According to industry estimates, one in every three rental applications contain some form of fraud.
Since COVID-19 made its way onto the shores of the USA, rental application fraud has increased by almost 10%.
More than likely, it’s because of the temporary suspensions of the eviction process imposed by local and state authorities.
No doubt, this is causing major frustration within the property management community.
A recent study showed that most cases of fraud were not discovered until after a tenant skipped a rent payment. While half of scammers were exposed within six months, 7% remained for a year or more before the fraud was discovered.
Online applications are the main reason for the increase in rental fraud. When fraudulent applications escape notice, evictions increase.This becomes a costly problem for landlords.
What these scammers do first is make up a fictional identity online to support a fraudulent rental application. Once this proves successful in securing a rental, he or she then will use the rental address to obtain credit and run up credit card charges before defaulting on rent and disappearing.
While evicting this type of person, property managers have reported that the second most disturbing problem in this scenario results in physical damage to the property. In a New York minute, these scammer renters can cause thousands of dollars in damage to plumbing, electrical and other systems.
The best thing you as a landlord can do is catch the scammer before the person moves in to avoid rental income loss:
1. Start by delivering the rental application online only after meeting the applicant in person. Better yet, use your own rental application and don’t accept online rental applications provided by third-parties.
2. Pre-qualify tenants over the phone and take notes to see if the story remains the same.
3. Require a photo ID before showing a property.
4. Require tenants to sign and verify a rental application under penalty of perjury (fraud).
5. Verify the information in the rental application, including speaking to previous landlords.
6. Run a tenant credit check to confirm the person’s identity and credit-worthiness.
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