Protecting Our Clients-Avoiding REO Rental Scams

Robert Smith-Adams
Robert Smith-Adams
Published on May 13, 2020
Photo provided by The Adams Family Real Estate Services, Inc.

As REO listing brokers, one of our biggest objectives is protecting our clients assets during the time period that we are trusted to manage, market and sell it.

During the last major market downturn, we saw a big increase in REO rental scams. This is where an individual or group pretends to be the owner or property manager of one of our REO listings and illegally places a for rent ad in Craigslist or other online rental platforms. Typically they place a below market rent price in the ad to generate interest. Many times the scammer will say that their job has required them to transfer out of the country for a year or two and they want somebody to take good care of their property while they’re gone. Due to the lower than market rent price, many soon-to-be victims jump at the opportunity to secure the rental and wire the scammer several thousand dollars as a ‘deposit’ and then begin to move their stuff into our clients home. They typically don’t find out that they are a scam victim until a few days later when we show up to do our weekly property inspection.

This presents a tricky situation for all parties involved. Even though any lease produced by the victim is obviously fraudulent, our client will likely have to initiate an eviction proceeding if the victim’s do not voluntarily vacate. Sometimes the client will have to execute a relocation assistance agreement with the victims to save the time and expenses of a lengthy eviction proceeding. Between damage to the property, costs involved in regaining possession, re-securing and lost time in the marketing process, the Craigslist Rental Scam could end up costing the client tens of thousands of dollars before it’s all through.

One tactic myself and a lot of my fellow NRBA Brokers use to combat this problem is “Scam Alert” postings on the front and back windows of the assets we are managing. It’s basically a message to anybody who is a potential rental scam victim that the subject property is not for rent, and that if they have seen a rental ad to call us and the police immediately. Since we started posting these notices about 11 years ago, we have seen our rental scam problem decrease by about 90%. Did you notice I said 90% reduction? That still means some scammers were still successful causing us and our clients headaches.

Just like how we have evolved as brokers to reduce the likelihood of our clients becoming rental scam victims, the scammers have evolved too. We started to see them be more thorough in removing our no trespassing and scam alert postings from the properties so that their potential victims wouldn’t see them.

To combat this new problem, we started hiding scam alert notices inside the kitchen and bathroom cabinets as well as other interior places so that they could be found by the potential victims. Let me ask you this question: Have you ever executed a lease agreement without looking inside the cabinets? This small change in our process has reduced our rental scam problem almost entirely.

Another tactic we use is monitoring the internet for our addresses being used in ads. Several companies have online search tools that will alert you if something is happening. We start the monitoring process the day we take possession of any new asset and continue until the new owner takes possession (Yes, we had a rental scam victim try to take possession of one of our client’s assets the day before closing in 2013).

Finally, we use old fashioned networking to protect ourselves and our clients from these REO rental scams. Whenever we take possession of a new asset, we make it a point to door-knock and introduce ourselves to several of the area neighbors. We let them know that we will be taking care of the house, mowing the lawns, cleaning the pool, etc. to keep it looking nice (or to clean it up in many cases since it’s probably overgrown and messy already) and also ask them if they could please call us and the police if they see anything suspicious. We also take this opportunity to tell the neighbors that the home is not for rent just in case they come in contact with a potential rental scam victim.

The real estate market in SoCal has changed. Want to know the real, current value of your home?
Our team will provide this value to you for FREE.

Let's Talk Real Estate!

chat_bubble
close
Get A FREE Home Valuation!
LET'S DO IT!