As the economic climate in Australia continues to look to be uncertain at best many Australian’s are being lured into ‘get rich quick’ schemes that often see them burnt and in a far worse off position than when they entered into the agreement. Scammers are aware of the insecurity and uncertainty in the population at the moment and will not hesitate to capitalise this in order to part you from your money.
Occurrences of property investments scams and schemes continue to rise in Australia, with government departments such as ASIC and ACCC sometimes unable to act on information of such scams due to the clever way in which perpetrators are able to cover their tracks and hide evidence, often through means of overseas banking.
Lets take a look at some of the most common property investments scams and ways in which that they can be avoided.
1. ‘Insider Trading’
It will surprise many people how often real estate agents take advantage of insider knowledge of their clients, such as if they are unaware or unsure about the accurate value of their property, in order to scam the owner into securing the property at a fraction of the market value. The agent will often ask a family member to purchase the property or it is purchased under a company or trust that is owned by the agent so that the original owner is unaware that they are being taken advantage of.
Although the selling of a property by an agent is illegal for this exact reason, the way in which scammers hide the asset purchase through corporate entities makes it very difficult to monitor and track these scams and perpetrators often go unnoticed and unpunished.
2. America – the land of opportunities
These scams are made possible through the extremely difficult economic situation in the United States at the moment. As property prices fell dramatically in the U.S scammers quickly took advantage of the situation, snapping property up at ridiculously deflated prices with the view of on-selling at a profit.
The scammers then take these properties to overseas markets, such as Melbourne and Perth, advertising the ability to purchase a property investment at a fraction of the cost that it would cost in Australia. The pitfall becomes apparent after these unassuming investors purchase the property and they find out that the house that they now own is on a street that has been abandoned and is essentially a ghost town. The house is actually worth significantly less than the small price that was paid for it, with no possibility to improve on the assets value.
It should go without saying that if someone offers you a property investment opportunity overseas it should be treated with extreme caution. These sort of investments should be avoided in most instances except where you are able to travel to the overseas location and source the property and property manager yourself.
As a result of these scams people are often left with a useless property that generates no income and is on the other side of the world, making it extremely difficult to effectively manage. Agents that brokers these arrangements are often solely concerned with the possible commission that they will make and take no steps to ensure that your purchase will be a financially sound on.
3. The Prince of Nigeria
Most Australians are familiar with West African financial scams. They come in many forms, typically through the internet, and normally talk about a raffle, ransom or lucky spot price. There are instances however of these scams concerning property assets, and indeed there have been two documented cases of the Perth residents having their homes sold without their knowledge.
In these instances both the owners were on overseas holidays when their homes were sold without their owner’s knowledge. These scammers were able to do so by hacking the digital accounts of their owners, obtaining information about their personality and finances. They then sell the property online, without ever physically meeting with an agent or buyer.
It is worth noting that these scams are not common place and require a great degree of skills and expertise on the part of the scammer in order to carry out the operation. However due to the severity of the impact of the scam the Western Australian government is examining property purchasing and selling laws to see if guidelines around personal contact between sellers and buyers can be tightened.
So there you have it, some typical property investment scams that are present in Australia today. As a general rule of thumb if something appears to be ‘too good for true it’ it often is and it is recommend that you take advice from a financial expert.
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The information provided is of a general nature and is not intended to be constituted as financial advice. We recommend that you seek independent advice from qualified professionals before employing any strategies outlined.