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The Most Common Rent-to-Own Scams—and How to Not Get Taken for a Fool



On the surface, rent-to-own deals can seem like a great idea. If you have shaky credit or lack sufficient financing, a rent-to-own plan can allow you to work toward homeownership.

The premise is simple: You pay monthly rent toward the purchase of the home, and at the end of the set term, you’ll own the property. Sounds perfect, right? But beware: The rent-to-own landscape can be a minefield of scams and deceptions designed to take your money—and leave you in the dust.

Common rent-to-own scams

There are several ways you can be swindled. One of the most common is scammers trying to sell property that they don’t actually own.

“People advertise a house that isn’t theirs, and pretend to be the owners and collect upfront fees from the tenant,” says Martin Orefice, the founder of To pull off the ruse, scammers find a vacant house that’s for rent and list it online with their own contact info.

“Then they meet the tenant at the home, pretending to be the owner, and ask for an upfront fee or nonrefundable deposit to hold the home,” Orefice says. “Once they collect the money, they disappear.” Shady, right?

Amy Hebert, a consumer education specialist at the Federal Trade Commission, says unsuspecting people can also be scammed by finding out the following:

  • The house is in way rougher shape than they were told (e.g., asbestos or lead is present).
  • The house is being foreclosed on.

How to protect yourself from rent-to-own scams

Sure, legitimate rent-to-own opportunities exist—you just have to know what to look for. Here are some simple tips to help you avoid being taken by a rent-to-own scam.

  • Find out who really owns the property. Before turning over any money, ask for documentation showing that the person owns the housea tax bill, for example. In many cases, the owner information is available online, so you can even check it out yourself. Before you enter into a formal contract, you should also get a title report from a title company. This will ensure that the seller owns the property and can legally sell it to you.
  • Know every detail of your contract. Make sure you understand every detail of any contract before signing. Many rent-to-own contracts allow for stiff penalties if the buyer is late or misses a payment, and some contracts may even become void. That means you forfeit any claim to the property and the money youve invested. Consumers should reviewor have an attorney reviewthe agreement before they sign, says Frank Dorman of the Office of Public Affairs for the Federal Trade Commission. It can be very difficult to extricate yourself afterward.
  • Know what could be wrong with your property. Just as an attorney can help you understand contract wording, a home inspector can help shed light on any potential physical problems and health hazards in your home. Most rent-to-own agreements will include some type of contingency for a professional evaluation. Consider it money well-spent: A professional home inspector can uncover all sorts of needed repairs that are not out in the open. This can give you leverage to negotiate a better price or terms, or even just alert you to possible repairs down the road.

What to do if you suspect a scam

If you suspect someone has scammed you—or is attempting to scam you—you should immediately contact your local police department, Orefice says. You can also notify your state’s Consumer Protection Office.


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