How Not To Be Suckered Into Scammy Property Deals

Georginna Tan

This article is contributed by my lawyer friend (and rumoured vigilante) D. Sidhu.

As with anything where substantial money is involved, the Malaysia property industry is rife with illegal schemes and con jobs targeting the gullible and the greedy. There are hundreds of laws that come into play when it comes to buying and selling property in Malaysia, and even if people don’t realize it, they are probably breaking a few when they perform a property transaction.

Does this mean that these law breakers are going to prison? Maybe not, especially if their transgressions are not that serious, and even if they get reported, the authorities may not take action against these ikan bilis types who don’t usually have malicious intentions in the first place. This is especially so when nobody loses money in the aforementioned transaction.

Like what some might say, it’s all fun and games until somebody loses an eye. Also, just because you’re unlikely to get caught doesn’t mean that you should knowingly flout the law. Any Malaysian would have faced situations where he or she would be asked to do things “under the table” or “tutup sebelah mata”, etc. You’ll encounter many of these kind of situations especially if you are in industries with high stakes (such as property) where people would often justify such behaviour by saying things like, “if you don’t do it, others will”.

Remember that you only need to get busted once, and your reputation is possibly tainted for life. Walk away from a deal if the seller, buyer, agent or lawyer asks you to lie or hide substantial information on the transaction. Avoid doing business with people who do those things – even if you only have a small part to play in the transaction.

What I am going to share with you next is a list of frequently dubious schemes which warrant further scrutiny if you ever come across these opportunities. Of course, similar to schemes like Multi Level Marketing (MLM) there are perhaps a handful of legitimate opportunities sunk in the haystack of dodgy deals (although Khai Yin could claim that all MLM schemes are dodgy!), but if I were you I’d walk away instantly the moment you find these pitched to you.

Private Deals

From my experience, any organization which are set up solely to promote a series of “private” (or “insider”) deals to their members is highly dubious. Usually these organizations make money through what I call “triple-dipping”: (1) from the membership fees that they charge you in a number of ways (one-time fee, yearly fee, “administrative” fee, etc), (2) from seminars and overseas trips, and most substantially, (3) the commissions that the organizers get from selling dodgy properties made by dodgy developers to you.

In many occasions you’ll get to read some pretty exciting testimonials from members who have made money in these property clubs in the past, but remember that even idiots look like geniuses in the bull market. To quote Warren Buffett, “only when the tide is out you’ll see who is swimming naked.” No property clubs are going to show you their “private deals” which have gone bad.

Private Launches

“We’re only launching this privately, and right now we are already 90% taken up. I can reserve you a special unit if you can pay the down payment today.”  Yeah, right, bucko. Any reputable developer wouldn’t even need to launch anything “privately” because there would be beelines forming outside their showrooms. Usually these private launches are accompanied by glitzy shows and blatant pitches disguised as Guru and Fengshui Master “workshops” coupled with high pressure “last day today” selling tactics – if you see any of these telltale signs then you know that you’re in to be suckered into a scam.

Syndications

Syndications are a method to raise capital from investors to buy properties in a large scale. REITs (real estate investment trusts) are a type of syndication, and I will have to make it known here that these are perfectly above board (especially when they are public). These REITs operate by pooling large sums of money to buy commercial properties like shopping malls as well as office blocks. Public REITs are “safe” because the information is disclosed publicly and therefore under higher market scrutiny which lessens the risk of mismanagement and fraud.

What I have reservations for are private REITs; these are offered to private investors and therefore may fly below the radar since they are not subject to public scrutiny. For this reason, the risk of potential abuse and misrepresentation as well as fraud is higher.

Another variation of the same idea is the current trend of crowdfunding. I personally have grown to dislike it, and Khai Yin has written quite blatantly that crowdfunding stinks. Avoid.

Credit Faking

The scheme works like this: the scammer pitches you some dubious deal which promises 10% gain on flip or something spectacular like that. However, you don’t have the credit history to get a bank to loan you $2,000,000 you need to buy that property. Therefore, the scammer would “fake” hire you into his organization, paying you $20,000 a month for three months so that you can establish a line of credit. In some cases, the scammer might even forge payslips for you.

You then use the fake payslips to get the $2,000,000 loan. Then you find out that you’ve bought a dud, and you have problems flipping even at the price that you’ve paid for it, much less at 10% gain. You’re now stuck with a $10,000 monthly installment for a piece of property that you have overpaid for. Margin calls are rare in this side of the world, but be prepared for the proverbial shit to hit the fan if your dud property continues to drop in value.

About Khai Yin

When I am not writing for GoodPlace.my and helping my readers find properties though the DealMatcher service, I spend time doting on my three kids: Wenyi, Qinyi and Eian. My personal stuff, some published essays and contact details can be found at khaiyin.com

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