Property scams surge as market slows

Buyers and sellers need to be particularly careful of scams and unscrupulous operators, with recent property tax changes and the market slowdown encouraging bad actors, according to experts.

Tyron Hyde, CEO of quantity surveyors Washington Brown, said the Federal Government’s scrapping of negative gearing for established homes could leave buyers exposed to agents pushing overpriced new properties.

Mr Hyde said he was concerned about the “unintended consequences” of the government pushing buyers to new build properties, where property spruikers are already by far the most active.

“I feel that the spruiker world will ramp up,” Mr Hyde said.

“With the latest changes in negative gearing, my concern will be, and I’ve been in the property industry 35 years, out will come the spruikers with new properties,” he told Australian Property Investor Magazine.

While the tax changes would incentivise the building of more homes, pushing buyers in that direction could have a “reverse effect”, fuelling unscrupulous spruikers in seek of huge commissions.

“In second-hand property, there’s a level playing field, and sometimes with new properties there’s a lot of commission involved,” Mr Hyde said.

“We get offered sometimes up to $100,000 to sell a property. 

“I’m not sure that’s a good thing.”

The changes would also likely draw existing agents into the spruiking game.

“There will be a lot of people pivoting,” Mr Hyde said.

“People who have previously said they will never, ever sell new property, now start saying that new property looks ok”.

Property industry veteran Ben Williams, CEO, Unreserved, said dodgy tactics by real estate agents are being turbo-charged as the market slows and buyers pull back.

Mr Williams contracts as an auctioneer in addition to his role at Unreserved, which aims to provide transparency around the sales process.

“It’s very, very prevalent. I see it every weekend,” Mr Williams told API Magazine.

“I see a lot of the action tactics behind-the-scenes from the agents,” he said.

The unpalatable property sandwich

One common practice, the “oldest trick in the book” — and known colloquially in the trade as the “sh#t sandwich” — involves agents lying to sellers by understating the size of offers being made on their property.

Unscrupulous agents would tell the vendor a lower number than they had actually received, then “drip feed” the vendor, incrementally increasing the stated offer price.

This made the sale more likely to occur, dragging down vendor expectations.

Vendors were unlikely to accept the first offer. And a vendor who thinks they have been actively bargaining with a buyer is more likely to sell if they believe they have received several increasing “bids”, rather than just one initial offer.

It also gave the impression agents were doing more work than they actually were, by pretending they are getting the buyer to continue increasing their bid.

“It’s called the sh#t sandwich; you give them (the vendor) bad feedback and they drop their expectations, knowing they have an offer in play,” Mr Williams said.

Agents were typically more confident of getting a seller to reduce their price than of getting buyers to increase their offer.

“They are very well versed, agents are less likely to get the buyer up, so they spend a lot more time getting the vendor down,” Mr Williams said.

The practice had increased “massively” with the property market cooling, as agents sought to get sales over the line.

“In the good markets there hadn’t really been a need because there’d been so much interest, with expectations met and very quickly exceeded,” Mr Williams said.

“It’s the oldest trick in the book and it’s being used very prevalently at the moment.”

Scam sophistication evolving fast

Lynette Owens, TrendLife’s Head of Consumer Education and Marketing, which specialises in consumer digital safety.

In their recent study, it was revealed one-fifth of Australians had been scammed, or knew someone close to them who had been scammed, while making a major purchase such as a property or vehicle.

“Scammers are targeting Australians during key life moments, including major purchases, job hunting and navigating tax time,” Ms Owens said.

The study analysed responses from more than 10,000 consumers across nine global markets, including more than 1,000 Australians. 

Ms Owens said people were particularly vulnerable when buying property.

“Buying property is a stressful moment where our anxieties are higher than usual,” she said.

“We may be operating on tight deadlines and with fear of missing out on the place we want.”

There were several important steps people should take to avoid being stung.

“Buyers and sellers should always independently verify payment instructions using a known phone number and never trust email communications,” Ms Owens told API Magazine.

“They should also talk to someone when something doesn’t seem right. 

“Get a friend or family member to give their opinion, as they may be able to see the communication from a clearer perspective or be more tech-savvy than you,” she said.

The AI threat is also very real.

The tactics behind the biggest scams targeting Australians during the property buying or selling process and have become more convincing and elusive over the past 12 months.

“They’ve absolutely become more sophisticated and are evolving as we speak,” Ms Owens said.

“The rise of AI has revolutionalised scams. The tell-tale signs, such as spelling mistakes, poor grammar, or badly done brand impersonations, have disappeared, so it’s now harder than ever to recognise scams.”

Not only is AI used for ironing out mistakes, but scammers are automating their processes and using AI agents to target multiple places in the world at once and execute scam operations en-masse, she said.

“Scammers review which tactics work and which do not, as well as which countries and demographics are most successful. With this insight, scammers refine and strengthen their process further.”

Protective scam measures

“The problem is that the anti-scam education we previously received has also become outdated; education alone is no longer enough,” Ms Owens said.

“The best approach for staying safe online is combining education with technology tools that can recognise scams for you.

“With the rate that scams are now evolving with AI, protective education is struggling to keep up, but technology is.”