By Mitch Rice
Property managers must navigate a minefield of issues in today’s apartment industry.
For example, real estate managers may encounter fraudulent activities during the construction period, like the falsification of financial documents.
Moreover, apartment managers may need to respond to resident-related problems such as collecting past-due rent and relocating freeloading tenants.
Assessing renter applications for fraud is also an essential task that savvy apartment operators must undertake. Rental fraud is commonplace in the apartment industry, so careful screening of applicants is necessary.
One way to mitigate the risk of rental fraud is to confirm applicants’ identities by checking their past histories, such as possible criminal records.
Performing an inmate search on everyone is vital to reducing the possibility of fraud. This website provides accessible public records and additional information, such as criminal investigations, disclaimers, press releases, and solicitations.
You may continue reading to know more about various types of fraud in the apartment industry and ways to combat them.
Apartment Application Fraud
Many existing identification procedures and legacy systems cannot effectively combat today’s sophisticated fraudsters. In addition, the ascendancy of online applications has opened up the possibility for new fraud tactics.
Although fraud patterns in the apartment market predate the COVID-19 pandemic, this global phenomenon may have boosted fraudsters’ operations.
For instance, the pandemic has caused widespread financial difficulties and has increased the demand for more virtual application interactions. This situation made it more challenging for property managers to detect fraud.
Another reason for increased fraudulence is that most fraud solutions are manual and lack advanced features, such as identity authentication and comparing an applicant’s risk to the company’s predictive factors.
Types of Fraud Landlords May Encounter
Landlords must be aware of the following types of fraud:
- First-party fraud: The individual who commits this kind of fraud—typically the tenant—uses fictitious or manipulated information, like pay stubs and prior addresses, to qualify for a rental apartment.
- Third-party fraud: This type of fraud happens when an individual steals another person’s identity or data to qualify for a rental residence. This activity may involve using someone else’s Social Security number, name, or date of birth.
- Synthetic fraud: This is one of the most prevalent types of fraud. Moreover, this fraudulent act refers to how an applicant constructs a phony identity by mixing accurate and misleading information.
For instance, a fraudster may construct a bogus Social Security number and combine it with a real address to construct a false identity to qualify for rental property admission.
- Rental application fraud: This form of fraud refers to lying on a rental application, such as submitting false income or uploading an edited photo.
How to Combat Apartment Application Fraud
Listed below are several ways you may detect fraud in apartment applications:
- Carefully inspect the applicant’s activity history, including past financial transactions or criminal records.
- Use tools that may assist you in critically examining applicants’ information. Elaborate identity verification strategies can help you avoid synthetic (fake) identity fraud and theft.
- Stay one step ahead of fraudsters by forming a solid fraud management strategy. Apartment managers should implement fraud prevention measures when potential tenants submit their rental applications.
- Integrate background screening and fraud management. Property managers should combine background inspection and fraud management tactics.
Refrain from relying on your staff to detect and recognize new fraud patterns. Fraud trends are constantly shifting and evolving, which may require you to implement adaptable screening solutions.
While there is no guaranteed method for avoiding scams, setting the proper mechanism in place to assess prospective tenants (and collect rent payments) would significantly lessen the risks of falling victim to fraudulence.
Construction Fraud
Falsification of Payment Applications and Invoices
One of the construction industry’s most prevalent frauds is fabricating payment applications and invoices. This illegal activity can happen at any point along the payment chain.
The four most common ways of manipulating payment applications are as follows:
- Inflating material or labor expenses
- Payment applications that do not fall within the scope of work
- Unfair wage rates or categories
- Billing for unperformed work
How to Combat Fabrication of Payment Application and Invoices
A delineated scope of work can help decrease misunderstandings or misstatements when it relates to payment information.
Consequently, the project leader should always maintain a payment checklist and request receipts or invoices related to the claimed labor or materials.
Another method for minimizing the possibility of fraudulent payment applications is to plan and rectify each request with approved work orders and job expense reports.
Always associate each payment platform with a work order and never authorize a payment simply because an application is received.
Fraud usually happens to real estate owners and managers when they do not pay enough attention to details.
While adopting some of the precautions above early on may help in the long term, staying vigilant as a baseline response can help ward off different types of real estate fraud.
Data and information are provided for informational purposes only, and are not intended for investment, medical or other purposes.
