How Rental Scams Work
There are a few patterns rental scams typically follow. Usually the perpetrator is outside of the U.S. and they use Facebook Marketplace and Craigslist to post fake listings.
The goal is to manipulate desperate renters who can’t find housing in their price range. The scammers get renters to pay the application fee, then the security deposit and first/last month’s rent. We’ve even seen cases where renters have paid six months’ rent because it was such a great deal.
The scam starts when a legitimate property gets published. The scammer finds property photos online, copies them, and uses them for their own fake ads on Craigslist or Facebook Marketplace.
As people see the fake advertisement, they’re immediately drawn to it, because it’s posted for just a fraction of the cost of other listings.
When someone inquires about the fraudulent ad, the bad actor then contacts the legitimate property manager. Posing as a prospective tenant, they arrange a self showing and receive the lockbox code.
The scammer shares the lockbox code with the tenant, which gives the appearance of legitimacy and boosts the renter’s confidence. After viewing the property, the tenant submits a rental application and soon the scammer has collected the application fee, the security deposit, and first/last month’s rent. Sometimes the tenant even moves in.
Any property can be used in a rental scam, but you’ll find a high concentration of scams in certain markets. These conditions are ideal for fraud:
- High competition among renters for properties
- High rent costs
- Desperate tenants
For example, one heartbreaking rental scam happened after a tornado ripped through Nebraska a couple years ago. It devastated the area and many residents lost their homes. Scammers started targeting this region, because they knew there were a lot of displaced people and fewer housing opportunities.
Rental Scams Hurt Your Business
In the best-case scenario, every time you have to deal with a rental scam creates operational drag on your business. There’s cleanup work to be done, undesirable communication with tenants who have been scammed, and communicating with the property owner about the situation.
One conversation you never want to have with the owner is to let them know someone got scammed using their property that you advertised through your unsecure software.
You could even lose property owners as clients.
If your property is used in a scam — whether it’s successful or not — it can hurt your reputation. Over time, scams can affect your ratings on Google and Yelp! You don’t want to be a housing provider with reviews that complain about scams.
We’ve seen many examples of property managers whose reputations have taken a hit from rental scams. It’s one of the biggest reasons that customers switch to Tenant Turner from other property management systems. They’ve been taken through the ringer and they’re looking for relief.
In the worst-case scenario, you have to deal with squatters. The scam has gone all the way through and a renter takes up residency with a fraudulent rental agreement. You only discover the scam when you stop by the property and discover someone living there.
You might have to deal with squatters that aren’t willing to move. They’re angry, they’re desperate, and they have nowhere else to go. Depending on the situation, the police may need to get involved. In some states like California, it’s very difficult to evict the victim, even though there was never any agreement between you and the squatter.
If the victim is agreeable to leaving, it could still take weeks or months before the property is vacant again. The squatter has probably been put in a situation where they can’t afford to move. They’ve already given the scammer their security deposit and first/last month’s rent, and they’ve paid movers.
Both you and the victim are stuck.
List Your Properties with Confidence
While rental scams may be increasing, you can reverse the trend for your own properties. True Property Management gives you peace of mind that your properties — and your reputation — are protected, 24/7.