COVID-19 is having a dramatic effect on tenants. Just look at AAOA’s recent survey that found more than HALF of landlords have tenants who are now unable to pay their rent due to COVID-19. We see it too—we’ve seen a nine percent increase in applicants fraudulently altering financial documentation since COVID-19 hit.
To better understand the problem, we recently conducted a survey of 100 property managers across the U.S. What we found is alarming.
Here are five important facts about fraudulently altered documentation from the survey.
#1. It is Rampant.
41 percent told us fraudulently-altered financial documentation is “somewhat to extremely” common. In fact, two-thirds have fallen victim to this kind of fraud. Worse yet, most (59 percent) see the problem staying steady or even getting worse over time.
#2. It Leads to Costly Evictions:
15 percent of all evictions are caused by this type of fraud, according to respondents. That’s an expensive problem! The average cost per eviction among those surveyed is $7,685. They also report an annual eviction rate of 12 percent.
Let’s take a property manager responsible for a 250-unit property. At an eviction rate of 12 percent, that’s 30 evictions per year at the cost of $230,550. The 15 percent of those coming from fraudulently-altered documentation represents $34,583 per year!
#3. It Causes Major Headaches for Property Managers.
The top issues they listed were:
- Eviction costs
- Physical damages to the property
- Missing out on GOOD tenants
- Criminal activity at the property
- Loss of reputation
#4. Factors Driving Application Fraud have Increased.
The top issues they listed were:
- The growing number of self-employed applicants
- Increase in online applications
- Tools used to alter financial documents are growing in number
- These same tools are getting much better
- Compliance regulations restrict property managers’ ability to trust their gut
#5. Fraudulently Altered Financial Documentation is Hard to Spot!
Most (58 percent) say spotting such tenant fraud manually is “somewhat to extremely” challenging. Half also remarked that it takes too long to do manually.
According to industry estimates, one in eight applications contain some form of fraud. At Spirited, we see evidence that the pandemic has made this problem even more rampant. Over the past few weeks, we have seen applicant fraud increase by 9% month over month. We believe this is a direct response to the current pandemic and property managers are becoming increasingly uncertain of an applicant’s ability to pay their rent.
Download our free report to read about best practices that you can implement to help you reduce your costs due to tenant fraud.
