Authorities Hoping to Shut Down Trending REO Scams

NOV 30, 2012 1:16pm ET

Financial scams are an affliction on our economy that most have come to accept and have learned to avoid. Requests from overseas to send bank account information to inherit millions is obviously a trick, but sometimes scams aren’t as obvious and become a trend affecting millions of unsuspecting people.

The REO market has seen its share of scams throughout the recent years, including a current one affecting renters looking for a great deal on the internet. The scam is trending nationwide and is occurring most specifically on Craigslist.

The way it works is a real estate owned property will be listed on the market for sale. The scammer will locate the property and post it as an available rental on Craigslist, usually for half the price of other rentals in the area. The attractive price and typically amazing photos of the property draws the renters to pre-pay a deposit and sometimes one- to two-months’ rent for their dream rental. Or, the renter will provide their bank information.

As a professional working in REO, you can guess what happens next. The scammer will take the deposit and rent and flee the scene. Usually the scammer gives false keys to the renter. But sometimes, the scammer will go as far as to have the locks changed on the property and allow the renter to move in.

The renter is soon discovered by a bank representative or an agent showing the property to a potential buyer. The renter realizes they’ve been duped and is then forced to leave the property, scammed out of thousands.

Freddie Mac’s fraud unit is teaming up with real estate professionals who list HomeSteps homes to sniff out bogus rental ads of REO properties. When the ads are located, they’re immediately removed. Authorities are also seeking to educate, asking potential renters to always verify the home or condo’s status through a listing agent or through county records.