An auction scam?

For those who are interested in buying real estate through electronic (or other types of) auctions, we keep noting various scams that surface from time to time with the end result that unsuspecting public/buyers are the victims.

Initially the auction is published giving as little information as possible, including a reserved fee for the auction (usually 10-15% of the reserve 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 we can say okay but let’s look at the details:

It is logical that the interested bidder wishes to have more details, such as the existence or not of a building permit, the unit’s square meters, the existence of a valuation in detail and whether the bidder can visit the property or not.

One of the auctioneers informed us we may not inspect the property unless the registered owner so permits, meaning consequent loss of interest.

The second and most important item is the non-disclosure of any existing ‘secret’ (or otherwise) agreements the registered owner has committed to third parties. In one case the bidder learned after acquisition that the registered owner had let the property (an apartment in Limassol) for a period of 20 years, plus an option to extend the lease for another 10. He was also informed that the rents for the first 20-year period were prepaid (in cash!!) so the prospective bidder/buyer not only could not take possession of the property, but neither the rent. In addition, he was told by third parties that the existing owner had €11,000 common expenses dues and other legal issues outstanding. So in this case the young couple that paid around €220,000 was not only left without the property, but became a debtor for (so far) another €11,000.

So, should those who undertake the procedure of sale not be obliged to provide to the unsuspecting public the information they have, or which they ought to have for the legal and physical sale?

We consider these secret deals which only come to light after the bidding to be an organised scam perhaps in collaboration of the financier, and the registered owner. It is our opinion there is a criminal offence and those who participate in this scam should have a criminal case against them.

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 for the auction including the payment of the prepaid rents, where those have been deposited etc. This is a procedure which might take three to five years in Cyprus courts.

A person who wishes to buy a property should not have to consider if there is a scam behind the whole procedure, whereas those financing the new purchase may (as in this case) withdraw the offer of financing notwithstanding the creditworthiness of the bidder.

We urge the public to be wary of such auctions.

www.aloizou.com.cy, [email protected]