Nearly one-third of U.S. renters struggle to pay rent in the midst of the COVID-19 pandemic, yet they also face the prospect of being defrauded when searching for a new rental home.
Fraud in the rental-housing market continues to take a toll on everyone. Tech advancements have made it increasingly difficult for law enforcement to tackle. According to a December 2019 report by the Better Business Bureau, 43 percent of online shoppers encountered a fake listing in their search for a rental. Simultaneously, the FBI reported more than $37 million in losses involving the word “rent” between Jan. 1 and Oct. 20, 2019.
What kinds of rental housing fraud activities are affecting the rental housing market?
- Scammers list a rental property on Craigslist or another open-listing site that has no restrictions about rent. These sites allow a user to easily list goods to purchase or rent for prices significantly below market value.
- Criminals enter a rental home during a self-showing appointment and make a copy of the house key using state-of-the-art technology. These same criminals meet the prospective tenant at the home, pose as a real-estate professional and illegally conduct a home tour.
- Scammers create fake applications that require security deposits. Renters are asked to fork over cash or wire money to an unknown entity.
- Fraudsters have been known to turn the keys over to a potential renter and walk away, stealing their money and leaving them to illegally occupy the home.
Here are some steps owners can take to protect renters in the midst of the COVID-19 pandemic:
- Website security: Create a website that is secure from spam, scammers, hackers and fraudulent activity.
- ID Verification using facial recognition: When setting up self-tours for renters, hire an identity-verification provider that uses facial-recognition software to ensure that visitors are who they say they are. Before the showing takes place, request a copy of the visitor’s government ID, driver’s license or passport and a headshot. Facial-recognition software allows an owner to match the photo with the renter’s legal ID.
- Two-factor authentication using a cell phone: Develop a “smart algorithm” to create a blocklist that allows a renter to book one self-showing at a time. Some scammers use the same phone number to book multiple showings in various markets.
- Photos, 3-D tours and watermarks: Use several interior and exterior photos in your listing. An owner can add the logo of their real estate agent or property owner on each photo (also known as a watermark).
- For-rent signs: A yard/building sign with the listing agent’s or company’s name, its license number and/or MLS number, phone number and website is a good sign that the listing is legitimate.
- Wire fraud: Wire fraud occurs when a fake entity asks a renter to wire money into an account when applying for a rental. Sometimes criminals will ask for a large security deposit or money to cover the application fee. Either way, they have gained access to a renter’s bank account and can now do massive damage.
- Unsafe websites: The sites most susceptible to fraud are Craigslist and Facebook Marketplace. Owners should entrust their listings to a licensed professional with a website and resources to combat fraud on that site.
Online renting remains the safest and most secure way to lease a home. However, residents should be resolute in their housing search and be aware of the signs of rental housing fraud, such as:
- Deals that are too good to be true: If you find a rental home significantly below market, it’s likely a scam. For instance, if there’s a three-bedroom listing in San Francisco for $750 a month, that’s a fraudulent ad. Stay up to date on the latest rental rates by checking out Mynd’s Rental Housing Tracker.
- Unusual pressure: Receiving pressure from a stranger in the form of emails, phone calls or text messages to lease a home before you have conducted your research and due diligence may indicate fraud. Scam artists ask you to front a deposit well before it’s time to pay a deposit.
- Emotional pleas: You may receive impassioned pleas that are tantamount to begging from an individual posing as a landlord. This is a sign of fraud. Real-estate professionals will never beg because they likely have another applicant lined up.
- Improper use of grammar: Listings that include improper grammar should send a red flag. If key words are missing, or if the phrases in the ad don’t make any sense, chances are that it’s not legitimate.
- No background checks: A rental company that fails to conduct background checks could indicate fraud. A reputable management company has a series of background checks in place to protect both the owner and renters. As an example, Mynd Management uses TransUnion to conduct background checks on the financial wherewithal and eviction history of its potential residents.
Here are some steps renters can take to protect themselves and their home search:
- Take legal action: A renter should capture screenshots of the listing in question, save emails, texts and voicemails of anyone who corresponds with them and share them with the local law enforcement.
- Flag the ad: Nearly every rental-listing portal gives a renter the ability to flag an ad that sounds too good to be true, or that displays some evidence of fraud. Take the time to flag the ad as suspicious, so that other people don’t fall victim to a scam.
- Online resources: Search for other online resources to help you combat fraud. There are a number of them available, but this is one of our favorite consumer protection sites.
Property owners and renters can fight fraud by being vigilant and remaining on the lookout for wrongdoing. Specifically, if owners use technology, legal expertise and local market insight they will be in the best position to protect their residents, as well as their investment property, from fraud.