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Not everybody has a high enough credit score or hefty down payment saved up to purchase their own home, but that doesn’t mean they’re want rent forever.
People who want to own a home even without a strong financial record, may want to consider a rent-to-own situation – but they need to be on guard for scams.
In a rent-to-own scenario, both parties – the seller and the would-be buyer – agree to let the would-be buyer move into the home while paying rent.
What makes this different than a normal landlord situation is that the person living in the home has the option to buy it later by using the rent they’ve paid as a down payment for the house.
While rent-to-own is a fairly common practice, it isn’t as popular as renting or buying a home. One of the reasons for its lackluster popularity that many people encounter rent-to-own scams.
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What Kinds of Rent-to-Own Scams Are There?
Scammers can target unsuspecting people who have a dream of owning their own home in a variety of ways. South Carolina couple Billy and Rebecca Dula discovered this the hard way when they recently lost their home after becoming victims of a rent-to-own scam.
In their case, the company they did business with kept the rent they paid each month instead of funneling it to the mortgage debt. When the original lender didn’t receive the money, the home went into foreclosure. That meant the couple lost their home and their money.
But that’s just one example of how potential homeowners can be scammed. In some scams, the homeowner lies about the value of the home, overinflating it. Without an appraisal, the buyer continues paying more than the home is worth or makes a bigger down payment than necessary.
Another way renters can be tricked is by not carefully reading the fine print. After months or even years of paying down payment money, missing a payment by a day or two can trigger an eviction process. They can lose all the down payment money they’ve made.
Another popular scam is for a renter to fork over a large down payment to the person they believe to be the homeowner. Only after the money is gone do they find out the person never owned the property to begin with.
How to Spot a Rent-to-Own Scam
Scammers can be clever, so consumers have to anticipate what they could encounter to figure out if the offer is legit. They need to think like the scammer and cover all their bases.
Here are some red flags in a rent-to-own situation:
The Home is Far Overpriced or Underpriced
Rent-to-own scammers may list a property for significantly more than its market value. Some scammers, though, including those who are interested in obtaining Social Security numbers for identity theft, will list the price for much lower than its market value. That way, a person will feel compelled to snatch up a “good deal” before someone else does and will readily provide personal information.
Asking interested people to fill out an application before even being able to see the house or building in question is one thing scammers do when they are only trying to land a person’s personal information.
Poor Communication Skills
If a consumer is dealing with a potential landlord through email for a rent-to-own situation, be on the lookout for poor grammar and a lot of typos in the correspondence that indicate the person is not a professional.
Ads without photos can indicate the property in question isn’t legitimate. Always ask to see photos of the property to make sure it’s real before giving any information or going to see the house.
What Should You Do If You Spot a Scam?
If you believe you are falling victim to a scam or believe someone you know is being taken advantage of, contact the authorities.
Or, investigate the person you are dealing with or the background of the home in question. A trip to the local courthouse or a quick internet search may uncover who the real owner of the home is and whether it’s for sale.
Another option is checking out the Better Business Bureau website to see if a landowner or corporation has a reputation for controversial business dealings. If that’s the case or if there is other evidence of a scam, make that call to the police.
In addition, there are many rent-to-own alternatives you could consider if you are afraid of being scammed.
>> Read More: How does rent-to-own work?
Author: Shannon Serpette