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Imagine dutifully paying rent for years only to find out your landlord lost—or never had—the right to rent you the house or apartment. In Detroit, as many as 1 in 10 recently evicted renters had faced fake landlord schemes like this where properties were rented or sold by landlords who didn't own them, according to an investigation by NBC and Outlier Media.
But these types of scams can happen anywhere, which is why it's important for renters to know what to look for. You can spot a fake landlord scam by checking records, touring the unit in person and working with a professional to verify the contract.
Ways to Avoid a Fake Landlord Scam
Commonly, fake landlord scams are perpetrated either by those who illegally gain access to the property and claim it as their own, or by homeowners facing foreclosure who are still trying to sell a property or rent it out. Regardless, they do not have the legal right to place the home up for sale, take in a tenant or otherwise collect money on it.
These types of scams can happen with any real estate transaction, but rent-to-own contracts make renters particularly vulnerable. Scammers prey on aspiring homeowners who may not be able to qualify for a traditional mortgage without a down payment or due to their lower credit score. Since rental payments can be significant, renters stand to lose a lot when taken in by these schemes.
Some red flags that a real estate listing may not be on the up and up include:
- Unusually low rent price
- Errors in the advertisement, including spelling and grammar issues
- The supposed property manager charges money for a tour of the unit
- Requests are made for money or signed contracts before the property can be visited
- Required deposits can only be wired
In addition to spotting red flags, there are some clear steps to take to avoid a fake landlord scam, including:
1. Don't Get Pressured
In a tough housing market, moving fast is part of the game. But fake landlords may rush you into putting down deposits. If it feels like you're being pressured, walk away.
2. Don't Just Accept a Deed From the Landlord
Fake landlords have been known to falsify deeds to convince buyers of ownership. You can check with municipal authorities to make sure public records match. Owners may be listed on their tax assessment records at the city hall or on deeds lodged with the county clerk. If anything on the landlord-provided deed looks suspicious, such as missing information or names, it is likely a scam.
3. Run a Title Search
Even better than checking records yourself, you can have a title search done by a real estate lawyer or title company during a real estate transaction to make sure nobody else has a claim to the property you are purchasing or renting. It verifies that the seller you are working with really owns the unit and is legally entitled to rent it out or sell it.
4. Tour the Home in Person
Fake landlords often operate by stealing photos of a property they don't own from another real estate listing or even by breaking into a vacant home to change the locks and make it look like they own it. If you tour the home in person before giving any money, you can verify that the home is at least real. Look for any signs of a hasty lock-change or other suspicious issues like recently broken windows to dispel the possibility of a "landlord" having broken in to take over the house.
5. Work With a Professional
Skipping having a lawyer or real estate agent will save you money, but not having a professional on your side could end up costing you more if you wind up being the victim of a scam. If you have the means, it can be a wise move to have someone with industry know-how to go over your contract and verify that your real estate moves are legitimate.
Protect Your Finances and Credit From Housing Scams
Being victimized by a fake landlord scheme can devastate your finances. Money paid into these scams is difficult to recover and could require a lawsuit against the fraudster who carried it out.
You may also face eviction if the true owner or bank realizes you are living in the home without their permission. Eviction records can make it extremely difficult to rent another home.
There are also secondary financial ramifications, like missing out on your on-time payments getting reported to the credit bureaus. You can always ask a landlord to report your rental payment history to Experian RentBureau to get credit for your on-time payments, but a fake landlord most likely will not report anything to official institutions about your rent. Therefore, you miss out on the benefits of building your credit with on-time payments when involved in one of these schemes.