While fraud is nothing new, advancement in technology has made it much easier for scammers to go undetected until it’s too late.
At T&H we have seen a lot of fraud, and as soon as we think we have seen it all, a new, more advanced scheme pops up.
Over the years we have created systems and policies in place that best avoid the scammers.
So how do you protect your most important assets? Your time, money, and sanity?
Here are some of the our best practices for combating rental fraud:
The Scope of Rental Fraud
Rental fraud is a pervasive issue in the real estate industry. Fraudsters often use advanced techniques to provide fake IDs, pay stubs, and employment records. It’s crucial to understand that combating rental fraud requires a multifaceted approach, leveraging technology to scrutinize potential tenants thoroughly.
Essentially, if scammers are using technology to get away with things, then we need to use technology to get ahead of them.
Listen to The Indy REI Podcast on Fraud
Verifying Identity
One of the most challenging aspects of resident screening is verifying a person’s identity. Gone are the days when a simple driver’s license sufficed.
Today’s fraudsters can easily create fake IDs, making it essential to use multiple data points to confirm someone’s identity.
A Comprehensive Approach to Verifying Identity Includes:
Government-Issued ID: Validating the ID against a database of registered IDs.
Video Selfie Matching: Ensuring the person’s face matches their ID photo.
Cross-Referencing Addresses: Checking if the address on the ID matches other provided information.
These methods collectively enhance the accuracy of identifying legitimate residents.
Running Background Checks
Background checks and eviction history are crucial components of the resident screening process because they provide valuable insights into a potential tenant’s past behavior and reliability. A comprehensive background check can uncover criminal records, credit issues, and past evictions, all of which are indicators of potential risks.
For instance, a history of evictions may signal consistent problems with timely rent payments or property care, while criminal records can highlight safety concerns.
These services offer detailed reports that aggregate data from various databases, ensuring landlords and property managers have a holistic view of an applicant’s history. By leveraging these tools, property managers can make informed decisions, reducing the risk of rental fraud and ensuring a safer and more stable tenant base.
Verifying Income
Income verification is a critical step in tenant screening. Traditional methods like pay stubs are no longer sufficient due to the ease of creating fake documents. Instead, technology now allows for direct connections to applicants’ bank accounts. This method provides a reliable view of their financial status, showing historic deposits and expenses. It’s not only more accurate but also more resistant to fraud.
Verifying Employment
Similar to verifying income, employment verification can be bolstered through technology. Connecting directly to payroll systems or requiring applicants to link their bank accounts can confirm consistent deposits from their stated employer. This method reduces the risk of fraud by ensuring the information comes directly from authoritative sources.
Obtaining Landlord References
Getting accurate landlord references can be problematic. Many previous landlords may be reluctant to share information due to legal concerns or simply lack the time to provide detailed feedback. However, technology can cross-reference payment histories from bank statements to confirm if rent was consistently paid to the identified landlord. This indirect verification method bypasses the need for direct communication with previous landlords.
Challenges & Limitations
While technology has significantly enhanced tenant screening, it is not foolproof. Sophisticated fraudsters continue to find loopholes, making it crucial to combine tech solutions with traditional scrutiny. For example, ensuring that each applicant undergoes a multi-step verification process without exceptions can help catch potential fraud early on.
Keeping it Consistent
The best way to fight rental fraud is to implement and adhere to a consistent system for verifying every resident, regardless of personal feelings or familiarity. This systematic approach ensures that all potential tenants undergo the same rigorous scrutiny, leaving no room for exceptions that fraudsters could exploit.
Even if you know the applicant personally or have a positive impression of them, it’s essential to follow established verification steps meticulously.
By maintaining uniformity in your screening process, you eliminate biases and reduce the risk of overlooking red flags. Consistency in resident verification not only strengthens the integrity of your property management practices but also upholds a high standard of security, ultimately safeguarding your investments against rental fraud.
In Conclusion
The fight against rental fraud is ongoing and dynamic. Landlords and property managers must stay vigilant and utilize all available tools to protect their investments. While technology plays a pivotal role in offering advanced verification tools, combining these with thorough personal oversight ensures a higher probability of screening reliable tenants. By embracing a comprehensive approach, landlords can mitigate the risks associated with rental fraud and ensure the integrity of their property management processes.
Staying ahead in the fight against rental fraud requires continuous learning and adaptation to new technologies. As fraudsters evolve, so must the methods to detect and prevent fraud, ensuring that only qualified and trustworthy tenants are approved.
