What managers told us about fighting apartment application fraud
Rental application fraud prevention has become the scourge of the multifamily industry in the wake of the COVID-19 pandemic.
After scanning more than 1 million apartment rental application financial documents, Snappt found that 121,876 had been fraudulently altered, or one out of every eight.
The problem is only getting worse. Before the pandemic, 66% of property managers said they’d been hit by application fraud. After the onset of COVID-19, that number skyrocketed to 85%.
Most instances come in the form of altered bank statements, credit reports, personal data, fake pay stubs, and documents that are easily obtained online or via the dark web today but hard to spot with the naked eye.
The consequences of letting those fakes through are preventable evictions when the bad actors or fraudster stops paying rent.
Nationally, the typical eviction costs $7,685. The current 12.5% rate of fraudulent applications being submitted to property managers translates into an avoidable expense of $2.8 million per year for a 3,000-unit portfolio.
To gain insight into how managers tackle these application screening challenges and scams today and get a handle on their most significant pain points, Snappt surveyed 230 institutional property managers nationally.
Dallas-based Eleven Market Research talked with some of the largest apartment operators in the US; 40% of respondents manage more than 10,000 units. They all focus on the application process and vetting as part of their jobs, with most (84%) leading teams of professionals qualifying rental applications themselves.
The 2022 Snappt State of Apartment Tenant Screening Survey shines a light on exactly how big the problem is, what property managers can do to combat it, and the tools, such as artificial intelligence, knowledge-based authentication (KBA), machine learning algorithms, and real-time behavioral biometrics and analytics, to fight this ever-escalating war.
Application vetting goals and challengesNearly 9 out of 10 (89%) survey respondents said making sure applicants can afford the rent and avoiding future payment issues and evictions were significant goals of their application vetting process.
But the challenges of hitting those goals today are daunting due to digital fraud and the ease with which bank statements and pay stubs can be altered.
Altered documentation was the biggest problem identified in the survey, with 84% of respondents saying it was a somewhat or highly significant challenge.
Given these issues, property managers do what they can to stop fraud losses before it gets in the front door, including:
- Asking for statements from financial institutions such as pay stubs and bank statements (78%)
- Using tenant screening software (66%)
- Running credit checks (61%)
- Implementing identity verification (59%)
- Using a solution to detect fraudulent docs (59%)
- Checking references (56%)
- Fingerprinting and running a criminal background check (56%)
- Checking prior convictions (56%)
- Linking bank accounts to avoid payment issues (33%)
But even after taking these steps, managers said that all types of fraud in its many forms, bust out fraud, first-party fraud, third-party fraud, and synthetic identity fraud, are still slipping through the cracks.
More than three-quarters of respondents -- 78% -- said the fact that their process wasn’t spotting bad applicants was a somewhat or highly significant challenge. In comparison, 75% put screening reports that contain incorrect information in the same tranche.
Finally, the staff time it takes to vet applicants was among the most significant challenges for 69% of respondents. (Previous surveys indicate property staff spends between four and 10 hours on the vetting process for each applicant.)
Three core components of application vettingThe length and complexity of the process speak to the severity of the challenge property managers face.
But just three of these steps were viewed as the most critical by managers, with high percentages rating them as somewhat or extremely important. They were:
- Vetting an applicant’s identity (92%)
- Verifying the accuracy of a pay stub (90%)
- Authenticating bank statements (89%)
While multiple ID verification platforms are available on the market today, only Snappt targets pay stubs and bank issuer statement verification.
By unmasking the digital DNA behind those documents to ensure they haven’t been altered, Snappt is helping managers win the war against application fraud in minutes instead of hours while avoiding high, preventable eviction expenses. Snappt is the only platform that can minimize the risk of tenant fraud and bad debt with revolutionary data-driven fraud detection software.