Protect Yourself from Common Rent to Own Scams
Rent to own scams have become all too common and if you’re interested in renting to own you will want to read this first to learn how to avoid getting scammed. Criminals have a scam for everything it seems, including renting to own. Every day people get tricked and fall for what appears to be a “good deal.” Typically this type of scam can be found on your local Craigslist site but can include other websites as well. Don’t let yourself get scammed. Learn how to avoid getting ripped off with these interesting facts and tips.
The Appeal of Renting to Own
The biggest appeal of renting to own is that there are no mortgage payments involved. This is an attractive offer to a renter with not-so-great credit. Rent to own agreements are typically between the homeowner and the renter/buyer and the bank is not involved.
Another appeal to renting to own is that there is not a large investment on the part of the renter and they get to sample the home and the neighborhood without making a large investment.
Locking into the agreed upon purchase price is the final big benefit for the renter/buyer. In the event that the price of the home rises in the future the renter/buyer will only have to pay the agreed upon amount.
Common Rent to Own Scams
Duplicate and/or Fake for Sale by Owner Ads – In this type of scam rent to own scammers blatantly place their ads on listing sites and they will either make a duplicate ad of a legitimate for sale ad or create something that is completely counterfeit. Either way, they’re both fake ads.
Let’s use the Craigslist rent to own scams for an example. These types of ads typically advertise beautiful homes with many modern and attractive conveniences in lovely neighborhoods for unbelievable and unrealistic low prices. They want you to hurry up and call now because these deals don’t last for long, etc.
Example: During the summer of 2013, in Houston, a family lost $2,000 to a Craigslist scam. The young couple met with the supposed “homeowner” at the home. The price was right and the ad seemed legitimate. They gave the “homeowner” $2000 to move in, packed their belongings, moved in and then found out the “homeowner” was a professional scam artist and was not the owner of the property. In this particular case it is suspected that were many other victims who have been ripped off by this criminal. Read full article here.
The Deceitful Homeowner – In this case, there are two types of rent to own scams involving homeowners. The first type is a homeowner that is facing foreclosure or has already lost their home to foreclosure. They will advertise the home as “rent to own” and then collect the money from a renter/buyer and then disappear.
The second type involves a homeowner that seems to legitimately be renting to own a property to a renter/buyer with an extremely large upfront option premium fee and then later backs out on the rent to own agreement by finding any little reason to terminate the contract and thus keeping the large fee.
Example: In 2013, in Philadelphia, a man named the ‘slumlord millionaire’ was sentenced to six years in prison for fraudulent activities. This man owned 480 properties and ripped off over 150 homeowners with fake rent to own agreements. He moved desperate families into broken down homes (many not even his) and told them if they fixed them up they would eventually become their own. Read full article here.
The Middle Man – The third common type of scam involves a middle man. In this case, the middle man is the scammer. The homeowner and the renter/buyer are both victimized. The middle man looks for homeowners who are facing the possibility of foreclosure and then also looks for people searching for rent to own options due to poor credit. Once the crook has found a match, he brings the two parties together in an agreement. When an agreement is made, the crook takes money from both parties and disappears.
Example: In July of 2013, in Ottawa Canada, the news broke of a company named Golden Oaks Enterprises that left several families in debt and owed money to 100’s of people for rent to own housing scams. They were a rent to own company that now owes millions in lawsuits to homeowners, potential buyers, contractors, and investors. One family lost their entire life’s savings to Golden Oaks Enterprises. The company tried to help them recoup their funds but the check wouldn’t clear the bank. Read full article here.
How to Avoid Getting Ripped Off
Avoid getting ripped off by playing it smart and playing it safe. If you’re genuinely interested in renting to own be suspicious of any rent to own ad and question everything. If it’s legitimate, they won’t mind the questions. Other ways to avoid getting ripped off is by involving a real estate attorney or a qualified real estate agent.
Warning Signs to Watch Out For with Rent to Own Scams
Here are a few Red Flags to watch out for with rent to own scams.
- A deal that looks just too good to be true.
- If the home looks worth more than what the “homeowner” is asking for.
- If they want you to send money overseas, pay cash or to wire transfer money.
- If the homeowner is out of the country or out of state.
- If the homeowner is not willing to meet in person.
- If the home doesn’t look “real”. It could be a fake picture or fake ad.
- If the ad sounds more like a sales pitch.
- If you visit the home and it appears as though it has been broken into.
Protect yourself by:
- Verify the identity of the homeowner.
- Check to see if the ad itself appears to be a “copy and paste” type of ad.
- Investigate the address of the home listed to see if it is in foreclosure.
- Investigate the telephone number of the person placing the ad.
- Never choose to rent to own without viewing the property first.
- Utilizing the services of a professional attorney or highly-trained real estate agent.
The bottom line is that there are many legitimate rent to own opportunities out there for people with not so great credit. Just be careful that you don’t fall into anything deceptive. Avoid getting ripped off by being suspicious of anything and everything. To be on the safe side seek the professional services of an attorney or real estate agent.