We all know COVID-19 is wreaking havoc with the economy. But how will this affect property managers? Well, consider this. The most significant downturn since WW II was the great recession in 2008. In that recession. We saw unemployment reach 10 percent in October of 2009. That's bad, but nowhere near the 25 percent in 1933 during the Great Depression. This crisis? Well, unemployment is widely forecast to reach 15 percent in May, and some are calling for the rate to reach 30 percent eventually.
Which brings us to the first issue landlords need to understand—expect a rise in unemployed tenants, leading to an inability to pay rent. A recent AAOA survey shows this. More than half of landlords are reporting they are seeing tenants unable to continue paying their rent.
There is a second issue to consider, as well—eviction moratoriums. Governments in nearly every state have pressed "pause" on eviction hearings. While this is promised to be a temporary measure, it will surely drive the already high cost of evicting bad tenants to even higher levels.
The third issue? An increase in tenant fraud. We've seen a nine percent increase in fraudulently altered financial documentation since COVID-19 hit. The tools are widely available to forge pay stubs and bank statements. There are more self-employed applicants than ever. And COVID-19 all but guarantees you won't see the applicant in person. All of which creates the perfect scenario for applications accompanied by fraudulent financial documentation and more tenant verification required by property managers.
What can property managers do? You need to do all the stuff you're probably already doing—credit checks, background checks, etc. But now, more than ever, you need to vet the applicant's financial documentation truly. Here are four things to focus on in your tenant screening process:
- Is the visual quality of every document what you would expect? Or, does it look like it has been copied multiple times? Ensure account numbers carry across separate documents. Check that transactional details and other figures are aligned and match formatting in verified documents you've received from the same source in the past.
- Call all the telephone numbers on a document to make sure they work; but, how do you know the person on the line is a prior employer or an accomplice in crime? Look up contact information for issuing organizations or corporate HR departments yourself. Ask questions for details such as a start-date, specific information a friend would be unlikely to know.
- Does the narrative across all sources of an application stay on track? Inconsistencies or dead links for live documents are a red flag. How do applicants feel about submitting paperwork in person? Peruse LinkedIn pages and review histories through online databases such as sba.gov or opencorporates.com to ensure a company is legitimate. Ask applicants to print statements in the leasing office
Tenant verification requires a lot of energy and time from managers who have other high-level tasks at hand. So, another inexpensive, quick, easy option is to have Spirited scan your applicant's financial documents. We'll give you a thumbs up or down within 24 hours.
