Beware of rent-to-own scams, unfortunately scams are all too common in this industry. “A recent ruling from an Allegheny County judge gave 285 Pennsylvania tenants the titles to their homes as compensation for being misled into predatory rent-to-own agreements with a national property management company.” – phillyvoice.com
Headlines like this are an unfortunate site to see in our industry. While we hope this doesn’t reflect us as a business we know that it can make some people nervous to consider rent-to-own homes. Instead of hiding that fact we want to bring it into the light so you can avoid those scams as well.
We do watch what is going on in our space and want to make sure our customers are safe and happy with our services and others. We use transparency and honesty to make this happen and you are free to ask questions to make sure of that.
We have seen two big groups of scams in rent-to-own homes. The “Quick Nickel” and the “Slow Dime”. Both scams are avoidable and here is how we see them happen.
Rent-To-Own Scam #1: Quick Nickel
The “Quick Nickel” as we call it is when a person is looking to make a quick deal to take a small fee or deposit. They may charge a small fee to do a background check and not run it. They keep the fee and deny you for some unexplained reason.
The other scam is when they get the deposit or first month of rent from you and then never let you into the home and try to disappear. They often don’t even own the home and the listing of the home might be from a different company altogether.
In both cases it can be difficult to get your money back because they use a fake personal and business name. This makes it exceptionally difficult to sue them as well.
To avoid this make sure they own the property by doing research and asking for documentation. The more research you do the better! The more questions you ask the more likely you are to figure out what might be happening. If it’s too good to be true it probably is!
You can ask for the business name and look into reviews, business status, lawsuits, liens, and judgments. If a business or person has been involved in several cases they may be involved in several shortterm and longterm scams.
You should also walk the property a few times and check signage, pamphlets, and signs of what property management company might manage it. Ask Questions!
Rent-To-Own Scam #2: Slow Dime
Similar to the case mentioned above the “Slow Dime” scam involves getting people into faulty agreements with no intention of you owning the home. They often own the property and want to pay extra with the intention of using the agreement against you at the end of the terms. This often includes threatening eviction.
The owner may also allow a bank foreclosure to occur. This may be on a cheaper house that they are okay with losing. They take your payments but default on their own bank loan. They often run this scam through a new company that they expect to fold.
The bank will take back the home and work with you. You may have more remedies since you can now work with the bank. The bank may have an assignment of rent or leases. This allows you to continue an agreement with the bank to continue living there and possibly buying the home.
Lastly, the value of the home may be vastly overstated. You may expect the hme to go up each year. The company selling the home often included this increase in value in the purchase price. That is why the agreed price is higher than the most recent purchase price. More than the average in your market is likely a scam. Do your research!
Historically, appreciation on homes long-term has been between 2-5 percent in most markets.
Rent-To-Own Scam #3: Wrapping Up
You should see reviews, closing photos, referrals, business information and more. You may be able to ask for contacts that can confirm that this is a legitimate company.
Real estate agents can also help you when you are looking for a home. This realtor is free to you as a buyer.
Do your research and ask as many questions as you need to feel comfortable with this big decision. This is your dream home and we want to see it go as smoothly as possible.
More Podcast Episodes at https://www.buzzsprout.com/1544305