Applicant fraud is a significant and growing problem in the multifamily industry. In 2023, 93.3% of apartment owners, managers, and developers saw application fraud. This means that almost every apartment community is at risk of being targeted by fraudulent applicants.
Almost 25% of evictions are due to fraudulent applications and this is resulting in a range of $7500 to $25,000 in eviction costs per apartment, according to JLL Multifamily SVP, Mendowa Martin. Even worse, once a property has been targeted successfully, they will likely get targeted much more as both professional fraud rings and word-of-mouth call attention to these properties.
With fraud becoming more sophisticated, it’s important to know the kind of applicant fraud out there so you and your teams can put a plan in place to prevent it.
Applicant fraud is pervasive across the industry as no region or property class is immune. Here are the different types of fraud you might see happening at your properties:
Document Fraud: This is one of the most common types of applicant fraud, where an estimated one in eight rental applications contains falsified or altered documents. You’ll often see this happening with created or altered bank statements and pay stubs. Prospective renters may submit rental applications with forged income documents, employment verification, or rental history to appear more financially stable. Instructions for creating fake documents can now be found through online tutorials and videos and some companies even offer to create fake pay stubs for a fee.
Identity Theft: Identity theft is a severe and widespread crime, where someone uses another person's personal information without permission to commit fraud. This can include using stolen Social Security numbers, driver's licenses, or credit card information to apply for an apartment. The FTC estimates that 9 million Americans have their identities stolen each year, and while only a small number of stolen identities are used to rent apartments, this number is growing for multifamily.
Synthetic Identity Fraud: This is a more sophisticated type of identity theft where criminals combine real and fake information to create a new identity. This can make it harder to detect fraud because the synthetic identity may not appear as stolen.
AI-Generated IDs: Advances in artificial intelligence make it easier for fraudsters to create realistic-looking fake IDs. These IDs can be used to bypass identity verification checks.
While you now know the different kinds of applicant fraud and how they might show up at your property, preventing fraudulent renters from leasing with your property should be a top priority. No matter how great your staff may be, they cannot catch all cases of fraud of their own accord. There are a few measures you can take to stop fraudsters from targeting your apartment communities:
Thorough Screening Processes: Implement a robust screening process that includes verifying income, employment, and rental history. This can involve contacting previous landlords, employers, and financial institutions.
ID Verification Software: It’s a great advantage for your teams to verify the identity of the potential renter before spending the time and money on screening the individual before a signed lease. An ID Verification software can quickly verify identity before you fully screen the renter.
Document Verification Software: Consider using a document and ID verification service, such as ResMan Fraud Detection powered by Snappt, which uses AI-powered image analysis to identify counterfeit documents in rental applications with 99.8% accuracy. The solution has multiple layers of fraud detection, including a proprietary blacklist check, payroll fraud check, and bank statement check to prevent even the most advanced kinds of fraud. In the short term, this technology can save money that would have been spent on credit screening and background checks. In the long term, it’ll decrease evictions or bad debt you might have had to deal with later.
Awareness and Training: Train staff to recognize the different red flags of fraudulent renters. This does not mean being suspicious of every renter that applies. Staff should treat prospective renters as if they have a positive intent, but there are warning signs you can also train staff to be mindful of in the leasing process.
Stay Informed: Stay updated on the latest fraud trends and techniques so you can continue to adapt your prevention strategies as needed. Continue to do your research when choosing any fraud prevention software so you can invest in solutions that keep up with future fraud trends.
Interested in technology that can help your properties prevent fraudulent renters from leasing? Chat with us about ResMan Fraud Detection powered by Snappt.
If you’re interested in ResMan as a software provider for your daily operations, book a demo to see the product up close.
