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Published on: Feb 2, 2024
Rental application fraud is becoming more and more of an issue for landlords coming out of the pandemic.
Rental application fraud has the potential to not only be a headache for landlords, but costly both in terms of lost rent payments and possibly even property damage.
By improving your screening criteria and potentially partnering with a company like Nomad, you can greatly decrease your chances of rental application fraud or having to go through the eviction process.
Rental application fraud isn’t a fun topic to talk about. However, if you are considering renting your property or have been doing so for a while now and have a vacancy approaching, educating yourself on the nuances of this dubious practice is crucial to ensuring an easy and profitable rental experience. Rental application fraud as a term encompasses a range of deceptive practices, but for the purposes of this article, we'll be focusing on potential tenants who falsify information to secure a rental for which they're unqualified. It's a concerning trend where the truth is often falsely stretched to fit the narrative of an ideal tenant.
The issue of application fraud is more than just a few bad actors bending the truth; it's about the risks and costs it can bring to you as a rental property owner. Tenants who secure a rental under false pretenses often pose a higher risk of missing rent payments or causing damage to the property. These scenarios can be more than just headaches; they can lead to significant financial losses and potentially even an eviction. Protecting your investment from such risks is crucial in today's rental market.
Rental application fraud isn’t a novel issue, but there has been a significant increase to the tune of about 20% in application fraud since the pandemic began. This uptick indicates a changing landscape in rental applications, one that requires landlords to be more educated and vigilant than ever when it comes to screening prospective tenants. Get ready as we’re about to dive headfirst into the intricacies of this challenge and explore effective strategies you can implement to protect both yourself and your rental properties from this growing issue.
Who does this impact?
Rental application fraud is something that can truly impact any rental property owner in the market. Unfortunately, it's smaller, private landlords not using a property management company who are the most at risk when it comes to falling victim to rental scams. In 2022, an alarming 85% of rental owners reported instances of application fraud, highlighting both the prevalence and extent of this challenge. This data reveals that small rental owners are particularly vulnerable in the current rental landscape. But why?
The reasons these owners are more at risk are multifaceted. Smaller landlords often don’t have access to comprehensive screening tools compared to larger rental operations or property management companies, increasing their exposure to fraudulent practices. Additionally, small property owners are typically more sensitive to vacancies, upping the severity and urgency to fill properties quickly to maintain steady cash flows. This pressure can sometimes lead to less-thorough vetting of potential tenants. Couple this with a more demanding rental market and a higher number of renters in general and this adds yet another layer of complexity to the screening process. Landlords now face the challenge of sifting through a higher volume of applications, increasing the likelihood of encountering bad actors. You can quickly see how this gets out of hand and the task of securing a qualified tenant is harder than ever.
This situation places small landlords in a particularly challenging position. They must navigate the delicate balance of filling vacancies in a short amount of time while ensuring they select reliable and genuine tenants. In the following sections, we’ll explore strategies that owners can use to not only identify potential scams more effectively, but also how these landlords can enhance their screening processes, safeguard their properties, and ensure a more secure and profitable rental experience.
What to look for?
When navigating the complexities associated with securing qualified tenants, it's critical for landlords, especially smaller ones, to be extremely cautious about certain red flags. Both recognizing and acting upon these warning signs can be the key to preventing application fraud and protecting your rental property.
One of the first things to watch out for is an email address that simply seems off. It might seem like a small detail, but a suspect or unusual email address can be a quick telltale sign that an applicant isn't who they appear to be. Look for emails with an excessive amount of numbers or random characters in them. Also, check and make sure their domain the sender is using seems legitimate. Oftentimes, we see folks try to use a domain like gmail for instance, but put in something like googlemail to sneak through without issue. This small piece of contact information can be an early indicator of a potentially fraudulent application.
Another red flag is an applicant who is in a rush to move in. While there can be legitimate reasons for a tenant to want to move quickly such as an expired lease approaching, it's often a ploy used by fraudulent applicants to pressure landlords into skipping proper checks. A tenant who's pushing to move in unusually fast should actually prompt you to take an even closer look at their application and background to ensure they have a legitimate reason for wanting to move quickly.
Along with phony email addresses, the inability to verify the personal information submitted in the application itself is another major red flag. If you find inconsistencies or the applicant can't confirm details like employment history, income, or previous addresses, it's highly likely they may not be who they say they are. Similarly, if you're unable to contact references, employers, or previous landlords, or if their responses seem vague or scripted, these should sound alarm bells.
Lastly, any mismatch between the form of ID submitted by the applicant and their appearance should raise immediate concerns. This is often a clear sign of identity fraud, where the applicant is using someone else's identity to secure the rental and should almost immediately raise caution.
By keeping an eye out for these warning signs, landlords can feel more confident screening potential tenants and reduce their risk of falling victim to application fraud or possibly having to go through the process of an eviction. It's about being thorough, methodical, and alert to the subtleties that might otherwise be overlooked.
Setting up a Thorough Screening Process
When it comes to renting out your property, having a thorough screening process is the most important step to safeguarding your investment. This process should be your first line of defense against rental application fraud to help ensure the person you're entrusting with your property is reliable, honest, and financially stable. A meticulous screening process can significantly reduce a plethora of potential issues down the line, such as unpaid rent, property damage, or evictions.
When it comes to setting up a thorough screening process, there are few critical pieces you should include to ensure you catch any and all warning signs. In this section, we’ll dive into the three most crucial components of this process: verified background checks, references, and credit screening.
Verified Background Checks
A verified background check is the cornerstone of a solid tenant screening process. When done correctly, a background check is more than just checking an applicant’s rental history and maybe searching their name on Google to see if anything comes up. It's about verifying their identity, criminal record, and past rental behavior, including any evictions. Oftentimes, folks committing application fraud will use a fake identity to try and cover hidden truths and potential red flags. It helps ensure that the person you're considering as a tenant has a history that aligns with being a responsible and trustworthy renter. By employing reliable services for these checks, you gain a clearer, more truthful picture of your prospective tenant.
References are another critical element in the tenant screening process. This step involves reaching out to former landlords, employers, and other provided references to gather insights into the applicant’s past behavior and reliability. Former landlords can inform you about the tenant's previous rental experiences, highlighting any issues with payments or property care. Employers can verify employment and income stability, key indicators of the tenant’s ability to pay rent. Personal references can shed light on the applicant's character and sense of responsibility. Diligent reference checks contribute to a more complete understanding of the prospective tenant, beyond what is presented in the application.
Credit screening is the final essential part of a thorough rental screening process. Credit screening includes examining the applicant's credit history and credit report. A credit report will reveal important information like debt levels, bill payment history, and any past bankruptcies. These factors are solid indicators of the tenant's financial health and their ability to make regular and on-time payments. A history of poor financial management, suggested by late payments or significant debt, can be a red flag, indicating potential risks in consistent rent collection.
How Nomad Can Help
Navigating the tenant screening process and avoiding application fraud can be daunting for any property owner, especially those choosing not to use a property management company. This is where Nomad steps in. We understand the importance of thorough application screening and the peace of mind that comes with timely rent payments. Here's how we can make a difference:
Thorough Screening by In-House Leasing Professionals
At Nomad, we pride ourselves on finding the best possible tenant for your rental property. Our team of in-house leasing professionals dive deep into each applicant's background, going beyond the standard checks to ensure we understand who we are placing in your property. Our team’s expertise and stringent approach give you the confidence to know your property will be taken care of. This level of detailed screening is designed to significantly reduce the risk of rental fraud and the problems that come with it.
Guaranteed Rent: Our Flagship Product
Our flagship product is Guaranteed Rent, a one of a kind product designed to provide you with unparalleled financial security. The process is relatively simple: we guarantee on-time rental payments to our owners, even when the tenants we place come across financial difficulties and are unable to pay. This guarantee removes the stress and uncertainty of collecting rental payments, something not offered by traditional property managers. It's about offering you stability and reliability in your rental income and consistent cash flows regardless of the tenant's circumstances.
Handling Evictions and Tenant Replacement
In the unlikely event that an eviction is necessary due to non-payment, Nomad takes on the responsibility and covers all fees through the first court date. We understand that evictions can be a stressful and costly process, so we aim to alleviate that burden from our property owners. Furthermore, should an eviction be required, we will handle the task of placing a new tenant at no additional charge. This commitment demonstrates our dedication to not only providing quality tenants but also standing by our property owners in every scenario, ensuring minimal disruption and maximum support.
Nomad's comprehensive approach to tenant screening, combined with our guaranteed rent product and proactive handling of challenging situations, provides a safety net for property owners. Our services are designed to protect your investment, ensure consistent rental income, and offer peace of mind in the ever-changing landscape of property rentals. If this is something you’re interested in learning more about, get started today by requesting a free online rental estimate.
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