As a follow-up to our article about buying real estate in Buenos Aires, LandingPadBA.com brings you a list of potential real estate scams that have happened here in Buenos Aires.
After reading several articles, we wanted to know which of the many scams were the most prevalent here in Buenos Aires, Argentina. To get these answers, we sought the advice of Michael Koh, real estate expert and consultant.
Below is the list of scenarios, their definitions, and Mr. Koh’s explanation of their relevance to the real estate market here in Buenos Aires. This information should prove exceedingly helpful for those shopping for property here in this great city, and at least interesting for those who are not.
Scam #1. “The Bickering Sibling Scam”
Brief scenario: When property is owned by more than one individual, often siblings who have inherited the location, sometimes they do not agree on the sale of the property. In these cases, one party puts the property on the market without the consent of the other, utterly bunging up the sales process.
Insight from Michael Koh: “Yes, I’ve run into this a few times. Not so much in the past year, but when I first moved here, I had a few incidents where one sibling that rightfully owned the property listed it for sale. However, when our escribano (real estate lawyer) did the search of the deed it turned out that more than one person owned the property. The most common thing was where someone passed away and had multiple children. Typically all kids are in agreement to sell, but I did have one time when before we did the boleto (30% down payment), one of the kids didn’t agree to sell. All kids/owners need to agree on the sale or it can’t go through.
“It’s VERY important that an escribano does a proper check to see all the owners of the property as many times there are more than one person. The most complicated cases are when the owner passed away and the property passed on to multiple children. Here in Argentina, it’s impossible to write your kids out of a will on real estate.”
Scam #2. “The Uncle Larry Scam”
Brief scenario: When property is sold with an existing tenant, getting rid of this tenant can be difficult. The process can take up to 3 years with or without rent payments.
Insight from Michael Koh: “Definitely the laws here are very pro-tenant. Frankly I’ve never known anyone silly enough to agree to purchase a property with the tenants still in it. When you write up an offer it typically says that the property will be delivered free and clear and unoccupied. I always recommend my clients NEVER agree to let the tenant stay in the property past the closing. I don’t even have them close until we verify no one is in the property. Typically the day before or the day of I’ll go to make sure no one is in the property and all their contents are out.
“I have had clients before that went against my advice and allowed a tenant to stay in the property a few extra days to move. I do NOT recommend this as it can be very difficult to get them to leave. I had one client, a few years back, that developed a friendship with the former owner and agreed to let them stay in the property a few days. The few days turned into weeks and they had problems getting him out as they already paid the money to the owner.”
Scam #3. “Shanty Town Scam”
Brief scenario: Sometimes property is sold to foreign buyers without their knowledge of the existence illegal squatters occupying the land or property.
Insight from Michael Koh: “Yes, this is still a problem. […]I’ll tell you a really interesting story about this old house in San Telmo one of my clients purchased. It was an old historic building. It was formally owned by the railroad union and the owner ended up going bankrupt and moved out of the house. Squatters moved in…I’m talking dozens of families. My client ended up negotiating with Banco de la Nación who owned the house. He got it for a really great price, but it took him over 1.5 years to get them out. He had to go through the legal system even though he legally owned the house. It turned out some thug was charging families to stay in there. He offered the guy money to get them to leave but he refused as he was making more charging all these squatters. Long story short, the police riot team had to come after a judge ruled they lost. He spent thousands of dollars and 1.5 years fighting to get them out. It can be a nightmare once squatters get into an abandoned property.”
Scam #4. “The Invalid Contract Scam”
Brief scenario: This happens when the buyer doesn’t register their official documents with the appropriate municipality, rendering your jurisdiction over the property unenforceable.
Insight from Michael Koh: “I’ve never had any problems or seen this but it might be more of a problem in the provincia but I have no experience there. I’ve never seen any problems with this [in Buenos Aires specifically].”
Scam #5. “Multiple Sale Scam”
Brief scenario: This is when a seller makes deals with several buyers, only the first one to register with government gets the property in the end.
Insight from Michael Koh: “I’ve never had any problems with this but I have heard of many cases where there are problems. The problem is, here the system is so fundamentally corrupt. There have been some public and documented cases of people trying to sell properties that don’t belong to the people selling or people that died and people trying to sell their properties. A few years back there was a story in the Clarín or La Nación about many people that went to jail including some lawyers, engineers, etc. that all worked together selling properties they didn’t own. They were doing it for years.
“It’s VERY important you have a good escribano/lawyer and they do a solid search on the title deed with the city. The system works well here as all land/real estate is recorded with a Central Registry but you have to have a good lawyer that actually does the research.”
Scam #6. “The Useless Property Scam”
Government conditions, set on a property, limit its use by a new buyer, who usually does not discover these limitations until after the sale.
Insight from Michael Koh: “I’ve never run into this or heard of anyone that had problems with this. However, keep in mind I buy in the best areas and typically only buy residential properties. I have bought buildings used for hotels, but I mostly buy residential eliminating this potential problem.”
Scam #7. “The False Document Scam”
Brief scenario: Property is sold and transferred via fraudulent documents. When buyers realize what has happened, the agents involved on the selling side have disappeared, along with the money.
Insight from Michael Koh: “I’ve never run into this but I’ve talked to people that got scammed. I simply referred them to a lawyer as I can’t do anything to help. Here, once you are scammed, it’s too late. The important thing is to do everything right from the beginning. Since these are all 100% cash transactions there is no room for error. See what I wrote above….. there was a ring that was selling fake properties with fake documents and I would assume there are others out there doing the same thing, especially to foreigners. Yes, this definitely goes on here.”
In conclusion: So there you have it. The verdict on these scams is that while all seven are not necessarily “common” here in Buenos Aires, they have happened. The easiest way to avoid getting scammed is to hire a good lawyer and learn as much as you can about the real estate market and the rules surrounding it. A good place to start is with Mr. Koh’s blog for ApartmentsBA.com, full of great introductory information on the market here in Buenos Aires, a great resource.
The idea for this article came upon us as we discovered a blog entry on Move it Globally.
This article was a brief introduction to real estate scams to avoid in Latin America, and was largely based on another article entitled “Real Estate Scams in Latin America to Avoid,” from EscapefromAmerica.com.