28.11.2022
For those interested in buying property through auctions, we continue to note various scams that pop up from time to time. As a result, unsuspecting buyers become victims.
Initially, the auction is published, giving the public as little information as possible, including the reserved auction fee (usually 10 to 15 percent of the reserved price). Those who placed a bet must deposit the required amount, and in case of failure, their money will be returned. However, in case of success, the bidder changes his mind for any reason, the deposit is lost.
Let’s look at the details:
It is logical that an interested bidder would like to collect more details beyond those published, such as the presence or absence of a building permit, the square footage of the apartment, the presence of a detailed appraisal and, most importantly, whether the bidder can visit the property.
One of the auctioneers informed us that we cannot inspect properties at auction unless authorized by the registered owner – so if the owner is hostile to the procedure for their own reasons, there will be less interest with an increased chance of a reserved price. This cannot be achieved at the expense of the financier, the bidder and, of course, in the end, the registered owner, who will incur additional losses in order to negotiate a higher possible price.
The second point is the non-disclosure of any existing “secret” agreements that the registered owner has to third parties. In one case, a bidder learned after his offer to acquire that the registered owner had leased the property for a period of 20 years, plus an option to extend the lease for another 10 years. He was also told that the rent for the first 20-year period was paid in advance (in cash!), so the potential buyer in this case not only could not take possession of the property or the rent. In addition, third parties told him that 11,000 euros had accumulated in the apartment for general expenses, contributions and other legal issues. Thus, in this case, a young couple with an acquisition price of about 220,000 euros was not only left without property, but also became a debtor for another 11,000 euros.
So, shouldn’t those involved in the sale process be required to provide the public with the information they have or should have regarding the legal and physical status of the property being sold?
These secret deals that appear after the auction are, we believe, an orchestrated scam, possibly a collaboration between the financier and the registered owner. In our opinion, this is a criminal offense and those involved in this scam should be prosecuted.
It is not easy to initiate a criminal case against those involved in the scam, since when selling an apartment, an ignorant buyer must prove illegal actions at the auction, including paying an advance payment of the rent to which it was paid. This is a procedure that can take three to five years in the Cypriot courts.
In another case, the ad mentioned the sale of an apartment building in Strovolos, consisting of 14 apartments for a price of 900,000 euros. Upon inspection, the potential bidder realized that eight apartments had been built without a building permit.
This confusing situation has bad side effects and the market reacts negatively. This is a very serious matter that the Financial Commissioner should investigate and hold accountable those involved in such sales and auctions.
From our point of view, such auctions are not worth the cost of the paper they are printed on, and we urge the public to avoid them.
