when buying a home, this should be the biggest real estate transaction red flag.
How to Protect Yourself from Property Scams?
Ideally, you should avoid trying to cut corners to save money, as this is often where scammers can pounce.
How Landlords Can Protect Themselves From Property Scams
Landlords should always conduct thorough assessments of tenants, call their references, review their job information, and enquire about who they'll share the flat or home with. If alarm bells ring, they're doing that for good reason, reject the application and move on.
How Tenants Can Protect Themselves from Property Scams
The easiest way to avoid a property scam as a tenant is to inspect the lease agreement before signing anything or making any payments.
The lease agreement should include information about the landlord or agent, including their full name/s, company information, and address. Popping up at the address unannounced and asking to speak to the agent is a good way to calm any fears that you could be the victim of a scam.
How Buyers Can Protect Themselves From Property Scams
Always have a third party review and witness the agreement. In South Africa, these parties are referred to as conveyancers. Be sure to hire your own to avoid being scammed.
Author: Coastal Property Group
