ATLANTA - Rental Scams have been around since the first cave man wanted to rent a nicer cave than he could afford at the time, and agreed to make payments every month.
The oldest scam is the one where the tenant moves out and the landlord decides to keep the deposit for no good reason. But most renters today are able to handle that.
Unfortunately, the scammers have gotten much more sophisticated.
I call this one the CRAIGSLIST SCAM, because most owners who want to rent out their house start their advertising efforts on CRAIGSLIST.com. And why not? It’s free, and there are a ton of prospective renters looking at the ads every day.
Here’s how the CRAIGSLIST SCAM WORKS:
Mr. OWNER works for Coca-Cola, and accepts a two year assignment as a brand manager in Mexico City. The plan is that, after his two year hitch, he will return to Atlanta as a senior VP. He and his wife love their current house, and don’t want to sell. In fact, it's worth about $250,000, and they own it free and clear of any loans. They even want to rent it FURNISHED AS IS!
Mr. Owner decides to list on CRAIGSLIST for two thousand dollars a month rent.
Mr. SCAMMER sees the ad, and immediately signs a 24 month lease with Mr. OWNER, giving him a security deposit of $2500 and the first two months rent in advance - all in all, a total of $6500.
Mr. OWNER is delighted, and moves to MEXICO CITY. The next day, Mr. SCAMMER files a fraudulent warranty deed at the courthouse transferring ownership from Mr. OWNER to Mr. SCAMMER. No one can or will stop him.
The following week, Mr. SCAMMER runs a new ad in CRAIGSLIST, this time offering to SELL the beautifully furnished home for about 20% less than it is really worth, say $200,000, asking for 30% down and also offering 20 year owner financing at 2.5 percent.
MR. BUYER sees the ad, visits the house, and decides it is an excellent deal. He produces $60,000 in cash from his retirement and from profits on the sale of his last house, then accepts Mr. SCAMMER’s offer of owner financing.
Mr. SCAMMER hires an attorney to handle the transaction (making sure the attorney knows that MR SCAMMER is the CLIENT, not MR BUYER. The attorney runs title, sees that Mr. SCAMMER is the legal owner, and closes the house and the loan. Mr. BUYER gets keys to the house and moves in.
Mr. SCAMMER nets $60,000 cash minus $7000 in rental and legal costs, and has funds wired to SWITZERLAND, then changes his name and does this same thing again.
It’s a full THREE MONTHS or even MORE before MR OWNER misses the next rent payment, and by then Mr. SCAMMER has done two more deals in two other cities.
This is RENTAL FRAUD, pure and simple, but it is hard to stop. The true owner eventually will get his house back. The SCAMMER got away with all the cash, and MR BUYER is eventually evicted from what he THOUGHT was his OWN house.
Unless he purchased TITLE INSURANCE, he loses everything he has paid. If he did, he probably gets back his earnest money. Mr. SCAMMER is having a good time!
Here are five tips on how to avoid being the victim of a rental scammer:
1. ASK LOTS OF QUESTIONS & DO IT IN PERSON.
Mr. SCAMMER will try to do everything over the phone or internet. Instead, you need to see them in person and get a photo of them AND their vehicle & car tag.
"Do you mind if I ask you to fill out this application? It requires that I submit a photograph of you and a photo of your government issued ID. "
If MR SCAMMER thinks you are asking too many questions, or might be able to identify him later, he will probably move to another owner. Remember that Mr SCAMMER has probably stolen someone else’s identity and is using it to rent your house. But the PICTURE and the DRIVERS LICENSE make things more risky.
2. Once you have decided to accept a renter, get a credit report and a background check.
All three of the major credit reporting agencies offer this service to landlords with similar results. Again, if the person is using a stolen identity, this may not help you, but at least you will be able to person whose identity is stolen, and see if they know about it yet.
I personally use MySmartMove.com by TransUnion, but Equifax and Experian also have similar services.
3. Never accept cash. Instead, demand a personal check or postal money order.
With that in hand, you can call the bank branch where the account was opened and make sure all is well and that the account has not been frozen. If they insist on cash, at least make them convert it to a postal money order. If they do, they are now guilty of a federal offense: using the US Postal Service to commit a crime.
4. Be especially wary of anyone wanting to rent your home without you ever seeing them in person.
If you have never seen them, you won’t ever be able to identify them. Mr. SCAMMER will invent lots of reasons as to why he can’t meet you in person. That should be a red flag for you!
5. If you suspect anything is not right, tell them your insurance company requires a new set of fingerprints from the local police department. This usually costs less than ten dollars, and you should agree to pay for it. If they refuse, they are probably scammers.
CONCLUSION: Being aware of the typical pattern of scammers can help you avoid them. Don’t be a victim when you decide to rent out your house!