Recently, the Seoul Western District Court sentenced two individuals to five and three years in prison, respectively, for defrauding victims of approximately 350 million won (about $300,000) by posting fake listings on a real estate direct transaction platform. The defendants created accounts using fake identities and used addresses and photos of vacant properties to mislead potential renters. They even forged business cards, certificates, and identification documents of property owners. When victims requested to speak with the landlord, the defendants pretended to be the property owners.
While direct real estate transactions offer convenience, they also come with significant risks, including fraud and disputes. Although individuals can save on brokerage fees, they must take full responsibility for verifying the other party, analyzing property rights, and drafting contracts, which requires careful attention.
A report published on July 23 by the Korean Institute of Criminal Law and Justice Policy revealed that the most common type of fraud in online real estate transactions is the distribution of false listings, accounting for 22.1% of cases. This was followed by cases of being unreachable and identity impersonation or document forgery, each at 15.2%, and defective properties at 12.3%. Additionally, 10.3% of cases involved fraud related to deposits and rent.
Experts particularly emphasize the need to be cautious of impersonation by landlords. Many victims have suffered losses after transferring deposits or final payments to accounts not registered in the name of the actual property owner.
As the use of direct transactions increases, so do the sophistication of scams. Therefore, it is crucial to verify that the identity details on the property registration match those on the identification documents, and to thoroughly check the authenticity of the registration certificate and any encumbrances. Reviewing the resident registration and building records is also considered essential. It is safest to transfer deposits and payments directly to accounts in the name of the registered property owner.
Another point of caution is that in direct transactions, the parties involved must perform the rights analysis and verification processes typically handled by licensed real estate agents. They must ensure the accuracy of the contract, any special provisions, and the payment procedures for deposits, interim payments, and final payments, as they often bear the responsibility if issues arise.
Unlike transactions facilitated by agents, direct transactions have limited protective measures. In agent-assisted transactions, the Korea Association of Realtors provides compensation through a guarantee system in case of incidents, but this does not apply to direct transactions. If legal disputes arise, the parties involved must bear the costs and liabilities.
However, the guarantee system does not cover all losses. Current regulations require licensed real estate agents to have guarantees of at least 100 million won for individuals and 200 million won for corporations, but the compensation limit is based on the total amount of incidents during the guarantee period, not per incident. If multiple incidents occur within the same period, victims may have to share the compensation, making it difficult to fully recover losses in high-value real estate transactions.
Disputes over property defects are also common in direct transactions. In agent-assisted transactions, agents provide a 'Property Confirmation and Explanation Document' that notes issues like leaks or mold, but such standard documentation is absent in direct transactions, making it harder to prove claims in future disputes.
Seo Jin-hyung, a professor at Kwangwoon University’s Department of Real Estate Law, stated, "Direct real estate transactions make it challenging to identify hidden rights issues, such as priority lease rights or tax delinquencies by landlords or sellers. It is often difficult to ascertain issues like double sales or property rights without expert assistance."
Professor Seo emphasized, "Since real estate transactions involve significant financial stakes, it is crucial to focus on risk-reducing procedures such as rights analysis and contract review rather than solely on brokerage fees. Even when engaging in direct transactions, it is advisable to adhere to basic safety protocols and seek expert help when necessary."
* This article has been translated by AI.
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