The number of jeonse fraud cases has risen sharply in South Korea. Real estate scammers take advantage of multiplex houses that are newly built. As it is hard to figure out the market value of such units because only a few transactions are made, they deliberately appraise the value of a home above its market value. After subscribing to insurance to guarantee the refund of a jeonse deposit, they do not return the money to their tenants.
The amount of damage by fraud cases involving written property appraisals for the jeonse guarantee insurance involving recorded at 99.7 billion won from January to July, according to data submitted on Sunday by the Korea Housing & Urban Guarantee Corporation (HUG) to People Power Party lawmaker Seo Il-jun, a member of the Land, Infrastructure and Transport Committee in the National Assembly. Of those scams reported, 80.5 percent include multiplex houses, the amount of damage of which amounts to 80.3 billion won.
The damage from such frauds from January to July rose by 125 times from 800 million won in 2018. It has already exceeded the total sum of damage (62.2 billion won), and the number of scams (251) recorded last year.
In the jeonse guarantee insurance, the HUG and other organizations ensure payment by subrogation and charge if jeonse tenants fail to get their deposit returned from the owner after a jeonse contract terminates the homeowner the paid amount afterward. The HUG evaluates the value of units in newly built multiplex houses, as shown in a written appraisal because their market value is not as accurately available on the market as that of apartment units. Suppose the value of a home is falsely overrated compared to its actual market value. In that case, the deposit of the house on jeonse ends up being higher than its sale price, increasing the risk of a tenant not being able to take back the total amount of the jeonse deposit even when the homeowner sells the house.