February rental advice: First foreclosed on, then scammed (© Neil Beckerman/Getty Images)

© Neil Beckerman/Getty Images

The housing bust has proved to be a bounty of riches for scam artists — there are just so many desperate people to prey upon.

Now, with as many as one in every 200 homes still being foreclosed on each month in some areas, the swindlers are gunning for one of the largest affected groups: tenants, who comprise about 40% of those displaced nationwide. (Bing: Find more information on rental scams)

The ruse is appallingly simple. A pseudo legal service sends letters to tenants in a foreclosed building, promising to stall their evictions by months — maybe even with free rent — in exchange for an upfront payment of anywhere from $800 to $3,000.

The letters even toss in false threats: "If you don't act immediately, you will be evicted," reads one such mailing. "If we do not respond to notices given to you by bank representatives within three days, the sheriffs will evict you within 15 to 30 days."

"Consider the tenant who is current on his rent, has a stable job, has children in school. The next thing they know they get a letter that says the house is foreclosed and the sheriff is throwing you out," says Steven R. Kellman, founder of the Tenants Legal Center of San Diego. "It's scary."

One tenant was told a service could secure him four months of free rent for a fee of $2,795. Fortunately for him, the tenant called Tenants Together, a nonprofit advocacy group in California, to ask whether such a service could be on the level. The answer was a resounding no.

Read:  Where can renters turn for help?

(Tenants: Do affordable apartments seem tougher to come by? Are you spending more than one-third of your income on rent? Next month, we'll provide the numbers, and maybe your story. Please share it by writing to msnrealestate@microsoft.com.)

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"In some cases, tenants do need assistance," says Dean Preston, executive director of Tenants Together. An owner may be trying to evict them illegally, for example. "But what's troubling about these services is they are often charging for services that don't get the tenant any more than they are already entitled to."

Namely, this means the right to stay several months. Federal law requires that the new owner of a foreclosed property, typically a bank, give tenants 90 days notice to move. Some states or cities may grant additional tenant protections.

If the tenant has a lease with more than 90 days remaining, he can stay for the remainder of the lease term. The only exception is if the new owner plans to live in the unit, in which case the tenant gets only the mandated 90 days.

Read:  If your landlord is facing foreclosure, stay put

It's an easy con. The scam artist trolls the foreclosure notices, which are public record, buys a few hundred stamps and sends a solicitation to every tenant in a foreclosed building. If "hired," he helps the tenant fill out a form, which he has downloaded for free.

Typically, he holds onto the form (he's probably bought some folders, too) until a legal action is filed against the tenant, at which time he may ask the tenant to submit it in court, Kellman says. Much of the time, that's it.

"We haven't heard of one case where they've negotiated anything with anybody," Kellman says. "You have this false sense of security that someone is watching out over you and representing you, when no one is."

Even worse, while these outfits are careful to use legal-sounding jargon, they are not staffed by actual lawyers. When and if they do submit paperwork in court, they can end up doing more harm than good, Kellman says. "An attorney is going to have to fix whatever damage was done, and that's going to cost even more," he says.

Beware these phrases in any notices you receive
So you're facing eviction and an offer looks tempting? Consider running it by your local government housing office, the Better Business Bureau or a legal aid group. If you spot these phrases, consider it an offer only for the dog to chew on.

  • "Stay for up to six (or nine) months." The law allows tenants to stay for 90 days, or longer if the lease permits. It may be possible to negotiate a longer stay, but for the most part, "These are not attorneys and there are no laws that provide for what they are promising."
  • "Pay no rent." Yes, tenants can stay. They may even be able to negotiate a bit of free rent in exchange for certain concessions. But tenants usually still have to pay rent. Banks may offer cash for keys, but that's to leave early and it doesn't require an intermediary service.
  • "We will secure you relocation assistance." In most places, the only assistance you're going to see is cash for keys. If you've suffered an exceptional loss and feel entitled to additional assistance, contact a lawyer.
  • "Act fast" or "If you don't act immediately ..." Any notice that threatens an impending eviction should raise enough red flags to stop a freight train. Toss it.
  • "Results guaranteed." Bona fide lawyers don't make guarantees. They will evaluate a case and negotiate in an attempt to meet the client's needs. "A tenant should be extremely cautious about anyone who guarantees them anything, in terms of outcome or cash for keys or how long they can stay," Preston says.
  • We're "tenant protection consultants," an "alternative dispute resolution center" or a "paralegal service." Also, "we will refer you to an attorney." In other words, are they lawyers themselves? If not, steer clear. You can probably find the answers you need for free at the courthouse or at a legal aid office. And if you need legal help, a lawyer will be subject to strict ethical guidelines, while others will not be.