I recently came across an applicant who had forged not only income statements but also W2, and bank statements. This type of fraud is difficult to detect even for professionals let alone the property owners. Given current economic climate, rentals application fraud is on the rise and property owners need to be prepared to handle it.
What is Rental Application Fraud
Simply put, it is intentionally lying on a rental application. An applicant making a mistake or forgetting a detail can happen from time to time. Clear and intentional misrepresentation on the rental application is fraud. And it’s not just professional fraudsters taking advantage. The availability of photo editing software, high-quality digital cameras, and personal scanning devices is tempting even the average applicant to want to fib a bit here and increase their income a bit there. At the end of the day, the intent is what makes this fraud, no matter how small it may seem.
What are the Consequences of Rental Application Fraud
Such fraud can have serious consequences to the property owner. If the tenant has no intent to pay right from the start, you will lose several months of income. You may have to initiate eviction process and incur the costs associated with the eviction process. If tenant is savvy and may have planned for the eviction. They will most likely draw out the eviction process for as long as possible, bearing high losses on the property with minimal consequence to the tenant.
If the tenant damages the property during this time then financial loss to you can be extensive. And needless to say all this can be emotionally very difficult.
What can you do to possibly detect the fraud
- Never accept a printed credit report. Always perform a credit check. SSN is difficult to falsify. I know homeowners who have gotten in trouble as they accepted paper report provided by the tenant.
- Be very rigorous with your employment verification. Make sure the name, website, email ids, and phone numbers provided for verification are legitimate. Try to locate the person who will be verifying employment on internet or social media websites such as LinkedIn.
- Be very diligent about rental reference check. Talk to at least 2 or more previous landlords for rental history verification.
- Look for errors. Quite often there will be errors in dates, calculations, or addresses. If something does not make sense then do not overlook but do your best to verify.
Summary
As a homeowner you can never be too careful screening prospective tenants. It is you who stands to undergo financial as well as emotional stress. Technology advances provide sophisticated tools to the fraudsters and you are always playing catch up. The advice I provided here should be very helpful but be always on lookout for potential fraud. If you feel doubtful for an application move on to the next one.
Happy Investing!! As always, feel free to reach out if you need help or simply want to talk real estate.
