Real Estate Scam that Really Happened in the Philippines
Too many people fall for it because it’s too clever.
Taking money away from pre-built properties
The most major type of real estate fraud in the Philippines is the “real estate broker who buys a property in Japan, but when he or she arrives in the Philippines, the title has not been changed and the money was simply handed over to the brokerage company.
This scam is usually perpetrated against pre-built properties that actually exist, and since the properties themselves are real and can be checked online for completion drawings, property details, etc., the purchaser is led to believe that the property is real.
A simple way to recognize this scam is to check “Is the developer the payee of the property payment? If the payee is set to an intermediary company, there is a high possibility that the scam is not genuine, so please be careful.
Top-secret scheme to buy land that foreigners cannot afford to buy
In the Philippines, strict foreign investment regulations prohibit foreigners (non-Filipinos) from owning land or a house. However, foreigners can own land indirectly as a corporation.
It is true that there are real estate investors who have made huge profits using this scheme, but it entails great risks. In the Philippines, there are restrictions on foreign investment when owning a corporation, and there is a law that only 40% of the total shares can be owned (except for some industries), and there have been many scams in which people team up with bad Filipinos, use the corporation scheme to get them to pay out money, take over the corporation, and run away with the money. This is because of this.
Sales Clauses to Watch Out For When Purchasing Overseas Real Estate
Dangerous salesman’s words to believe
Although we have introduced some obvious examples of scams in the Philippines, there are also sales phrases such as “It is not an obvious scam, but what about it from a moral point of view?
You can buy only pre-built purchase rights and resell them before completion.
The earlier you buy a pre-built property in the Philippines, the higher the discount and the more installments you can pay. For example, a property can be purchased at 30% off the list price two years before it is scheduled to be built, but at 15% off one year before. Therefore, it is theoretically possible to buy at a high discount and resell before the property is completed to make a profit on the difference in discount rates.
In situations where demand is clearly high relative to the supply of properties, and pre-built properties sell out quickly, reselling the right to buy a pre-built property can be effective, but such properties are rare among all properties, and investors who target this strategy often do not have enough money to buy the property. It is not uncommon for investors who pursue this strategy to not have the funds to purchase the property, and it is not uncommon for the property to be foreclosed on in the process.
With installment payments, you can buy Philippine real estate for a few hundred dollars a month.
Pre-built properties in Philippine real estate offer installment payment options, with a maximum of about 50 installments (4 to 5 years). As a monthly handout, even a 20 million peso property can be purchased for about $500 per month.
However, there are two points to be aware of when making installment payments on Philippine real estate.
- The fact that 60% to 80% of the total payment must be paid in one lump sum in the last month when the installment payment is completed.
- The price of the property is more expensive than a lump-sum payment due to the installment payments.
In Philippine real estate, it is common to use the installment method of “paying a small down payment (about 10% of the total) at the beginning of the installment, paying 20% of the total in installments over the remaining years, and paying the remaining 70% together in the last month of the installment.
In other words, although it appears that the property can be purchased with less out-of-pocket expenses by dividing 20% of the total into dozens of installments, the remaining 70% must be paid in a lump sum, which means that a large outlay cannot be avoided.
If you have a specific purpose, such as “to use delayed payments as a tax measure to prevent management from taking too much in executive compensation and having to pay personal taxes,” then paying in installments is recommended, but it is not advisable to pay in installments while there is no spare cash.
The biggest advantage of pre-built properties is that you can get a discount by taking the risk of “whether the construction will be carried out without defects and without delays,” and you can buy the property at a lower price than the normal price. However, installment payments are 5% to 20% more expensive than lump-sum payments, which may diminish the benefits of pre-building.
With a loan, you can buy Philippine real estate with little outlay.
Some real estate agents claim that a loan will allow you to make payments without any problem, even if you have to pay in installments at the same time. However, bank loans in the Philippines are at an annual interest rate of 6% to 8%, and loans are not always available, and sometimes loans are denied.
From the perspective of Philippine banks, lending a large sum of money to a foreigner who does not have a regular job in the Philippines is a high risk, even with collateral, and the screening hurdles are higher and the interest rates set are higher than usual.
In fact, there are many people who have purchased properties because they were told they could get a loan, but were forced to let go of the property because they were not approved for a loan, even though they had relied on the loan.
Property prices will skyrocket several times because of the new subway station in the future.
Infrastructure construction in the Philippines is rapidly underway as the population grows: construction of a subway connecting Quezon, Ortigas, and BGC began in February 2019, with some areas to open in 2025 and all planned stations to open in 2028. The Skytrain monorail connecting Makati and BGC is scheduled to be completed within a few years.
With the opening of the new station, there are many salesmen who claim that “if you buy a condominium near the station, the price of the property will unconditionally go up”. It is risky to jump in and purchase a property just because “a new station will be built” without examining the property’s added value and information on the surrounding area.