'Blind Spot of Jeonse Fraud'... 35% of Real Estate Transactions Conducted by Unregistered Brokers

[Asia Economy Reporter Ryu Tae-min] It has been revealed that 4 out of 10 real estate transactions are illegal or unregistered brokerage transactions. Recently, as so-called ‘Villa Kings’ and ‘Construction Kings’ have emerged as a social issue due to jeonse fraud, the urgency of improvement has come to the forefront.

According to the Korea Association of Realtors on the 21st, the proportion of real estate transactions conducted by 'registered licensed realtors' in the entire real estate market in Korea is only around 60%. About 5-6% are direct transactions, and approximately 35% are brokerage transactions by unlicensed realtors without certification, commonly known as planned real estate or real estate consulting operators.

Illegal and unregistered real estate transactions have long been identified as the root cause of undermining and disrupting the soundness of the real estate market. Most of the problems cited as market maladies, such as the recent surge in ‘jeonse fraud,’ price manipulation, under-the-table contracts, and illegal resale, occur through illegal and unregistered transactions.

The problem is that it is not easy to crack down on these illegal and unregistered brokerage transactions. Currently, the authority to guide and crack down on illegal and unregistered brokerage transactions lies with local governments. However, the number of officials in charge per region is generally only 2 to 3.

For example, in Taebaek City, Gangwon Province, which is the smallest ‘city’ in terms of population nationwide (39,428 people), the number of land and building transactions last year reached 2,462. This means that each official has to manage about 800 to 1,000 transactions.

In particular, the number of houses involved in jeonse fraud cases committed by groups such as ‘Villa Kings’ and ‘Construction Kings’ recently exceeds 6,300. From July last year to January 1 of this year, the Ministry of Land, Infrastructure and Transport and the police arrested 844 people and detained 83 in connection with jeonse fraud crackdowns. Especially, it is difficult to even grasp the scale of damage from jeonse fraud cases that have not yet been uncovered.

An industry insider explained, “Except for cases where joint investigations and mass crackdowns are conducted, there are virtually no results in the regular crackdown on illegal and unregistered brokerage transactions,” adding, “Local licensed realtors can most quickly identify illegal and unregistered brokerage offices operating in their area, so it is necessary to reduce blind spots in management and supervision through them.”