Today, many people prefer rent-to-own homes in Canada because it gives them a chance to own a home they love without having to break the bank. But still, like any other investment, rent-to-own doesn’t come without its fair share of issues – scam being one of them.
No one wants to be scammed – especially when they are making a significant decision like buying a home. Unfortunately, the market is packed with people who make a living out of conning others. And since this is their source of income, they continuously horn their skills, and prey on unsuspecting individuals. That’s why you need to educate yourself about the intricacies of the industry to avoid getting scammed.
To help you get started, here are seven rent-to-own scams and how to avoid them:
Don’t pay or provide personal information upfront
As mentioned earlier, scammers use attractive deals to lure you into their traps. If you are not careful, you may end up paying or providing your data beforehand. So, unless you see the property, and have done your due diligence, you shouldn’t give any deposits or your personal information.
Watch out for hidden charges
A good seller will be open about the fees from the onset. However, a scam artist will quote one price today and another the next day. In your quest for rent-to-own homes in Canada, you should be wary if the vendor requests an application fee to look at the property. It is not uncommon for scammers to list nonexistent homes to collect money from unsuspecting buyers. In the same breath, you want to be careful about the mortgage lender who expects you to adhere to strict conditions like paying very high-interest rates and so on.
Research average market rents
If you are renting to own, you will most likely pay more each month. So, if the offer is lower than the rental rate, then that could serve as a red flag. Some scammers (even those who only want to get your Social Security numbers for identity theft), will underprice a home. This way, you’ll feel compelled to grab the “good deal” before any other person does and end up issuing personal information. But still, that doesn’t mean that you go for the highest price. Scammers may list a home for significantly more than its market value.
Contract with ambiguous wording
It is easy to assume that it’s just you being picky with words and stuff but don’t. When you read the contract, and it doesn’t look too good, you should not sign it. Scam artists know that many people don’t read in between the lines. So, they squeeze in clauses that give them away out or implicate buyers. Unless you have some real estate legal knowledge, it might be a good idea to bring in a lawyer. Lawyers have a trained eye and will quickly uncover items that work to your disadvantage. For instance, some sellers may void the rent credit and option fee if you delay a single payment. Not knowing this might mean losing lots of money towards buying the house.
You have doubts about the seller
As mentioned earlier, you have to do a thorough background check on the seller to learn as much as you can about their business, experience, reliability, etc., before signing. Many scammers will list homes on the internet, but in reality, they do not even own the property. Others will sell a single property to many individuals and disappear into thin air. By doing your due diligence, you get to find out whether the company or seller has been involved in any embezzlement or fraud transaction cases prior. On top of that, you need to look into the property to establish whether steady mortgage payments are being made
It is a good idea to ask the landlord for a copy of their credit report. If you get a good one, he or she would not have a problem giving it to you. Better yet, you want to watch out for their reputation of making false promises and agreements that make it hard ever to buy the house. Because of these many pitfalls and risks, it might be in your best interest to get a contract that places both you and the landlord on a level playing ground. Hiring a lawyer at the onset of the process can also be a great way to protect yourself. Usually, most scammers will shy away from making deals with you if they are faced with a possibility of legal issues.
Rent-to-own homes can be an attractive option, especially if you expect to be in a stronger financial position in a few years. However, despite the numerous benefits it presents, it’s essential to be vigilant to avoid getting scammed. With the tips mentioned above, you should be able to keep scammers at arm’s length.