The Rise of the Short-Term Rental Scam

Before the Internet, travelers searching for a place to stay were typically limited to hotels, but in today’s digital world, they can also use online home-sharing portals such as VRBO, Airbnb, and HomeAway. These services connect homeowners who want to rent out a room or their entire house or apartment with travelers who want an alternative to hotel chains. With the home-sharing economy increasing, scams used to defraud unsuspecting consumers are also becoming more common. Because more individuals and organizations are using home-sharing sites to book short-term rentals, fraud examiners should be aware of the various types of scams that exploit this market.

By Misty Carter, CFE, CIA                                              
Research Specialist, ACFE

Imagine a potential client contacts you, seeking advice about being victimized by fraud. He tells you that he planned an overnight trip out of town. He booked a short-term rental home through an online rental site and, to secure the deal, paid for the rental in full. When the client arrived at the address of the rental home provided by the rental website, he did not see the cozy home he booked, but instead an empty parking lot. He realized that he was a victim of a short-term rental scam.

Before the Internet, travelers searching for a place to stay were typically limited to hotels, but in today’s digital world, they can also use online home-sharing portals such as VRBO, Airbnb, and HomeAway. These services connect homeowners who want to rent out a room or their entire house or apartment with travelers who want an alternative to hotel chains. With the home-sharing economy increasing, scams used to defraud unsuspecting consumers are also becoming more common. Because more individuals and organizations are using home-sharing sites to book short-term rentals, fraud examiners should be aware of the various types of scams that exploit this market.

The scams

One scheme known as take the money and run (a variation of an advance-fee scheme) occurs when a fraudster creates a fake vacation rental listing or website to get money from unaware victims. The fraudster takes photos of properties directly off the Internet and uses random interior photos from other rental sites to make theirs appear lived in. The property usually doesn’t exist or is not located at the address provided by the fraudster. As part of the scam, the fraudster usually asks the victim to wire funds for the first and last night’s stay or might even require them to pay in full. Once they receive the funds and pass off phony information about the short-term rental home to the victims, they disappear and are no longer reachable. The victims show up at the address they were provided and realize the property they paid to rent does not exist.

Another scam is the bait and switch. In this scam, the fraudster shows unavailable properties to lure the would-be renter to a less-desirable property. Another version of this scam occurs when the fraudster double-books a location, and then sends whoever arrives last to a backup rental in worse condition than the advertised unit.

Price jacking is similar to the bait-and-switch, except that the traveler actually gets the rental they reserved, but they have to pay more for it than they agreed. 

Phishing uses deceptive emails to lure travelers. The fraudster hacks into the email account of a legitimate rental owner or manager and forwards the rental inquiries to his own email account. This allows the fraudster to pose as the owner and collect payments.

Protection

With so many short-term rental scams out there, CFEs that participate in the home-sharing economy need to protect themselves. They can do this by being alert for suspicious behavior, such as:

• Beware of emails that are sent with bad grammar. Legitimate property owners or management companies would not maintain websites or send emails that are full of bad grammar.
• Be cautious if asked to send money using Western Union or Moneygram. Most owners or managers ask for payment through a more secure means, such as a credit card or Paypal.
• Use websites that show a property or location in real time, such as Google Earth. This at least indicates that the property exists as advertised.
• Communicate with the owner over the phone. One of the best ways to uncover a scam is to ask questions. Direct communication allows the potential renter to ask specific questions about the property and check references from people who stayed there previously.

Because home-sharing websites and the sharing economy in general are growing so rapidly, fraud examiners should be alert to criminal trends exploiting this market. Also, fraud examiners should be knowledgeable about the tips provided above so they can advise their clients and employers about how to avoid such scams. Victims of short-term rental scams can make a report on the Federal Bureau of Investigation Internet Crime Complaint Center (IC3) website.