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Caveat Renter: Fraudsters Falsely Advertising REO as Rentals

VP Joan Ferenczy

Can you spot the fraud in this rental ad? It looks like your typical Internet home-for-rent ad. This one happened to be on Craigslist and the fraud could cost an unwary renter thousands of dollars. Here’s the scam: the advertiser doesn’t own the house at the address. Freddie Mac does. It was never for rent and it’s scheduled to close next month. (Craigslist immediately pulled the ad after they were notified about the problem.)

Fraudulent Rental Advertisement

Source: Freddie Mac

Unfortunately, we’re hearing more reports about fraudsters trying to cash in on the housing crisis’s remaining foreclosed homes by advertising them as rentals on the Internet. It works like this. Once the house is sold at foreclosure, the fraudster posts an ad online and tries to rent it before it can be sold to a new owner. People contacting the fraudster about the ad are asked to submit their personal credit information as part of the lease application plus two month’s rent.

The would-be renters have no idea they were scammed until they try to move in. Then they discover that they either don’t have a working key, the house is for sale, the previous owners may still be occupying it, or all of the above. In some cases, the fraudsters reportedly changed the locks and provided a working key to the renter, who didn’t realize what was happening until the real listing agent showed up with the sheriff to secure the property.

There’s also nothing stopping the fraudsters from using the personal credit information on the rental application to open up credit card accounts or commit other acts of identity fraud against the victim.

In response, Freddie Mac’s fraud unit is working with the 2,300+ professional Realtors who list our HomeSteps homes to identify bogus rental ads so we can immediately tell the Internet providers to cancel the ads. At the same time, there are a number of steps families shopping for rentals, on or off the Internet, can take to avoid this scam.

  • Check if the property is for-sale. Google the address to see if the property is listed or drive by to check for “for sale” signs in the yard. (Check to find out if Freddie Mac owns the property. If we do, report the rental ad by calling 1-800-4FRAUD-8.)
  • If there is a “for sale” sign or online sale listing, call the listing agent immediately to confirm the status of the house. (Be suspicious if you’re told by the advertiser not to call the listing agent.)
  • Verify who owns the house by checking the county land records, which are usually available online.
  • Never send personal credit information over the Internet until you have independently confirmed all of the facts about the rental property being advertised.

Freddie Mac is committed to fighting fraud by alerting the public to new scams and by training real estate professionals through special seminars and Freddie Mac's website, where we post the latest fraud prevention information and best practices.

If you see fraud being committed – or want clarification about a suspicious real estate offer – call the Freddie Mac Fraud Hotline at 1-800-4FRAUD-8 (or 1-800-437-2838) and contact your local FBI office, state attorney general, and Real Estate Board.


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