Fraud prevention is always a priority in property management, but it’s an even bigger issue now that many (or most) interactions occur online. So, how do you really know someone is who they say they are? What steps do you need to take to prevent fraud in your community?
This article is based on a virtual session from our 2021 IRO Summit. Check out the full discussion between Paul Vengilio, owner of LVPM, and Patrick Hennessey, vice president at Yardi. They discussed some refreshingly simple ways to verify renter identify, keep technology on your side and not get bamboozled by fraudsters.
Types of fraud
There are a few common ways fraud occurs. Property managers may recognize these common strategies:
- An applicant poses as someone else (e.g., family helping family when the true resident has bad credit)
- A new, false identity is invented
- The identity is real, but some details are slightly changed
Why is fraud such a hot topic these days?
According to the 2020 NMHC/Kingsley Apartment Resident Preferences Report, 73% of leases are signed electronically. Consider that this study was conducted before social distancing measures were put in place, the rate of electronic leases could be even higher. Online leasing is simpler and faster than in-person leasing, but it makes reliable fraud prevention technology more important than ever.
If technology creates the danger of increased fraud, it also provides the solution. Resident screening tools can make it difficult, if not impossible, for fraudsters to succeed.
Paul Vengilio has been dealing with fraud in his commercial property management business for years. He said that instances of fraud generally increase during hard economic times. Plus, COVID-19 has upended millions of lives and renting habits nationwide.
Technology poses another problem for property management pros: increased access to forgers and real-looking identification documents. “Yardi Breeze has really opened up our eyes, giving us the ability to do all kinds of background checks and identify verifications,” said Mr. Vengilio.
Make a plan
It goes without saying that you need to know your renters are who they say they are. No matter the size of your portfolio, the safety and security of your residents comes first. This is both a practical business concern and an ethical obligation to your community.
That said, small property management businesses and IROs can be disproportionately affected by the consequences of renter fraud. It’s harder for them to cover losses in rent, legal fees, the eviction process, etc. So even if you run a small, independently operated business, make sure you have top-of-the-line screening in place.
Pro tip: Yardi Breeze uses ScreeningWorks Pro, which seamlessly automates screening during the application process and provide results in less than a minute.
Make middle name mandatory on all forms
Some people alter their data to prevent fraud detection. The middle name or initial is an easy way to catch this. Always ask applicants to provide their full legal name.
Review the Credit Bureau Fraud Alert
Leasing staff can miss fraud warnings on a credit report. This review pauses the screening workflow when an alert comes up until an authorized employee reviews and approves it. For instance, if a social security number is flagged, you’ll have the opportunity to pause the approval process until the applicant can provide a copy of their social security card.
Final words of wisdom
Staying a step ahead of fraudsters is simple but not easy. To prevent fraud at your properties, you must make safety and security part of your company culture. You need trusted tools that attack fraud from different angles: criminal history, identification, financial records and employment history.
You can’t stay up to date on the latest technologies on your own, so be sure to use a known, reliable resident screening service. If you’re already a Breeze or Breeze Premier user, protecting your community is already refreshingly simple.