How to protect yourself from property fraud with technology
Property management fraud is a threat that seemingly never ends.
Just as you’re confident you’ve secured a wonderful new tenant, you discover that they applied under a fake name and are now subletting your apartment.
No matter how smart you are with your background checking, or how extensive your process, there’s always the chance that you can fall victim to fraud.
After all, new scams arise and old ones evolve, putting many landlords at risk of losing profits or even facing legal action. This is something best avoided.
What is property fraud?
Property fraud occurs when a tenant lies about their information or has malicious intentions for the use of your property (such as trying to sell or mortgage it illegally to someone else). It can have devastating impacts on your business survivability and reputation as a manager. There are many impacts of property fraud and, most commonly, scandals can cause issues for you when trying to onboard new tenants.
Are you a victim of property management fraud?
There are a variety of red flags that can signify you are already the target of someone’s malicious rental scam. If someone is irregularly paying rent or providing cheques that keep bouncing, something bigger could be at play.
To protect yourself, you should be suspicious of all prospective tenants right from the very start of their application process and address any concerns you have. Watch out for duplicate addresses being used under different names, telephone numbers that lead nowhere, and inaccurate personal identification information.
On top of this, be wary of anyone who is unwilling to meet you in person and always insists someone else speaks on their behalf.
4 ways tenants commit property fraud
Tenants that lie about who they are put landlords in a tricky spot. Even when you make sure to double-check you have the right paperwork, this doesn’t always mean it’s real. Tenants commit property fraud in a variety of ways, including:
- Forging Documentation: Credit scores, IDs, and bank statements can all easily be forged and are almost impossible to discern from the real thing.
- Stealing Identities: When real documents have been presented to you, there’s still a risk of property fraud. By pretending to be someone else, tenants can benefit from someone else’s good reputation.
- Providing Fake References: Someone might claim they are giving you their work phone number; only for you to end on a call with a fake (or biased) referee.
- Unintended Use: When tenants start using your property for anything other than its intended use or lie about the number of residents living in the space, this leaves the door open to property management fraud.
How technology helps reduce property management fraud
As the pandemic’s economic impact continues, bad actors are increasing their use of technology to perpetrate fraud. In order to secure housing, they are using false forms of identification, fake pay stubs, and stolen identities.
It’s terrifying, to say the least.
So, what can you, as a property manager, do to combat this? You want your business to be safe, but also your residents and your personal livelihood.
Fortunately, technology exists that can identify these increasingly common types of fraudulent activity and further mitigate risk.
4 technology solutions that prevent property management fraud
When risk is managed and property fraud is eliminated, both the property and residents benefit and create a stronger, safer community.
Solution #1) ID verification
Identifying false forms of identity, like drivers’ licenses and passports, can stop a bad actor early in the process. Often required as part of a tour process, technology can be used to quickly validate ID, in person or online, to deny fraud in property management. This also ensures site staff do not spend time on a fraudulent applicant and that they are not put at risk during a tour with someone who is misrepresenting themselves, lying, or has bad intentions.
Solution #2) background screening
Tenant screening processes, such as credit and background checks, continue as table stakes in residential leasing processes. While these common screens are being processed, additional validation is now available.
Understanding if the applicant’s credit file has had recent fraudulent activity can be a key indicator of potential issues, as can an applicant’s inability to perform a two-factor identity verification using their mobile device.
Solution #3) income validation
Validating income is also becoming more challenging as fake paystubs and instructions on how to doctor them are available across the internet. Google “fake pay stubs for apartments” and you might be surprised how easy it is to misrepresent one’s income. Emerging technology products to validate income are the next clear wave of preventing fraud and they are currently making their way to market.
Solution #4) insurance compliance
Technology is also guiding compliance within the tenancy insurance market, which can reduce the risks you face from the various types of property fraud. Conveniently, renter’s insurance policies can be paid along with their rent on a monthly basis.
Avoiding property management fraud – FAQs
With the help of a range of software platforms, property management fraud doesn’t have to be such a big risk. However, if you suspect that it’s too late and you are already a victim, these FAQs might help.
How much can property management fraud cost you?
The costs of fraud include many things – lost rent, legal fees, court costs, and eviction costs. The average eviction costs $7,685, which can quickly add up to millions for property managers with multiple units.
How common is property fraud?
Every year, insurance fraud takes over $300 Billion from consumers in the US and occurs in around 10% of property-casualty insurance losses. It’s estimated that 5.2 million renters in the US are affected by rental fraud scams.
If you think your business has not been a victim of fraud, you’re probably wrong – 97% of property managers have experienced fraud.
How do you report property fraud?
If you suspect you are a victim, immediately report the housing scam to your state consumer protection or local law enforcement.
Property fraud protection with MRI Software
In 2022, fraudsters are getting smarter.
They are using technology to their advantage, and, today, there are hundreds of different types of property fraud. It’s a dangerous climate.
Landlords rapidly need to learn how to keep up.
Thankfully, MRI has a range of software services that directly prevent fraud. Through them, you can:
- Review historical data on renter performances.
- Utilize data, analytics, and artificial intelligence to conduct screening processes.
- Predict better outcomes on applicant profiles.
Does that sound like it could be of use?
