Because multiple scams have surfaced recently, I’m focusing this week’s blog on how to avoid getting caught in a Mexico timeshare scam.
These timeshare scams have already cost expats and others tens of thousands of dollars of their retirement savings. The scams, which seem to be copycats of each other, involve approaching people who own Mexican timeshare real estate by phone calls, mail or by email, and pretending to have ready buyers. The catch is the prospective sellers are told they need to prepay phony closing costs and other fees into a phony escrow account in the U.S. to be reimbursed at closing. This, of course, never occurs. A signed sales contract using the words “Guarantee” or “Guaranteed” is used to trick the seller into thinking that it is a sure thing.
These companies look almost legitimate on the Internet—but not quite. They have clearly gone to some effort to build websites that look professional, but the websites didn’t exist before last year. These companies pay people to put their fake company name in directory listings on many Internet sites in order to make their name come up in searches, which gives them legitimacy. They also list memberships in fake organizations on their websites, groups that do not exist. They have even created scam law firms to scam people a second time by saying they can recover the lost funds for a fee of over US$1,000 dollars! These scam attorney websites even have fake testimonials.
Their websites include phone numbers, but phone calls are not answered unless the caller ID identifies the caller as one of the people being scammed. The phone numbers are VOIP numbers in the U.S. or cell phones in Mexico City.
When questioned about the charges, they provide an opinion letter from a supposed international Certified Public Accountant (CPA) for the U.S., Canada and Mexico, but no such people actually exist. Their addresses, when searched on the Internet, are not legitimate. They don’t give their phone numbers or their cédula numbers (official licenses), which could be verified on the Internet. The phony letter also has a fake address and lists no phone number.
The documents look almost legitimate, too—but not quite. They use the real SAT (Mexican tax office) forms or outdated ones, but place false information and false payment codes and fee descriptions that do not exist or are grossly inflated by over 1,000 percent.
They also use such nonsense titles and terms as “Guaranteed Purchase/Sale/Escrow Contract.” No such thing exists. And the list of expenses to be paid is filled with phony codes and line items, too, like IVA taxes, which are never part of timeshare transactions, and Foreign Investor Registration fees, which should never be expressed as a percentage of the selling price.
Here are some line items they use that are phony or grossly inflated:
• Maintenance Fee to date and Renovation Fee to date to be reimbursed at closing
• Closing and Administration Fees paid by Seller to be reimbursed at closing
• 11% Foreign Investor Registration paid by Seller to be reimbursed at closing
• 16% Value Added Tax (IVA) paid by Seller to be reimbursed at closing • Removals of Liens to be paid by Seller to be reimbursed at closing
• Free and Clear Certificate to be paid by Seller to be reimbursed at closing
• 5% Commission from Buyer to be paid to Seller at closing
• Erasure of Records to be paid by Seller to be reimbursed at closing
• Termination of Fideicomiso to be paid by Seller to be reimbursed at closing
In addition, the Mexican buyers’ names and signatures don’t look right because there’s just a first name and a last name, which is not how Mexican legal names are written (first name, middle name, father’s last name and mother’s last maiden name).
And, the seller is never given a set of regulations governing the escrow account, detailing how and under what circumstances the funds will be disbursed. The seller is just told to send the money to a particular account. In a normal escrow transaction the escrow company is licensed, maintains a separate trust account and requires specific authorization in order to disburse funds from the trust account. The scammers have people send money directly to third parties and do not have licensing nor their own escrow trust account for managing or disbursing funds.
The only two escrow companies I have used for Mexican transactions have been Stuart Title and First American Title, both large companies with trust accounts and large staffs in the U.S.
Scams involving the elderly are, of course, always despicable. In this case, the scams take advantage of expats’ likely confusion about how real estate transactions are handled internationally. And, they assume that elderly expats would probably jump at the chance to unload their timeshares for a profit in this shaky economy.
To avoid these kinds of scams, prospective sellers should:
• Always be wary when approached in an unsolicited manner by anyone claiming that a “guaranteed” buyer is waiting.
• Always be wary if you are asked to pay any upfront closing costs. Only buyers pay closing costs in Mexico, as well as much of the world. Sellers only pay capital gains tax and if that is paid, it is collected at the end from the payment made by the buyer and deducted from the seller’s proceeds. Don’t fall for being promised a reimbursement at closing.
• Always hire your own real estate lawyer to review real estate transactions. Never hire a lawyer recommended by third parties. Sellers need an independent advocate who is not partial and who can review the transaction and documents provided.
Also, beware that these scam artists will put you on a “sucker” list and then have fake attorneys call you afterwards to help you reclaim the stolen funds. But remember, these people too are confederates of the scammers and will only suck you in further and provide you with forged court documents saying you are entitled to part of a class action settlement or other judgment.
