Scam Artists Enter the Rental Market
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UPDATED: Oct 24, 2012
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A new scheme is threatening the already unsteady housing market. Scammers are luring potential renters with foreclosed properties and stealing their money and financial information.
For-sale properties are still struggling to compete in the housing market in comparison to rental properties. After years of unpaid home loans, thousands of properties across the country are headed into foreclosure. The homes are usually left vacant during this time, while their owners, flooded with home loan bills, move to a different area.
Robert Hagberg, Freddie Mac’s associate director of fraud investigations, told the LA Times that Freddie Mac owns more than 53,000 houses across the country which are either for sale or under contract as of June 30. Hagberg estimates dozens of rental scams have occurred in recent months.
The process typically proceeds in a similar fashion: the con artist finds a property and lists it online. The con artist, acting as the property owner, communicates with potential tenants and takes their information and cash deposits. In some instances, the scheme ends after an initial deposit is received. Other scammers break into the property, change the locks and rent it out for as long as possible.
While the scams might be obvious to some, they have what people in the current economy long for: a great deal. Most of the properties listed at half the competition’s price — making it difficult to resist for cash-strapped tenants. However, these rental scams can harm people of all economic classes, even previous home owners, who are overwhelmed from failed home loans and foreclosures.
The scammers steal anywhere from several hundred dollars to upwards of thousands of dollars from the applicants.
Robert O’Hara, a Re/Max Synergy foreclosure specialist told the LA Times that one applicant was victimized out of $10,000 from paying upfront fees and rental payments to a fake landlord. After the scam was exposed, the victim was forced out of the home.
According to MSN, if the tenants are unaware of the scam, they will not be charged with a crime. However, they will have to move out quickly — and will likely never see their money again: two consequences that previously foreclosed home loan borrowers are already all-too-familiar with.
“This is happening all over the place, in every price range. They take the victim’s money and disappear,” O’Hara said to the LA Times.
Some recommendations to prevent a rental scam, provided by Freddie Mac, include proper research and patience. First, search online and make sure the property is not currently listed for sale. If the posting offers an address, drive by the property and check for any signs out front. If there are for-sale signs posted, notify the listing agent of the potential scam.
Another method of scam prevention is waiting to submit personal information. As with a home loan application process, until the property has been certified as a legitimate listing, do not submit any credit applications online. This poses a threat to the applicant’s social security number, financial history and credit information which can impact one’s future rental or home loan applications.
Chuck Lee, an investigator with the Volusia County Sheriff’s Office in Florida, told MSN the easiest way to prevent rental scams is refusing to use cash or money wires. Anything beyond these two payment forms increases the criminal’s chance of being caught.
“If you didn’t use cash, I’d say probably 90 percent (of these scams) you could avoid,” Lee said.