Spotting Fraudulent Rental Applications
Renter application fraud is another source of expense for small to medium-sized landlords. TransUnion published a report that stated 97% of property management companies experienced fraud.
When the stakes are high for renters to capture a rental in an ultralow vacancy market, some may embellish their rental application data and actually manage to put one over on you.
These application related scams could be falsifying or embellishing their rental history and real income (renter lying), or could be part of a more complex scheme (rental scam) that may create seriously financial harm for you.
The matter of rental property application fraud is complex, and scams could involve any number of individuals and techniques. The hiding or cloaking is most easily done via paper documents. Yet these matters of fraud are being conducted online too.
It’s wise to know how criminals and poorly qualified applicants might put one over on you.
What Causes Rising Fraud?
Very likely, it’s the difficulty and unfairness of the tight rental market with its criteria (income, non-gig employment, very high credit ratings, and other tough applicant criteria). Tenants are losing their incomes against rising unemployment and lower incomes. It’s evictions too which put tenants into desperate situations.
It makes renting a stressful and difficult challenge for some renters, and for a few, submitting false information might be how they deal with that.
And online tools may enable a rising the number of people willing to try to perpetrate some kind of rental-related fraud.
Review Application Information Carefully
You can breeze through the renter verification process. And you can be lenient in your decision about who to rent to, however applicant deceit is hardly a good footing for a long term relationship with a tenant.
The threat may be more significant than the average landlord realizes. For instance, in the UK there are reports of renters selling the unit. In one case, the duped buyer of the unit lost 1.3 million pounds and the UK’s HM Land Registry has apparently stopped 50 similar property hijackings in one year.
Let’s hope you never see this level of rental fraud.
Why Do Applicants Misrepresent?
Why helps you understand where the applicant fraud will occur, and where serious problems are lurking if you’re unwary. For instance, fudging earnings/pay info points to their income as a question mark.
After the terrible pandemic period, tenants might really be financial challenged, underemployed, psychologically stressed, in severe debt, owing on their back rent due, or have serious personal behavioral or drug use issues that would make them a risky tenant.
Other times, it’s their rental history and bad events that they don’t want you to discover.
And the professional criminal might be positioning for a more significant real estate crime. Your rental applications and fake ones are an interesting starting point for many scams.
Of course, spotting fraudulent rental applications isn’t always easy. Building your spotting skills is wise. Here’s some fraud-detection signals to look for.
14 Most Common Types of Rental Application Fraud
- altering documents such as credit reports
- using fake photos and stolen ID
- using friends or family to pose as current or former employers or as personal references
- non-disclosure of relevant information which you’re legally entitled to see
- false rental history
- false income/ employment information
- unauthorized co-signers
- all documents forwarded are new or created recently (passport, drivers license)
- has no proof of employment or self-employed customers (self-employed applicants)
- has no social media visibility or presence on publicly accessible websites
- documents come from another country and can’t be verified
- applicant can’t or won’t meet in person, only via Zoom
- applicant asks to move in right away
- applicant provides paper pay stubs that seem odd or low quality for a credible company
How you write your rental ad determines whether an applicant feels they could dupe you.
What is Rental Application Fraud?
Application fraud (and lease fraud) is the intentional, sometimes systematic misrepresentation of important information on the rental application and in related documents and declarations.
Given digital tools such as photo editing software and document editing packages which can scan and then reproduce a fake version of any document, misrepresentation is easier than it seems.
In the tenant screening post, we outlined some of the items to cover as you assess the background and intent of the applicant below. You’ll be looking at rent payment history, any past evictions, property damage and reported information from former landlords, lease violations, credit history, along with criminal records.
Bad tenants can use the property for purposes other than a living space for them (drug manufacturing, drug sales, hideouts for criminals/terrorists).
Rental Scam Fraud
The FTC warns of 2 common rental scams:
The scammer tries to hijack a real rental or real estate listing by changing the email address or other contact information, and placing the modified listing ad on another website. The altered ad could use the name of the real landlord listing ad. That ad may not even exist or is expired.
Creating and advertising rental listings for places that aren’t for rent or don’t exist, promise a too good to be true offer or amenity, even non-existing amenity to dupe the hopeful applicant.
Scams not only target unwitting landlords but may involve genuine rental applicants too. USA.gov highlights some common scams they’ve spotted along with some tips on how to protect yourself from scams involving target renters.
It may be advantageous to include anti-scam comments in your website where visiting fraudsters can see it. This may be enough to deter them and let them choose another landlord to perpetrate their scheme. Every vacancy listing, tenant sublet, or renter in default provides an opportunity for a rental apartment scam to happen.
Illegal subletting and short term rental scams are common now. For instance, the renter you leased to suddenly rents out the unit to an unsavory or non paying tenant. They may have even took 6 months rent payment in advance from the duped applicant renter, and that person may now sue you for the loss and damage the unit in anger.
Professional Vacancy Listings Management
From writing great rental ads, advertising on the right rental listing sites, choosing the best criteria for selecting a tenant (e.g., long term renting rather than highest income/credit rating), screening application information for inconsistencies and claims that just don’t see believable, and engaging with top candidates to validate information and the candidate, there’s a lot you can do to attract quality, reliable, long leased tenants.
Online rental applications are necessary (60% of applications taken online), however you may want custom design your own legally-compliant application, and take additional measures of scrutiny to ensure you’re able to cull out signals of deception. Then on your listings page or website, you can warn applicants of your anti-fraud measures. That announcement can discourage fraud.
Use your property management software platform to collect and orchestrate your applications, and do more than rely on outsourced screening services to choose who will be the source of your business revenue. The detailed information you collect in your documentation process will be important in any future legal action. Learn more about evicting tenants.
Check out ManageCasa’s Online Rental Application Template
Take your rental applications online for better management and processing. Take the hard work out of the way so you can focus on identifying high quality, low risk renters for consistent cash flow and lower maintenance costs.
Further Resources on Rental Fraud
However, given how tough it is to evict, or force rent payments, knowing what to look for can save you and owners significant misery in future. If you’re a property manager, it’s expected that you’re an expert on tenant selection and screening.
In California: Warning Regarding Online Rental Schemes (ca.gov)
FTC page about rental listing scams
New Jersey property rental scams warnings
Texas rental real estate scam warnings
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