Landlords Beware: A Rise in Fraudulent Applications
In 2018 it was reported that more than 80% of property managers surveyed have fallen victim to tenant fraud. Many of these cases of fraud were not exposed until after the tenant had moved into the rental property and proven to be an unqualified tenant. Could there be an even greater statistic of undiscovered fraudulent renters? How can landlords and property managers protect these property investments?
The major increase in online rental applications and exponential rise in technology have significantly contributed to application fraud. The most common tenant scams include fabricating a fictional online identity, doctoring identification, and falsifying pay stubs.
The most effective way to combat these scams is to utilize an established and trusted third party tenant screening agency. It is important that the property investor hire a professional property manager who is doing their due diligence in collecting current & government issued identification, accurate Social Security Information, and have all the disclosures listed clearly on the application.
Most property managers prefer to use an instant online screening solution. This is largely due to the inexpensive cost and swift completed reports. It is important to consider hiring a professional property management company to invest in the necessary processes to be able to alleviate the grievances of apathetic tenants. First Rate Property Management invests in the knowledge, procedures, screening agencies, and programs on the front end to find qualified and consistent tenants to help capitalize on the investments of our clients.
First Rate Property Management’s screening agency, AcraNet, will always notify us if the name provided on the application does not meet the name provided by TransUnion through the Social Security Number. AcraNet is able to identify these “red flags” so we can address them with the tenant to gain clarification.
AcraNet does a great job of proactively combating these concerns before they become an issue. However, our screening agents here at FRPM do the income verification. When we heard that there has been a rise in pay stub fraud for rental applications, we went to work finding ways to proactively combat this before it became a problem locally. There are for-profit companies that can be found with a quick Google search for “fake paystubs” that, for a small fee of $10 or less, will formulate seemingly valid paystubs to submit to a landlord or property management company. Some companies will charge “package” fees for rental references, pay stubs, employment verification, and more for almost $100.
Upon my research, I found there are many avenues to travel to mitigate this risk. The first- and perhaps the simplest- is to request paystubs and bank statements. You can verify that the direct deposits or cash amounts deposited match the check number.
The second way is to verify employment by calling the employer. While this will verify the applicant is indeed employed, it may not verify the amount. This was listed in my research but was not recommended as it doesn’t alleviate the issue in whole. Some larger corporations that do this will outsource the verification service and can charge up to $25.
Once AcraNet has reported the applicants’ credit report through TransUnion, we can cross check the information provided and the information found. There will inevitably be exceptions to these rules but it will create a need for open dialogue with the applicants to be able to get to the bottom of it.
Landlord’s need to make sure they are enforcing a policy that keeps fraudulent applicants accountable, and follow our lead by having a more strenuous employment verification process. This process includes cross checking bank statements with pay stubs, and in some cases verifying with the employer. FRPM is a Fair Housing Provider so we are allowed to update our screening criteria, but are required to qualify each and every one of our tenants based on the exact same criteria. We hope this issue never becomes prevalent in our market, but on the off chance it does, FRPM is prepared.
Julie Tollifson, Leasing Team Leader