As real estate investment continues to grow in popularity, consultations related to real estate fraud are also increasing year by year. To prevent fraud losses, it is important to understand the common schemes and the sales talk used by dishonest real estate companies. This article explains the fraud patterns and defensive measures that investors should know.
What kinds of schemes are used in real estate fraud?
Real estate fraud is the act of conducting a real estate transaction using false claims in order to take money from the other party. The National Consumer Affairs Center of Japan, an independent administrative institution, also receives many consultations, and the number of victim cases is increasing in proportion to the growing number of investors.
Bait listings
This is a method in which popular properties that are not actually available for transaction are placed in advertisements, and the customer who inquires is then pushed toward a different property. The more attractive the advertised property appears, the easier it is to mistakenly assume that the alternative property being introduced is also safe, so caution is required.
Provisional contract fraud
This is a scheme in which someone says, “It is only a provisional contract,” but in reality has you sign the actual final contract. If you try to cancel after the contract is concluded, you may be charged a cancellation penalty. Avoid signing casually without fully checking the contents of the documents.
Worthless land sales fraud
This is a scheme in which land with inherently low value is sold at a high price under the false claim that it will rise in value because of redevelopment. As with land title fraud, it is a pattern that causes investors to make the wrong decision based on false information about the future.
What sales talk from real estate companies should raise concern?
The trap behind “It will reduce your taxes”
In practice, a meaningful tax benefit from real estate investment can generally be expected only in the case of older secondhand properties owned by people with annual income of 12 million yen or more. Be cautious of real estate companies that promote tax savings through newly built studio apartments.
The risk behind “It can replace life insurance”
Even if the property is sold after a 35-year loan is fully repaid, a property that is more than 35 years old will have declined substantially in market value. When you take the total costs incurred up to that point into account, its value as a form of life insurance is questionable.
How to respond to “It will go up in value in the future”
Under Japan’s Real Estate Brokerage Act, it is prohibited to present uncertain matters as definite facts. Statements such as “It will definitely go up in value” or “You will definitely make money” are legally problematic as well.
Frequently Asked Questions (FAQ)
Q. If I become a victim of real estate fraud, where should I seek advice?
Consult a consumer affairs center (188 without an area code) or a law office. In some cases, early action can reduce the extent of the damage.
Q. Is there a way to identify a trustworthy real estate company?
Checking the license number, reviewing any past administrative penalties, and obtaining a second opinion from multiple companies are effective steps.
Q. Can the cooling-off rule also be used in real estate transactions?
If the seller is a licensed real estate business operator and the contract was signed somewhere other than an office or similar location, cooling-off is possible within 8 days.
