Landlord Tools to Defend Against Tenant Applicant Fraud

Landlords, you and 93.3% of your peers have been blindsided by the same invisible enemy: tenant applicant fraud. This isn’t just a minor hiccup. It’s a growing epidemic that’s undermining the very foundation of trust and financial stability in property management. The latest findings from the National Multifamily Housing Council’s Pulse Survey reveal a staggering reality – nearly every property manager is in a technological arms race against fraudulent tenant activities. But what does this mean for the future of property management? And how can you safeguard your properties against this pervasive threat?

This figure isn’t just a number. It represents a widespread threat to the financial stability of the property management sector. The survey also found that 23.8% of eviction filings and 24.5% of bad debt could be traced back to fraudulent applications, underscoring the need for effective countermeasures. So if you’re a landlord, arm yourself with awareness and the correct tools.

The Fraudster’s Arsenal in Residential Rentals

Document fraud is one of the most prevalent forms of deception in the rental application process. It includes a number of tactics aimed at misleading property managers. Here are the six most common types:

Common Fraud Techniques:

1. Synthetic Identity Fraud: Criminals create new identities by blending real and fake information. They might combine real and fake personal data, like an actual address with a fake Social Security number. The aim is to create an identity that passes initial checks but doesn’t correspond to a real person, making it challenging to trace or prosecute the fraudster.
2. Misuse of Genuine Documents: An imposter uses someone else’s legitimate documents to apply for an apartment. For instance, they could present pay stubs or ID documents belonging to another person. This type of fraud is particularly difficult to detect when the documents themselves are authentic, but don’t belong to the person applying.
3. Counterfeit Documents: Fraudsters may produce entirely fake documents- Fake IDs, pay stubs, or bank statements. These counterfeit items are used to meet the application requirements fraudulently.
4. Document Tampering: This technique involves altering genuine documents to suit the fraudster’s needs. A fraudster might change the income figure on a pay stub or modify the name on a bank statement. The document is real, but the information has been tampered with.
5. Income Fabrication: Applicants may use software or services that generate fake pay stubs or employment verification documents. These documents appear legitimate and show an income level that meets the rental application requirements.
6. Rental History Forgery: Similar to income fabrication, this technique involves creating a false rental history. The applicant might forge letters from previous landlords. They might also fabricate rental ledgers to show a history of timely rent payments, even if they have a history of evictions or missed payments.

The Landlord Arsenal For Combating Applicant Fraud

Worry not, landlords, in this technological arms race, there are just as many tools to combat tenant applicant fraud! Many proptech companies that focus specifically on this problem are in The Proptech Directory’s Tenant Screening Category! It’s a matter of understanding which ones will suit your needs best.

Factors to Consider in Selecting Applicant Fraud Detection Solutions

1. Comprehensive Verification and Contextualization: A robust fraud detection system must offer comprehensive document verification, contextualization, and reading capabilities. The solution should verify the authenticity of various documents, analyze their content in context, and ensure that the information aligns with the applicant’s details.
2. Integration with Existing Systems: Ensure that the fraud detection solution can seamlessly integrate with your existing property management systems and infrastructure. Smooth integration should complement, not complicate your current workflows.
3. Human Review Component: While automated systems are efficient, they might not catch every instance of fraud. A system that incorporates human review can provide an additional layer of scrutiny.
4. Awareness and Adaptability to Emerging Fraud Techniques: This is a technological arms race, so your fraud detection solution must evolve with the fraudster’s methods. As with any proptech company, choose one with staying power (read: PROFITABLE and been around a while) that has the resources to continue adapting.
5. Accuracy and Reliability: Consider the solution’s track record for accuracy and reliability. A high accuracy rate is crucial to ensure that the system effectively identifies fraudulent applications without generating an excessive number of false positives, which can waste time and resources.

Fortifying the Frontlines Against Applicant Fraud

As applicant fraud evolves, the responsibility lies on property managers and landlords to fortify their defenses with technologies and comprehensive strategies. Embracing robust fraud detection and prevention tools is not merely a protective measure but a strategic investment in the future of property management.

Derek Hsiang

Derek is the founder of The Proptech Scout, as well as an NYC landlord and real estate developer. In a former career, he bootstrapped and exited an e-commerce business while side hustling as a strategy consultant.

www.theproptechscout.com