How to spot and prevent application fraud
Let's start with a game: is this ADP paystub real or fake?
The answer is…
If you voted fake, congrats!
What did you see to know that it was fake?
Besides the scratched out name and account number to protect the fraudster, it looked pretty legitimate to the naked eye.
Document fraud is on the rise
And scammers are constantly improving their techniques.
TransUnion says that 1/7 applicants had a fraud trigger in 2020 - and it’s only gotten worse since.
Getting fake documents is really easy
In fact, there are hundreds of Facebook accounts and WhatsApp groups dedicated to it.
And it's cheap, too!
Looks like the going rate is $25 for paystubs and $50-$75 for bank statements. They can produce them same-day and accept CashApp for payment.
Most property managers, agents and owners ask for two recent paystubs and a bank statement for income verification. For just $100 a scammer can rent your apartment.
Ok, but what’s the big deal?
Best case scenario: The tenant used the fake docs to get a slightly nicer apartment than they can afford, so are always behind on the rent
Worst case scenario:
Once you approve an unqualified tenant and they sign the lease, you’re stuck with them. The only way out is via eviction and that’s a nasty process that can take months. In the meantime, your property is getting trashed, utility bills are mounting and the neighbors are complaining.
Prevention is better than cure
Like early cancer screening (this is a reminder to get your annual testing), it’s WAY better to catch the problem before it’s too late.
For an owner/agent/property manager, that means rigorously vetting every applicant before signing the lease. Let’s review potential red flags and best practices:
🚩 Red Flags
These are potential signs that the applicant is using fake documents and/or is unqualified for your property
- They want to move in ASAP and expedite the process
- They already have a background check and credit report that they’ll share
- They say you can only call a specific phone number to verify employment
- They are happy to pay higher rent or more upfront in exchange for faster application process
- They want a reduced security deposit
- They come from a short term rental platform (like Airbnb) and then ask to extend outside of the platform with no application process.
✅ Best Practices
- Create intentional friction in the processFollowing up to verify details or ask for more documents will scare away some scammers while good applicants won’t mind too much
- Run your own background check and credit report (or use RentEngine to do it for you)This is the only way to be 100% confident that the information is correct
- Call the employer and previous landlords to verify the informationMake sure to find the phone numbers online and take the time to fully verify income and rental history
- Use ID and document verification softwareOften this is not accessible to small owners and agents, but you can work with a tech-native leasing platform like RentEngine to handle the screening.
- Have an application checklist and don’t cut cornersDefine your own applicant verification process and stick to it religiously, no matter how pushy they are. Most fraud happens when owners/agents skip steps to make it faster
- Trust your gut but don’t discriminate. If anything feels fishy, investigate until you either feel confident or have enough suspicious evidence to reject the application with cause.
