A lesson from Scam University, otherwise known as Scam U. School is in session! Today's class is on the rental property scam.
The rental scam is a con scheme gaining popularity these days. While this scam has been around for awhile, increased reports show that people are not paying attention to the warnings. There are various articles on the Internet about this scam, if you don't believe me, Google it, or let me do it for you by clicking http://bit.ly/1fMvajp.
Three different U.S. government agencies spent time warning people about it in hopes an alert public would not fall prey to it. Back in July, the Federal Bureau of Investigation (FBI) advised people to exercise caution when dealing with online postings of rental properties after they received multiple reports from victims. (FBI, 2013) The Federal Trade Commission (FTC) warn about rental scams on its site. As an educational tool, the Better Business Bureau (BBB) posted on its blog an awareness piece on online rental scams. In case you were thinking this is strictly a U.S. problem, the Australian Competition and Consumer Commission warns about this too at its Scam Watch site.
Basically, there are two scam variations dealing with rental properties.
Rental Listings.

- written above the required amount, with the scammer asking for the excess returned, or
- written for the proper amount, but the scammer backs out of the rental agreement and asks for a refund.
Since banks typically do not place a hold on the funds, the owner has immediate access to the amount on the check after depositing it. Owners provide a refund, then later get told the payment check didn't clear, and they are held liable for the amount. In end, the owner is out of money when they were trying to make money off of their rental property.
Best bet? Ask the bank to place the funds on hold until the check actually clears. If the check is found to be counterfeit, you won't lose money. If the check is legit, the soon-to-be renter will not mind waiting the week or so for processing. If they pressure you for the money, instruct them to have their bank issue a stop payment on the check.
Fraudsters place a fake advertisement for a great vacation rental at really low prices in an online forum, such as Craigslist, or made-up real estate website. Or they're advertising a new rental property on the market with a great location and cheap rent. Scammers either use the hijacked rental ad or phantom rental. The hijacked rental ad uses rental property description and photos from a legitimate real estate site with different contact information. Phantom rentals are made up listings real homes that are not for rent; or fake locations with made-up descriptions and pictures.
The ruse tries to obtain advance payment or trick you into filling out a detailed application form that requires personal information the tricksters use to steal your identity. Some scammers will even send keys, a rental agreement, or other indicators of a legitimate transaction for you to learn about the scam only after you get to your "paid-for" vacation hide-away.
Signs of a scam. Below are potential red flags that should make you think twice about the deal you're about to get.
- Ask you to wire funds to secure the property.
- Want security deposit or first month's rent before you met or signed a lease.
- Won't meet you in person or show the property in person. Scammers will give the excuse they're out of country, or other excuses.
- Uses a third party working on their behalf.
- Use of other high pressure tactics to force you to act NOW.
- Improper use of the English language in correspondence. Nigeria-based or other foreigners perpetuate this scam, so their sentence or word usage will be different than a native English speaker.
Protection Tips.
- If you can't meet in person, see the inside of the rental, or sign a lease before you pay, keep looking.
- Do your homework before signing any documents or sending any money. Do an Internet search of the contact information, and listing. If you find the same ad listed under a different name, it may be a sign that it may be a scam. If public records show the property is in default, you may want to rethink going after this deal. You can check out the potential new landlord through http://www.checkyourlandlord.com/, if you're directly dealing with the owner. If you're dealing with a third party, you can verify their real estate license at https://www.arello.com/.
- Do not wire funds or pay with pre-loaded debit cards. This is almost the same as sending cash. It is rare to recover money sent through these methods. Use a credit card, PayPal, or through a reputable vacation rental site with its own payment system. If something goes wrong, you have recourses to recover your money.
- Never provide your banking information to people or businesses you don't know.
- Stick to reputable real estate websites and agents that you know and trust.
- Do not rely only on email correspondence. You'll want to talk to the parties involved, preferably in person. A phone call is slightly better, but there is no guarantee that the person taking the call is not using a disposable cell phone or an Internet-based phone service, such as Vonage. Be leery of foreign accents or long distant area codes.
Remember the old adage "if it's too good to be true, it probably is," still holds true today. Don't get suckered into a scam in trying to get the best deal, because you may just get the "deal of a lifetime."
Check out our "Verify Spam, Scam, or Hoax" post to discover resources in conducting your own research.
Check out our "Verify Spam, Scam, or Hoax" post to discover resources in conducting your own research.
References
Australian Competition and Consumer Commission. Fake rental properties and shared accommodation listings. Scam Watch. Retrieved from http://www.scamwatch.gov.au/content/index.phtml/itemId/741233
Bernhardt, S. (2013 September 5). Scammers prey on those looking for good deals online. Better Business Bureau. Retrieved from http://www.bbb.org/blog/2013/09/scammers-prey-on-those-looking-for-good-deals-online/
Federal Trade Commission. (2013 May). Rental listing scams. Retrieved from http://www.consumer.ftc.gov/articles/0079-rental-listing-scams
Federal Bureau of Investigation (2013 June 12). FBI warns of rental and real estate scams. FBI San Diego Division: Press Release. Retrieved from http://www.fbi.gov/sandiego/press-releases/2013/fbi-warns-of-rental-and-real-estate-scams
Kirchheimer, S. (2013 May 13). Avoiding vacation rental scams: Online sleuthing and a little common sense are your best protection. AARP. Retrieved from http://www.aarp.org/money/scams-fraud/info-05-2013/avoiding-vacation-rental-scams.html
Morran, C. (2013 February 27). 5 warning signs that a Craigslist rental listing is probably a scam. Consumerist. Retrieved from http://consumerist.com/2013/02/27/5-warning-signs-that-a-craigslist-rental-listing-is-probably-a-scam/