Further cases of the ‘resale property scam’ have come to my attention involving a number of Cyprus property developers.
In all cases, the ‘agent’ selling the property on behalf of the original buyer was the developer. And in both cases, the sale price reported to and handed over to the original buyers was significantly less than price paid by the ‘new’ buyer! Where does this extra money end up? I’ll give you three guesses!!!
This scam occurs as a direct result of the unacceptable delays in issuing Title Deeds. Sometimes these delays are due to Government bureaucracy and in other cases they are due to developers dragging their feet. In some cases I know of personally, people have been waiting for their Title Deeds for nearly 30 years; these problems have been the subject of a damning Channel 4 documentary.
Because the original buyer does not have the Title Deeds, he is not free to sell the property on the open market – even though he may have paid for the property in full and may have been living in it for many years.
Without Title Deeds, the buyer must come to an ‘arrangement’ with the person in whose name the property is registered; invariably this is the property development company from whom they bought the property. Sometimes, this ‘arrangement’ alone can cost the original buyer many thousands of pounds in ‘contract cancellation fees’ extorted by the developer – and many of the developers charge a further 5% sales commission.
This resale property scam is very lucrative for the unscrupulous property developers!
How does this scam work?
Imagine that you’re trying to sell your property and you have come to an ‘arrangement’ with the developer to sell it on your behalf as described above.
After many months of waiting, you get a call from the developer “Good news Mr Smith” he says “I have someone interested in buying your house and they’ve offered €210,000. I don’t think we’ll be able to get any more for your house; the market’s very slow at the moment. Would you like us to accept the offer and proceed with the sale?”
Relieved that the developer has finally found someone to buy your house, you reply “The offer isn’t as much as we were expecting, but if you don’t think we’ll be able to get a better offer, we’ll accept the €210,000”.
(But in reality what has happened, unknown to you, is that a buyer has offered the developer €320,000 for your house).
- The developer gets you to sign a “special power of attorney” document or a “sale agreement”, enabling him to sell the property on your behalf for €210,000.
- The developer pays you €210,000 (less his 5% commission and ‘arrangement’ fee).
- The person buying your house signs a Sale Agreement with the developer for €320,000.
You have been defrauded out of €120,000, which ends up in the developer’s back pocket!
How do you avoid the scam?
- Do not sign any special power of attorney documents or sale agreements with the developer.
- Engage the services of an independent property lawyer to handle the sale on your behalf. If that lawyer does the job properly, they will get a copy of the Sale Agreement between the developer and the person buying your house to check that everything’s OK and above board.
You may need to instruct the lawyer to get a copy of the Sale Agreement – as Jim Murphy MP – the UK’s Minister for Europe has warned “There have been – and still are – cases where dishonest estate agents and lawyers have knowingly taken advantage of the unwary”.
Wealth warning
There are a number of Cyprus property developers who operate a ‘closed shop’, which prevents home owners from selling their property on the open market. These developers insist that ALL sales of ALL their properties are handled by their company.
If you’ve bought a property from one of these developers and wish to sell it, make sure you use an independent property lawyer to handle the sale on your behalf – otherwise you risk being defrauded out of thousands!
