5 Ways to Spot a Rent to Own Scam
April 15, 2016 by Natalie Heller |
Rent to own tends to attract inexperienced, first time homebuyers. Because of this, there are many rent to own scam artists out there hoping to lure naive renters into their trap. It can be difficult to identify them, since the industry isn’t subject to much inspection. No worries though, we’ll go over the most common characteristics of an rent to own scam so you’ll know what to watch out for.
1. Your Agreement Sounds Too Good to be True
Rent to own scam artists attract their prey by promising them far-fetched rewards. They’ll make claims to give you financing with no money down, inconceivably low rent prices, and other misleading offers. It is always a good idea to question your seller’s authenticity, especially if prices are ridiculously low or if the agreement appears to lean drastically in your favor.
2. You’re Skeptical About the Seller
It’s critical that you perform a background check on both the landlord/company and the property before signing. Many rent to own scam artists pretend to list homes online when they don’t even own the property. By performing a thorough background check, you can ensure the seller or company hasn’t committed fraud transactions or embezzlement in the past.
Likewise, you should investigate the property to find out if stable mortgage payments are being made or if there are tax claims on the house. Some rent to own scam artists will list houses on the market that are subject to foreclosure, so be careful. You can contact a local tax assessor to make sure all the listing is legitimate.
3. Prices Are Unreasonably Overpriced
Many rent to own scam artists will list their property at exceedingly high prices. They to this to take advantage of those who desperately want a house but cannot secure a mortgage. You should always confirm if the listing price of the home and the monthly rent price are close to market value. You can do this by contacting a mortgage lender.
In addition, many rent to own scam artists will deliberately seek tenants who they know cannot afford the house. These scammers hope to steal their option money and rent credit when the lease expires. These sellers don’t even aim to sell their home and will repeat this process as long as ill-prepared tenants fall for it.
4. Lease Contract Wording is Ambiguous
It is optimal to hire a lawyer to check for discrepancies in the contract. This can help to interpret difficult legal terms and conditions. For example, it’s common for sellers to void the rent credit and option fee if you are late on just one payment. If you are unaware of this before you sign the contract, you could lose a lot of money towards the purchase of your home.
5. Seller Demands Additional Fees From You
While scoping out potential homes, be wary if a seller asks you for an application fee to view the property. It’s more common than you might think for scammers to post listings for nonexistent houses in order to collect money from inexperienced buyers.
Also look out for mortgage lenders who expect you to follow strict conditions, such as pay extremely high interest rates on your mortgage. Consult several different options before entering the transaction to ensure you receive the best rates out there.