Renters: Beware of new twists on an old scam

Combine a bad economy, a glut of abandoned homes and people in need of cheap housing and you’ve got rich ground for con artists posing as landlords and targeting renters.

The scam is as old as desire itself: sell a “super” product at a “low price,” then make off with the cash as the victim discovers he’s been left with a fake bill of goods.

Now, with a slow economy and more Americans in need of affordable housing, the age-old ploy is rife in the rental market. The rental scam comes in several variations, but it typically follows the same basic recipe: A con artist finds a property, pretends to be the owner, lists it online, then communicates with the would-be renter and takes a cash deposit.

The renter is left with nothing or ends up squatting on someone else’s vacant property while paying “rent” to a fraudster, all unbeknownst to the property’s real owner.

Familiarizing yourself with the scam can help you avoid being one of its unwitting victims. With that in mind, here’s a quick rundown of its various forms, followed by a list of tips on how to avoid falling prey to even the cleverest trickster.

A pretend owner ‘rents’ out a vacant home

Even criminals are subject to market conditions. If thousands of abandoned homes sit empty and thousands of people are in need of cheap housing, someone is eventually going to put the two together, legal or not.

In this case, the scam artist steps in to take advantage of the situation.

He finds an abandoned property, or two or three (these days, it’s not hard), and creates an online advertisement pretending to be either the owner or someone authorized to rent on the owner’s behalf.

He then breaks in, sometimes changing the locks, and typically asks to be paid in cash. In Las Vegas, a woman arrested for just such a scam had provided a contract and written rental receipts to a mother of two, and instructed the woman to meet her each month in a public location to pay her cash “rent,” according to a story in the Las Vegas Sun.

The real owner, who lived in California, arrived one day to find a family living in the home.

“When a house sits vacant for a year it becomes easier to take advantage of it. Six months of collecting rent at $1,500 can be hard to pass up,” said Sean O’Toole, founder and CEO of ForeclosureRadar.com, which tracks foreclosures in California.

As proof, take a case this year in Fremont, Calif., in which a former licensed Realtor rented out foreclosed homes at least 13 times before he was caught by a visiting owner. Police said he had 19 more foreclosed homes lined up to rent and had identified 126 others. He copied listings from the Multiple Listing Service and somehow obtained the key codes. He then instructed the would-be renters to change the locks, according to news reports.

Tenants in such cases did not intend to occupy a house illegally and aren’t going to be charged with a crime, police say. But the renters are going to have to move on short notice and are unlikely to see their security deposits again.

A fake agent pretends to rent a foreclosed property then splits before the renter moves in

This scam starts in much the same way, except the con artist supplies a throwaway or fake phone number and never supplies the keys to the property. He may also collect a deposit from several victims at a time.

In this case, the victim is out both the money and a place to live.

In Miami recently, a con artist went so far as to create a fake warranty deed and introduce himself to neighbors as the new owner.

“He showed me the house. He had a key. He knew the floor plans of the house, everything about the house. It was convincing,” the alleged victim, a teacher who handed over a $3,000 deposit, told the Local 10 television news.

As it turned out, several others had handed over deposits, too, and had shown up with moving trucks only to find they were unable to get in.

“It’s very, very devastating,” the teacher told reporters.

A fake property manager pretends to rent out a home that’s for sale

In this case, the con artist hijacks listings of homes that are for sale or rent by legitimate agencies. He may rewrite the ad a bit before posting it online (often on Craigslist, where posts are free), including undercutting the original price by as much as half.

When interested tenants respond, eager to secure such a good deal, the con artist may claim to need a cash deposit or application information – containing personal data that can be mined for identity theft – before arrangements can be made to view the apartment. The scammer may say he is out of state for work, or for some other reason has to rush to rent the apartment from afar.

The con artist may also use the name of an actual leasing agent and agency; when renters go online, they believe they are verifying the self-proclaimed agent’s identity. (See more on how to protect yourself.)

One woman in Florida who got access to a real-estate agent’s lock-box codes, apparently by pretending to be agent, printed rental contracts and business cards, which she displayed inside the home after hiding the real agent’s cards in a drawer, police said.

She also pulled the true realty sign from the yard and hid it in the garage during home tours. When one couple spotted the sign, she told them to ignore the telephone number on it, a move that made the couple suspicious and ultimately led to a police sting.

“If you were to listen to her when she was actually doing any transactions you wouldn’t think twice about it,” said Chuck Lee, an investigator with the Volusia County Sheriff’s Office in Florida, who followed one of her presentations. “She was very smooth.”

The woman would fill out a rental agreement on the spot and take a cash deposit, making arrangements to deliver the keys later and providing a telephone number, police said. She received money for several homes before she was arrested and charged, police said.

A real owner rents his foreclosed property

At times the scam artist is a desperate homeowner. Authorities say owners approaching, or in, foreclosure have been renting the property and pocketing the cash, removing eviction signs from the property to keep tenants in the dark as long as possible.

Renters may not learn their money has been taken until eviction day, although government agencies have been working to ensure that tenants get at least three months to move after a confirmed notification.

When renting, “you should as a matter of course check whether the property is in foreclosure or not,” said ForeclosureRadar.com’s O’Toole.

One free site dedicated to helping renters with this task is RentalForeclosure.com, where you can type in the property’s address.

A con artist borrows a real apartment or address and collects deposits and Social Security numbers

Instead of borrowing a listing, the scammer creates his own for an occupied apartment that he has borrowed or even temporarily rented using phony identification. He advertises a low price and creates a sense of urgency to encourage people to hand over cash and an application containing Social Security numbers to hold the unit.

For a dramatized example of how such a ruse is carried out— and how easy it is to fall for — check out this video by “The Real Hustle.”

In the end, the victim risks losing not just cash but his identity and banking information.

A con artist rents a real, but unavailable, apartment to tourists

Anyone can list a property as a vacation or temporary rental, and it attracts those visiting or moving from out of town. But a scammer will request that a security deposit and rent money be wired in advance, as opposed to accepting a credit card or check.

Visitors show up at the address to find no apartment and no valid contact information. Authorities say it is almost impossible to recover money that has been wired, which is almost as untraceable as cash, or even to find the perpetrators.

10 ways to spot a rental scam

Many of the same rules apply when it comes to spotting (and fleeing) any of the aforementioned rental scams. Here are the 10 things to do to avoid being ripped off.

1. Don’t give cash or wire money

This is Rule No. 1. Criminals prefer to work in cash, for what are probably obvious reasons. Once they accept checks, they have to create fake identities, which not only adds criminal counts but also risks capture. No one wants to get caught on surveillance camera at a bank.

“If you didn’t use cash, I’d say probably 90% (of these scams) you could avoid,” Lee said.

The same goes for money orders.

“Don’t wire anybody money as a down payment, because if you do there’s no way to get it back and there’s no way to track down the bad guys. Really,” said Leonard Gordon, regional director for the Northeast Region of the Federal Trade Commission, which issued an alert about rental scams.

But don’t stop there: You also want to avoid giving checks to someone who may be hustling bank account and routing numbers. Counterfeiters can print their own checks using your bank numbers and signature, then spend from your account. That’s why a combination of safeguards is necessary. Checks are safer than cash, but read on to ensure you’re giving those checks to legitimate landlords.

2. Research what the price really should be

“On all of the scams, the rental rate is too good to be true,” Gordon said. “They’re more interested in getting your money once, rather than a long-term rental payment.”

This is as true here as it is with any scam. But how do you know whether it’s too good a deal? How do you know what the price range should be? As it turns out, it’s not hard to check, professionals say.

First, make sure the listing has a valid address by punching it into an online map program. Next, go to a listing site used by professional property managers, such as Rentals.com, RentalHomesPlus.com or Move.com.  (Move.com is an MSN Real Estate partner.) Search for homes in the same neighborhood that are the same size and have comparable amenities.

You’ll notice that they tend to fall within about a $100 price range, said Fred Thompson, president of the National Association of Residential Property Managers (NARPM). If your original listing is $800 instead of $1,500, it is probably too good to be true.

“If it’s too low, then you should be asking what’s wrong. Either there’s something wrong with the property or the owner is desperate or in some stage of foreclosure,” said Thompson, who also serves as director of property management for Re/Max 200 Realty Property Management Division. Or, of course, the person you’re dealing with is not the owner at all.

3. Ask yourself, ‘Why is this owner so gosh darn eager to have me?’

Legitimate property owners and managers take the time to ask questions and screen potential tenants. They can’t risk renting to someone who might cause damage or fall behind on payments.

They may take a small fee ($15-$35) with your application to pay for a background screening, or a deposit in the form of a cashier’s check to hold the apartment if they need to take it off the market for a day. Most will not even accept cash, saying they don’t want to risk holding cash. A cashier’s check at least requires identification to cash and can be traced.

But a scam artist will often be eager to close the deal with cash on the spot, and may very well have a good story to tell about why he is in such a hurry: He is moving for a job; others have expressed an interest. Don’t fall for it.

Remember, if somebody wants to take the time to check you out, don’t be offended; that’s actually a good thing.

4. Pay attention to any odd behavior

In Florida recently, a scam artist who appeared legitimate in every other way – she had business cards, contracts, key codes, a professional demeanor – displayed one piece of odd behavior that alone should have tipped off her victims, police said: She parked her car around the corner and walked to the house, explaining that she’d been showing a nearby house.

Legitimate listing agents “don’t come walking up with a clipboard in their hand,” said Lee, the police investigator. They pull into the driveway.

“Just be aware,” he said. “Get a tag number off a vehicle. If a person walks up, like this one, from two blocks away, that should be a clue.”

Observe their behavior, and trust your gut if something seems odd.

“Do they have a set of keys? Are they entering through the back door? Just how they’re acting — does the story make sense?” said Jesse Holland, a regional vice president for the Institute of Real Estate Management.

5. Collect documents

Ask for copies of everything: checks, money orders, the application, receipts, the lease.

“You want to create an audit trail and a paper trail to protect yourself,” said Holland, who also serves as president of Sunrise Management and Consulting, in upstate New York. “That proves that you are entitled to rent it and have gone through a legitimate process, as opposed to, ‘You give me $700 cash.’”

Be aware that a savvy scam artist can easily create his own documents using samples from the Web. So paperwork by itself is not enough to protect you. However, should another sign tip you off, your papers could help authorities prosecute the con artist.

6. Ask a lot of questions

“Ask, ‘Do you have a plumber? How do I get ahold of you if you’re on vacation?’” Holland said.

Do they have a lead-disclosure form if the property was built before 1978? Do they have a certificate of occupancy from the municipality?

Legitimate property managers will either have answers or be willing to get them. So ask questions and be wary if the answers don’t seem to make sense or the person seems unreasonably uncomfortable or defensive.

7. Meet at a rental office

If you really want to be safe, use a professional property management company and meet your agent inside his office.

“Generally, if you meet at an office you’re OK,” said Sgt. Virgil Ford, of the Volusia County Sheriff’s Office.

Except for in a few cities in the Northeast, it is standard practice for the property owner – not the renter — to pay the management company’s initial fee to match an apartment with a tenant, Thompson said. Furthermore, companies set the rent at — and not above — the market rate.

In other words, it should not cost a tenant any more to use a professional leasing agent than it would to deal directly with owners, Thompson said.

Still, many legitimate owners manage their own properties. And many legitimate, small property-management companies use a home office and meet renters at the properties. So …

8. Confirm the identity of the agent or owner

Make sure the person you meet is who he says he is, and that he is either the owner or property manager.

Unfortunately, this requires more than seeing a business card. Scam artists have been borrowing the names of real property managers and printing fraudulent stationery, contracts and business cards. They have even been creating fake warranty deeds to the property.

So, go to independent sources. Fortunately, this is also not difficult:

* If he has listed an agency name, look up the listed number for the agency and call it. Ask to meet the “agent” at the office. Property-management firms commonly list photos of their agents. Check that photographs, telephone numbers and other information matches what you have received from the agent.

* To see who owns the property, go online to your county property records office. Call if you need assistance. These days, many municipalities have databases that let you simply punch in an address to find basic information about any property, including who owns it.

* If you’re dealing with a property manager who has a business address that’s not a business location, that may be OK. Some work out of their homes and do meet potential tenants at the rental properties. But legitimate managers will more than likely be members of a professional organization. You can search for their name at the NARPM, and make sure that the Web and business addresses listed with the NARPM or its regional chapter match those the agent provided to you.

* Some states require that leasing agents be licensed. Check with your state’s Department of Real Estate. You should also be able to request a history of complaints against that agent.

In California, a former licensed Realtor who fraudulently rented out foreclosed homes at least 13 times had a business office and official-looking materials, but a quick records check would have revealed that he had lost his real-estate license in 1979 for fraudulent business practices.

“With the speed and the information on the Internet today, there’s no reason that you should be taken advantage of,” Thompson said. “I’d say that within five or 10 minutes you can check that they are who they say they are.”

9. Check: Is there a similar listing for the same address at a higher price?

In many cases, scam artists hijack rental listings posted by legitimate agents and owners. Sometimes they change the language a little, sometimes not. But there are ways to check.

Professional property managers will typically list a property on multiple sites, including their own Web site and fee listing services (see No. 2 for samples). Type the address of the rental property into those sites. Does the same listing emerge, or one that’s eerily similar except for the contact person’s name and number? Is the price significantly higher on the professional sites? These are dead-on signs that the free listing you happened upon is a hijacked fake.

Or, simply type key words about the property into Craigslist. Did a similar property description emerge but listed at, say, $1,500 instead of $800, and have different contact information? Again, the lower-priced ad is likely a fake.

10. Make sure the property is not in foreclosure

So the owner checks out, but what about the property? Unfortunately, desperate times sometimes drive otherwise law-abiding people to desperate acts, and panicked owners have recently been hiding their home’s impending foreclosure status from tenants and pocketing the cash. Tenants might have no inkling that the rent checks haven’t been going toward the house until the sheriff arrives to kick everybody out.

This, too, can be prevented. Check the county recorder’s office in your area for the most up-to-date public information about the property’s status. You can also type in the address at a free site such as RentalForeclosure.com, which is set up for this purpose.

Unfortunately, there can be a delay of several months before foreclosure information is posted at a county clerk’s office, Thompson said. And a mortgage company won’t release a customer’s personal financial information to a third party. In those cases, the only protection for tenants may be new laws that require tenants to have at least 90 days’ notice before an eviction.

Note: Report any suspected fraudulent activity

If you think you’ve run into a scam artist, give the details to your local police department and report it to the FTC. The information may help police catch the criminal and help the FTC educate other consumers, which is ultimately the best way to prevent such crimes.

Also, flag suspicious listings on Craigslist and staff will quickly remove the post. (For more, see Craigslist’s information about scams.)