Property managers understand that protecting themselves against fraud is a valuable notion. What some might not realize, however, is that that they can actually affix a dollar amount to what implementing one fraud prevention solution in particular – Spirited – can save their portfolios year over year.
Each month, as a benefit to our clients we provide a “Monthly Fraud Report” which highlights the previous month’s fraud hit-rates and the estimated amount potentially saved to property managers.
In 2020, Spirited analyzed application documentation for over 15,000 rental applications. On average, our customers saw a 14% fraud rate and collectively saved an estimated $15 million in eviction costs.
But let’s start at the beginning.
What types of fraud do we see on rental applications?
The most prevalent type of fraud that we see on applications can be categorized as Text Alterations. Basically, applicants are using home office equipment to change the names, dates or numbers on their employment documents or financial documents in hopes of securing a rental that they would otherwise not qualify for.
Other types of fraud include false referrals, fake documents obtained online from “template farms”, and falsified credit reports. Finally, identity fraud and synthetic fraud are no longer just affecting the credit card industry – they are also heavily infiltrating the residential rental industry. The bottom line? Fraud is here and it’s getting worse.
Financial document fraud leads to evictions
What’s the link between fraud and evictions? It’s simple. When fraudsters game the system to obtain residency in a unit that they would not have qualified for otherwise, the risk to the property skyrockets. Fraudulent tenants may not be able to afford the rent in the first place and unfortunately this scenario leads directly to evictions.
Let’s look at the numbers
This information is sourced from Spirited’s database.
- Out of 15,000 rental applications in 2020, 14% of them contained some sort of financial document fraud
- Fraud leads to evictions, with the average cost of a single eviction costing property’s approximately $7,500
- A 14% fraud rate in this example opens properties up to almost $5 million in risk!
Why is fraud on the rise?
There are many contributing factors that stem rental application fraud. The global pandemic of 2020 affected us all in many ways, including unprecedented unemployment rates and a sudden requirement for digital transformation. The increase in online applications and screening in particular is a major contributor to fraud. Armed with home office equipment, anonymity, and sometimes desperation - even non-criminally inclined individuals are being tempted to “fib a bit” to qualify for rentals.
Fake documents are also unnervingly easy to purchase online. A simple Google search can get fraudulent applicants the paystubs or other financial documentation they need to scam their way into a rental unit and property managers will be none the wiser.
The point is fraud is here and here to stay. The numbers above reflect our recent findings but all signs point to increases in the future. Luckily, technology advancements in fighting back against fraud have improved as well, providing organizations with the means to stay a step ahead of even the most sophisticated fraudster.
What’s the ROI of fighting fraud with Spirited?
The best way to determine whether or not your applicant is lying to you is to deploy sound tenant screening processes. This includes both standard and technology-enabled best practices. With the right combination, you can limit your risk of actually allowing a fraudulent applicant to become a tenant in the first place and prevent the high costs of the eviction process from hitting your balance sheet. By consistently screening your applicants with a trusted provider like Spirited, you dodge potential risky applicants.
Spirited’s proprietary software is designed to integrate seamlessly into your existing tenant screening process. We make it easy to identify falsified application documentation such as pay stubs, identification, and more. You can detect fraudulent documents with advanced data-driven forensics methods by simply uploading the applicant’s documents via the upload link, and within 24 hours, Spirited will analyze and review the documentation. Reduce fraud, screen tenants faster, and reduce costs for only $1.50 per application.
Find out how much you can prevent in losses with our transparent pricing tool: the ROI Calculator.
