Scams to Avoid When Looking at Rent to Own Homes

May 7th 2016

Image courtesy of pnwra via Flickr

Rent to own homes are the ideal solution for many renters. When renting to own, instead of throwing your money into a rent well that isn’t building equity, a portion of your rent goes toward a down payment. After a set period of time, you can seek financing to buy the house outright. Rent to own is not as common as other rental arrangements, allowing scammers to take advantage of the less knowledgeable. Here are five ways scammers try to get your personal information, money, or down payment through rent to own home schemes.

1. Spam Lists and Identify Theft

Many scam listings are designed to harvest your personal information for spamming and identity theft purposes. The listing, commonly posted on Craigslist, shows an attractive house and describes how you don’t need good credit to own a home through the program. These listings steal photos from Realtor listings to appear legitimate, but the description of the listing often references finding similar houses, the property description doesn’t match the pictures, or the pictures come from multiple houses. Check your credit report if you submit your information to one of these listings to be sure you weren’t scammed.

2. Application Fees Before Showing

Another scam that steals money and your personal information is listings that require you to submit an application before they show you the house. Instead of showing you the house, they take the money and your personal information to use for fraud. Like the spam lists, these scammers use photos from real estate listings. They appear legitimate at first glance, but these things should make you nervous: They require email-only contact; the listing is poorly written; they make promises about helping with second-chance tenants and bad credit.

3. Unreasonably High Purchase Price

Some scammers actually have rent to own properties on the market, but they make it extremely difficult to meet the terms of the lease. You are asked to pay an option price on the rent to own property, either completely upfront or over the term of the lease. This option price is based on the purchase price of the home. If the purchase price is unreasonably high, it may be a way to get you to pay more on the option payments. Get an independent valuation of the home, and look at tax assessments before signing a lease option.

4. Late Payments

Another way scammers try to stop you from going through with the lease purchase is by putting multiple penalties into the contract that force you to forfeit the amount you have put towards the option price. They may try to use any reason possible to evict you from the home, which also serves to forfeit the option amount. It’s important to look over the contract carefully to determine whether it includes the standard clauses for a lease, or if it has eviction and contract violation clauses that go beyond the landlord-tenant laws for your state.

5. Inability to Finance

Most rent to own arrangements have a certain time period in which you have to purchase the house, whether through owner financing or conventional financing. If you do not secure financing within that time frame, normally 12 to 36 months, you lose your option payment. This is one reason why scammers target the bad credit market as exceptionally bad credit takes several years to work through, and some mortgage options require two years of clean credit before you’re eligible. Scammers and unethical landlords bank on your credit not being good enough in that time frame, so you lose out.

When considering a rent to own option on your next home, check each house, seller and contract with great care to avoid being scammed.


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