According to Snappt, one out of every eight rental applications contain fraud. Rental application fraud occurs when an applicant intentionally falsifies information on a rental or lease application.
Unfortunately, advancements in technology have made it extremely easy—and tempting—to commit fraud. Renters can use even the most basic photo editing software to modify their income, falsify identification, or improve their credit scores.
Applicants tend to use deception for two purposes: They may want to improve their chances of securing housing (such as reporting a higher income) or they may want to hide something (like a criminal conviction).
As a landlord, you should know how to spot scams during tenant screening. Whether you’re leasing a rental in Sydney or elsewhere in the world, this step is important. Fortunately, there are several ways to prevent fraud, including preventative measures, screening by human eye, and digital tools. The only way to reduce risk and protect your investments is to take fraud seriously.
Here are a few tips for preventing rental application fraud.
- Know the possible scams and where to find them.
The first step to preventing fraud is knowing what you’re looking for. Fraud can appear in several places on any rental application.
One of the most common types of application fraud is photo-edited documents. This could include edited paystubs, offer letters, bank statements, or other documents you require as proof of income.
Fake or stolen documents are another possibility. This kind of fraud may or may not be difficult to spot. If a fake ID or stolen passport doesn’t arise your suspicion, the applicant could succeed in hiding criminal activity or previous evictions.
If you notice that a document appears off or excludes certain identifying information, these are good signs that it may have been modified. It should also concern you if all the documents an applicant provides (photo ID, passport, SSN, etc.) are brand-new or recently issued.
Other fraud red flags are behavioral. For example, an applicant may refuse to meet face-to-face before signing the lease or request to move in unreasonably early. An unconvincing call with a “prior employer” could mean that the applicant asked a friend or family member to pose as their boss.
Any of these scenarios should catch your eye and prompt further investigation.
- Automate tenant screening.
The best way to prevent fraud is to remove the renter from the equation. Whenever possible, don’t allow your applicants to supply or deliver their own documents. This step means your applicants won’t have any chance to tamper with credit reports, bank statements, or identification.
Instead, use an automated tenant screening service. Many property management software platforms offer tenant screening as a free or paid feature.
By partnering with credit reporting agencies and background check services, your software can generate an accurate report containing all the credit, eviction, and criminal history information you need.
With renters out of the picture, fraud is very unlikely.
- Use fraud prevention software.
If you must ask applicants to supply their own documents (such as proof of income), there are tools you can leverage to reduce risk of fraud.
For example, many landlords use fraud prevention software like Snappt. This tool complements your traditional property management software by detecting fraud in various rental application documents. The software identifies modified documents by analyzing image properties, running detection algorithms, and comparing documents to a historical database.
How does it work? After you sign up with Snappt, the software sends your new applicants an email with instructions to upload their documents on their portal. Then, Snappt generates an authenticity analysis and sends it to you for evaluation.
Snappt is also compliant with fair housing laws, including the Fair Credit Reporting Act (FCRA), the Federal Fair Housing Act (FHA), and other information privacy laws.
- Keep written documentation of your specific requirements.
Fraudsters are constantly looking for loopholes. Don’t give your rental applicants the opportunity to exploit them. Eliminate potential loopholes in your application by getting specific with your document requirements and stating them up front.
For example, your proof of income requirements shouldn’t stop at a list of acceptable documents (e.g., a recent paystub, bank statement, or award letter). Instead, specify what “recent” means and elaborate on what will and won’t be accepted.
Here’s an example of an appropriately thorough set of requirements for paystubs:
“Applicants must provide a month’s worth of their most recent pay (if paid bi-weekly, provide two consecutive paystubs; if paid monthly, provide one). Paystubs must clearly indicate applicant’s name, employer’s name, the pay period, and earnings. Paystubs must not be screenshots; only scans or electronic documents are acceptable.”
Specific and thorough requirements eliminate the temptation to skip months or purposely exclude relevant information.
Identify Fraud to Protect Your Investments
As technology evolves, the means to commit fraud are only expanding. Renters have access to the tools to participate in all kinds of fraudulent representation. Now is the time to be vigilant with your rental application policies—and to use your own digital tools. By automating screening and fraud detection with software, you can protect your business from as much risk as possible.