Thursday, August 10, 2017

Vacation Rental Booking Company Chargeback Scam

How owners of vacation rentals get robbed by booking sites


The private vacation rental business has grown to gigantic proportions.  Likewise several of the web based companies which offer booking and payment services for owners of such properties.  Among the most popular are Airbnb, VRBO (Vacation Rentals By Owner), and  

All of these firms solicit the vacationing public online, with owner-provided photos and information of furnished and outfitted properties available for the vacationer to rent short-term.  The companies also take the booking, contract the ower, sub-contract the renter, collect credit card payments of booking fees, rent and deposits from the renter and disburse funds to the owners.  Of course, the companies keep a healthy cut in between. is a major player, which owns VRBO and  All three of these use one company to handle all payment transactions -  


Recently property owners have seen an uptick in renters who spend time at their properties, then deny they ever did any such thing and charge back the payment made to rent the property, by denying it to their credit card issuer.  This puts then puts Yapstone in charge of dealing with contesting the case, as they act as the defacto merchant account for the property owner.

It's not too difficult to document that a renter stayed at such a property.  They execute an online agreement which provides their IP address.  They communicate online with the owner for access to the property by either keys or code locks.  Often coded locks on vacation rentals record when they arrive and depart.  They often text or email confirmations of arrival and departure, etc.  But recently, a new game appears to be afoot.

Renters are denying legitimacy of vacation rental charges to the booking companies, which pass it off to Yapstone.  Yapstone then contacts the property owner to request evidence of communications, etc. But even when the owners provide this, Yapstone has gone on to request such things as "wet signatures" and "copies of identification" of the renters.  Not only are such items not collected and not necessary to validate payment, but they are not collected by Yapstone itself when it collects the payment, and are not provided by Yapstone to the property owner from whom they demand it in order to protect the payment collected.  Yes, they actually require signatures that they themselves waived.

Owners are being charged back the credit card charges based on not being able to provide the evidence Yapstone itself fails to collect.  Further, the buyer does not contract the renter directly. Instead, the renter is contracted by Yapstone's partner, the online booking companies themselves. These companies bring the renter to the owner, not the other way around. Because the renter's agreement is not with the owner but with the online rental agency, the owner has no recourse which can be executed directly against the renter.  

Those property owners who suffer chargebacks from Yapstone have no way of knowing if Yapstone actually got paid, as the property owner is not privy to the credit card information collected by Yapstone, nor are they entitled to the information held on the borrower by Homeaway, VRBO or VacationRentals. It is conceivable that Yapstone and/or these booking companies could obtain the charge, without paying the property owner, using the smokescreen of an unverifiable phantom chargeback.

To make matters worse, these booking companies openly and knowingly operate in markets in which they know short term vacation rentals are either illegal, or require extensive licensing which their client owners do not have.  This willful blindness, coupled with the suspicious credit card activity is attracting the attention of class action firms, and as an interstate, online business is likely to do the same with the Justice Dept.

Accepting renters from these services carries risk, no matter how much you document.  You might be able to reduce the risk by getting signed original confirmations of when renters arrive, together with the other verifiables mentioned above.  But even these can simply be ignored, leaving you with no way to effect recourse against a renter who had an agreement not with you the owner, but with the online broker who may not in good faith contest the chargeback.

If you've lost money in this way, get in touch.

Wednesday, August 9, 2017

Renters likely to fall victims of next Wall Street crash

Big landlords, big financing, big disaster.


The basic endeavor:
  1. Large, often publicly traded companies buy up single family tract homes by the hundreds, dominating markets for properties with proximity to certain schools, jobs and other facilities. They then rent to lower-middle class families who are typically unable to buy.
  2. As soon as they purchase the homes, the companies then sell off the future rental income of the homes to Wall Street entities.  These become bonds offered  to investors in various portfolios called tranches, after having them rated by big rating agencies.  The rating agencies offer a supposedly reliable third party opinion of the likelihood of performance of the bonds.
  3. Companies use the advanced funds generated to buy more homes, repeating the process with more and more cash to work with.
  4. They repeat the process, with portfolios growing year by year exponentially.
The dynamics of disaster:

The purchase of the homes was initially in blocks of entire defunct neighborhoods left vacant or unfinished by the last Wall Street mortgage debacle.  Those are all gone.  So now the purchases are in much smaller foreclosure blocks or even single properties, for prices closer to market, or even higher. 

Because the landlord companies obtain from Wall Street the home purchase money as well as an immediate cash payment back to them from selling the future rental income, their motivation to purchase is not true to market.  They are effectively getting what we used to call a "cash-out purchase."  The more properties they buy, the more cash they get. This is causing these home prices to rise above those which families would be willing to pay for the same properties. That's artificial demand, and that's a bubble.

The afflicted areas see a limited diversity of landlords, allowing the companies to set monopolistic rent pricing and also less desirable (shorter) lease terms.  The companies have raised the rental rates above those of the market.  Because there is virtually no regulation on these rents, there is no one to stop them.  They simply say that this is what the market demands.  But it isn't.  That market is a false bubble they are creating.

Addicted to their cash advances and locking up the local rental markets, the companies are willing to pay more and more for the homes they acquire.  This drives up the price for the real, qualified, home buying public, which is increasingly shocked at the appraisal values driven by the companies' practice.  That's another bubble.

How it's going down twisted:

The companies won't forever be able to find enough houses to buy in order to satisfy their need for advanced Wall Street cash.  They are already beginning to build homes to fill the gap, pretending as always that this is what the market demands.  In reality, it's what their cash flow demands.  The market has little to do with it.

The renters will not continue to sign on to the bad rental agreements, especially with the precarious position of the landlord companies growing ever more desperate, and outed in the press for these shenanigans.  This will cause Wall Street to pressure the companies to produce more rental agreements for the new homes, no matter what.  That's when false rental agreements will be executed and used to get more advances from Wall Street.  That's a scam.

The bonds will default, the credit agencies will again collapse, the companies will go bankrupt and their officers will skate free, probably to serve in the public sector, where some have already run. 

With billions in bond crashes, the single family home market will be dominated by bankrupt companies looking to unload, sending prices plummeting.  Those who bought in competition with the companies on the upswing will be decimated and upside down in their homes, causing a second wave of property abandonment and crash beyond the immediate areas of purchase.  

How to protect yourself:

  • Don't rent a home from any big company
  • Don't buy or rent a home in any market dominated by big landlord companies
  • Don't buy any bonds secured by single family residential rents
You may not be keeping up with the Joneses for now, but you'll be ahead of them later.

American Homes 4 Rent
Havenbrook Homes
Allianz SE
Colony Starwood Homes
Tom Barrack
Colony Capital
rent secured bonds
rental securitization
rent securitization