For those interested in buying real estate through electronic auctions, we keep noting various scams which surface, with the result being the unsuspecting public or buyers being the victims.
Initially, the auction is published, giving the public as little information as possible, including a reserved fee for the auction (usually 10-15% of the reserved price).
Those who bid to participate must deposit the amount required, and if not successful, their money is returned.
If successful, however, and the bidder changes his mind for whatever reason, the deposit is lost.
So far, so good, but let’s look at the details:
- Logically, the interested bidder would wish to collect more details over and above those which are published, such as the existence or not of a building permit, the unit’s real square metres, the existence of a valuation given in detail and, most importantly, whether the bidder or not can visit the property for viewing, details which are not recorded or offered.
One auctioneer informed us that we could not inspect the property unless the registered owner permitted it. So, suppose the owner is hostile to this procedure. In that case, there will be less interest with an increasing chance of the reserved price not being achieved at the loss of the financier, the bidder and of course, the registered owner who will suffer an added loss to get the highest price possible.
- The second and most important item is the non-disclosure of any existing “secret” (or otherwise) agreements the registered owner has committed the property to third parties. In one case, the bidder learned after acquisition that the registered owner had let the property (an apartment in Limassol) for 20 years, plus an option to extend the lease for another 10 years. He was also informed the rent for the first 20-year period were prepaid (in cash!), so the prospective bidder/buyer, in this case, not only could not take possession of the property but either the rents. In addition, he was told by third parties that the existing owner had accumulated €11,000 in common expense dues and other legal issues. So, in this case, the young couple with an open-acquisition price of around €220,000 were left without the property and are now in debt for an extra €11,000 plus any possible added dues.
- Shouldn’t those who undertake the sale procedure not be obliged to provide all the information they have, or which they ought to have for the legal and physical situation of the property to be sold?
- These secret deals, which come up after the bidding, are nothing more than an organised scam, perhaps in collaboration with the financier-lender-asset manager and the registered owner. This is fraud and a criminal offence, and those who participate in this scam should face criminal prosecution with possible imprisonment for all those who participate in it.
- It is not easy to undertake a criminal procedure against those involved in the scam since, in the above sale of the apartment, the unaware buyer must prove the illegal wrongdoings of the auction, including the payment of the prepaid rents where those have been deposited. This procedure might take 3-5 years in the Cypriot courts, with time and money, raising the bidders’ cost by several thousand euros.
For a person who wishes to buy a property, the least of their concerns should be if there is a scam behind the whole procedure, whereas the financier-lender in the new purchase will (as has happened in this case) withdraw its offer of finance.
To this messy situation, the market responds negatively with a bad impact on property sales.
It is a very serious matter for which the Financial Commissioner and any other financial prosecutors should look into and insist that those involved in such sales should have clean hands and a clean record.
They should be responsible for protecting the public with all details necessary or declaring that they do not have all details.
Such online public or private auctions are not worth the value of the paper that they are printed on, and I urge the public to avoid them altogether.
This is a major task for the financial commissioner to examine and take measures to set the matter right and increase the measures to protect the public.
Antonis Loizou F.R.I.C.S. – Real Estate Valuer, Estate Agent & Property Consultant