Protect Yourself from Real Estate Rental Fraud

As I left my local grocery store, I was inundated by loud, amplified violin playing—actually, electric violin playing. The sound was so overwhelming that it seemed to follow me through the large shopping center – from the grocery to the pharmacy and then to the bakery as I looked for the source.

Finally, I saw him – a weathered, middle-aged man standing in a grassy median in the parking lot. He played an electric violin, amplified by what looked like a boom box from the 1980s.

His case was open, and there was a sign asking to help him support him and his children because he was unemployed and needed money to pay rent. The man appeared to be busking – an age-old practice where fledgling musicians perform in public places, hoping for donations to support their living expenses and musical training.

As I watched the man masterfully perform music ranging from Bach to Bluegrass, something seemed off. A non-violinist might not notice – but he wasn’t playing the violin. His bow was moving but not perfectly with the music, and his fingers weren’t playing the notes coming from the speaker. Rather than busking, the man was doing the violin equivalent of lip syncing.

Police in Montgomery County, Maryland, where my office is located, have warned residents of scammers posing as buskers. According to the warning, these scammers weren't only asking for cash--- they were taking electronic payments, which exposed donors to credit card fraud. A National Public Radio report expresses concern that actual musicians may be harmed – not only by the fake buskers but also due to the resulting lack of confidence the public may have in giving money to performers.

Unfortunately, busking scams are only one way fraudsters take money from unsuspecting people. With the apartment rental market becoming tight, rental scams are on the rise. And as people start vacationing again, scams for vacation home rentals are a more significant issue, also. This article discusses rental fraud and what prospective tenants can do to identify and protect themselves from scammers.

What is Rental Fraud?

Rental fraud usually involves a fraudster collecting rent for a property they don't own or that doesn't exist. Scammers typically use one of two techniques to commit rental fraud:

Hijacked Ads

Some scammers use an ad for an actual property but will change the contact information to their own. This scam can involve hacking into a site listing rentals and changing the contact information for the landlord. Or, the scammer may hack into the property owner’s email.

With this scam, the prospective tenant can verify that the property exists. However, usually, the scammer won't have access to the property and manufactures a reason—such as being out of the country—why they can’t give the prospective tenant a tour.

More frequently, scammers hijack the photos and description for a property from a rental ad to their rental listing – often in a different city. Since this property doesn’t exist in the city the scammer uses, a prospective tenant can’t view that property either. But prospective tenants should be able to uncover this version of the scam by checking whether the property exists.

Renting a Property the Scammer Doesn’t Own

Scammers also may rent a property they don’t own. This scam can take several forms.

Sometimes, the scammer may collect rent and give possession of a home to tenants even though the scammer doesn’t have the right to lease the home. One of my friends was a victim of this scam when they had to move out of state and listed their house for sale.

My friend became suspicious when the home hadn’t sold despite having been listed for months at a market price. When back in town, they stopped by the house to see what they could spruce it up for better curb appeal, only to discover someone was living in their house without permission.

The real estate salesperson rented the property to a tenant without authorization and pocketed the rent payments. The real estate salesperson lost their license, and my friend had to incur the expense of ousting the unauthorized tenant, who was reluctant to give up their below-market rental.

Although I’m telling this story from my friend’s perspective as the homeowner, the tenant who rented from the salesperson also was a scam victim. The tenant thought they had found a deal too good to be true, only to have to move quickly or risk having eviction proceedings on their credit record.

At least the tenant in my friend's situation had possession of the home (albeit without authorization). Often, the scammer leases a home and collects a security deposit and, at minimum, the first month's rent. But the scammer can’t give the tenant possession of the property -- because the scammer doesn’t have access to it. That tenant might not learn of the scam until they try to move in, only to discover someone else is living in the home. Other times, the fraudster can’t give the would-be tenant access because the property doesn’t even exist.

Identifying Rental Fraud

Prospective tenants should remember the adage, "If it looks too good to be true, it is."  That’s because a hallmark of many scams is that they offer a deal better than other options in the market.

For instance, rent may be lower than landlords usually charge in that neighborhood. Or, the scammer may tell prospective tenants they can rent without undergoing background checks or obtaining a credit report. Other times, the landlord might not require a formal lease agreement.

Other red flags are similar to those for other real estate scams. For example, the ad or email communications may have significant grammatical or spelling errors—this can be the case when the scammer is outside the United States. Or the scammer may require the prospective tenant to pay money or sign a lease before seeing the property. High-pressure sales tactics and requiring tenants to send payments via wire transfer (rather than check or credit card) can also signal a scam.

Another red flag for a rental scam is not allowing a prospective tenant to view the home before signing a lease and paying money. I'm not talking about the situation where an apartment complex only has a model available to view because an apartment is occupied. Rather, scammers usually have an excuse – such as the owner being out of the country – why the tenant cannot see the property.

How Tenants Can Protect Themselves from Rental Fraud

Education—knowing the red flags for scams-- is the first step tenants should take to protect themselves from scams. However, tenants also can protect themselves by conducting due diligence before signing legal documents or paying money.

Prospective tenants can conduct basic due diligence for free on the Internet by doing the following. But it’s important to note that failing the test signifies that the prospective tenant should conduct further research—not necessarily that the rental is a scam. There are legitimate rentals, owners, and agents that might not pass some of these tests.

Verify the property exists.

Zillow and similar websites contain listings for most single-family residences and some multifamily ones. The landlord bears further investigation if there isn't a Zillow listing for a home like that.

Also, in most states, real estate tax records are public, although it varies from state to state whether the county or state maintains the records. All real estate in the state should have a real estate tax record—although for multifamily properties, the record might not be under an individual unit number.

Real estate tax records often provide you with the name of the actual owner of the property. If a would-be landlord doesn't know the name of the true owner, that doesn't always indicate fraud, but it suggests that prospective tenants should investigate further.

Google maps frequently has a street view for an address. Prospective tenants can compare that view to the listing to confirm the advertised property is actually at the stated address. In areas where Google maps doesn't have a street view, Google earth may enable a prospective tenant to zero in on the address and at least confirm there is a residential building at the location.

Occasionally, a prospective tenant can uncover a scam by Googling a unique phrase in the rental listing. Although a search like that can yield thousands of results, sometimes, a search like that will reveal an identical listing – down to the photos – of the same rental but in a different city. Duplicate listings signal that it’s likely that at least one of the listings is a  scam.

Research the owner and agent

Prospective tenants also can conduct free research on the owner and agent. Businesses should be registered with the state Secretary of State (or in Maryland, the Department of Assessments and Taxation). Not being registered doesn’t necessarily mean that the business is fraudulent. Although there are legitimate rentals where the owners are unsophisticated and have skipped this vital step, a scammer rarely will bother registering.

Professional rental agents often will have a website or LinkedIn bio. Scammers occasionally create websites, but it's rare for them to create a LinkedIn bio.

Plus, in most states, a professional rental agent that isn’t affiliated with the owner who isn’t an attorney must be licensed as a real estate professional. States have websites where consumers can verify licensure.

As with all online research, not being licensed doesn’t automatically mean there is a scam. And as my friend learned, being licensed doesn’t mean the individual won’t get involved in a scam. But if these searches don’t add up and there are other red flags, there could be a scam.

Google the company name and the individual’s name. Although legitimate owners and agents might not have websites or may have an occasional bad rating, it’s telling if the same company is associated with many postings claiming it is engaged in a scam.

Don’t give out personal information to strangers

Since legitimate landlords require personal information, scammers can also get away with asking for it. Prospective tenants should be wary about disclosing their Social Security number or other identifying information. Although not a rental scam, a fraudster might ask for a victim’s mother’s maiden name or other items frequently used in password reset questions for credit cards and other websites.

Be suspicious of unsolicited email or telephone offers

Scammers often find victims through unsolicited spam emails. They may send tens of thousands of those emails, hoping to find a handful of individuals who will respond. It’s rare for a legitimate rental agent or owner to send an unsolicited offer.

Insist on a written lease that outlines the rental terms

Even with legitimate rentals, it’s in everyone’s interest that lease terms be in a written lease. If the landlord refuses or the lease contains many spelling errors or looks odd, the rental could be a scam.

Insist on a tour of the property before renting

Tenants should visit the property before signing a lease or paying rent. A virtual tour is better than no tour, but even those might not show the property that’s supposedly being leased.

Don’t pay money before signing a lease

No reputable landlord or property manager will require money as a fee to show a property. Nor will they require payment of a security deposit or any rent before a lease is signed.

Don’t wire security deposit or lease payments

Tenants shouldn’t wire funds to someone they haven’t met. Wires, money orders, and ACH are equivalent to handing over cash. Sophisticated property managers usually accept credit cards, and nearly all landlords accept checks. After moving in, if a tenant wants to arrange for an automatic ACH for rent payments, that’s different.

Conclusion

Scam listings frequently can be identified if prospective tenants conduct basic due diligence. However, many prospective tenants either don’t know how to research the property or are so desperate to find a home they cut corners. By stepping back and taking the time to do that research, those tenants may prevent themselves from being victimized by scammers.

© 2022 by Elizabeth A. Whitman

Any references to clients and their legal situations have been modified to protect client confidentiality.

DISCLAIMER: The content of this blog is for informational purposes only and does not provide legal advice to any person. No one should take any action regarding the information in this blog without first seeking the advice of an attorney. Neither reading this blog nor communication with Whitman Legal Solutions, LLC or Elizabeth A. Whitman creates an attorney-client relationship. No attorney-client relationship will exist with Whitman Legal Solutions, LLC or any attorney affiliated with it unless all parties sign a written contract.