Chaos in the housing market has spawned a fertile new ground for crooked entrepreneurs: rent fraud.
The kind of rent fraud being discussed here has to do with the fraud occurring on the leasing side. An individual or individuals purporting to be the lawful owner of a property, advertises that property for lease, takes applications for deposits, and then usually disppears after "renting" the home or apartment to multiple applicants. Con artists come from several backgrounds:
• A habitual criminal. A common source of for their listings is to look for rentals on Craig's List that are vacant. The scam artist changes the locks, then "shows" the properties to prospective tenants, asks them to fill out a rental application and pay for the credit check, then collects first and last month's rent and/or a security deposit. The victim then shows up on move-in day, only to meet other people who thought they had a valid rental agreement. Con artist disappears into the sunset, not only with the victims' money, but also their confidential information from the rental application, such as driver's license number, date of birth and social security number. Those items together can result in the victim being re-victimized in the form of identity theft.
• Former owners leasing their property that is either in foreclosure or has been foreclosed by the lender. The unsuspecting tenant dutifully pays the rent, which the former owner deposits instead of paying the mortgage. When the bank attempts to take possession of its property back, it then finds the tenants, not the owner, on the property.
• The third scenario would be funny if it weren't so unbelievable as well as being shameful. Apparently at least one (former) real estate agent came up with a creative way to mine listings in his local Multiple Listing Service (MLS) in Fresno, California. Sam Haley, 66, who lost his real estate license in 1979 due to fraudulent business practices, had rented out 13 homes and collected up to $26,000 before police arrested him and charged him with felony theft. Haley has had run-ins with the law before and was turned down by the California Department of Real Estate when he reapplied for his license in 1998.
As a defensive measure, an article on MSN.com advises renters to check if the property they're interested in renting is in foreclosure by looking at
www.RentalForeclosure.com but a random check of three (3) properties in the San Fernando Valley that have either received a Notice of Default (NOD) or are bank-owned (REO) resulted in a message that none of the properties were in foreclosure according to RentalForeclosures' records. Not a useful website in my opinion.
Here's how you prevent becoming a victim of rental fraud:
• Check to make sure the property is not in foreclosure. Distressed properties, whether currently in foreclosure or bank-owned, are targeted by fraudsters.
• Ask the leasing party if s/he is the owner of the property. If not, that person should prove they have the legal authority to rent the property. If the person says s/he is the owner, check with a title company to see that that person's name is on title. If the person claims to be the leasing agent, ask for his or her business card, including DRE license number, and a copy of the lease agreement between the lessor and the agent.
• Never, ever give a cash deposit. Instead, pay for the deposit with a cashier's check or money order in case you need to prove in the future that you did in fact make the deposit.
• Check market rents. If the rent appears to be well-below the market rate, ask yourself why a reputable landlord would rent for such a low price. If that person is in a hurry to be leaving town, or either is out-of-town or renting for an out-of-town landlord, again, ask for proof that the person has authorization to lease.
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