Two-thirds of property managers say they’ve fallen victim to fraudulent rental applications, which drive higher evictions, property damage, and criminal activity
Los Angeles – Snappt today released the 2020 Fraud in the Rental Industry Survey. The survey shows that fraud has become common in the residential rental industry, with two thirds (66 percent) of property managers saying they have been victimized by fraudulent rental applications. Furthermore, applicant fraud has increased 9 percent month over month since the COVID-19 crisis hit—a likely response to the current economic climate as well as recent changes to local and state eviction moratoriums.
The typical property manager reports 15 percent of their online rental applications exhibit obvious fraud, with an additional 10 percent of fraudulent applications slipping through unnoticed. “There are a number of factors that are fueling the increase in fraudulent rental applications,” says Daniel Berlind, CEO and co-founder of Snappt. “The increasing number of self-employed applicants, a move to online rental applications and the increasing availability of tools to fraudulently alter financial documentation all make the problem more common.”
Two in five (41 percent) property managers say fraudulent rental applications are somewhat to extremely common and report an annual eviction rate of 12 percent. Thirty-four percent reported annual eviction rates of 20 percent or higher. This can be an expensive problem when you consider the survey shows the average cost per eviction reaches $7,685. "If someone understands the law, they can stop paying and live rent-free for six months while we work to evict them," according to Chad Vasquez, general manager of Circa LA. "That's $150,000 for one of our penthouses."
The top five problems reported by property manager caused by tenants that slip through with fraudulent lease applications include:
- Costs associated with having to evict bad tenants
- Physical damage to the property
- Missing out renting to good tenants
- Criminal activity at the property
- Loss of reputation
The biggest issue is spotting fraudulent documents and with no automated product to check the documents provided, property managers must look for alterations manually. Respondents report it takes four hours to vet an application and one in five report it takes more than 10 hours. Fifty-eight percent rate this task as somewhat to extremely challenging and half say it takes too long to do it manually.
The full ‘2020 Fraud in the Rental Industry’ survey is available www.snappt.com/confronting-costs-tenant-fraud. The free report includes a list of top strategic tips property managers can take to detect fraud and decrease evictions.
Snappt, a Los Angeles based real estate technology company, provides a quick and inexpensive data-driven fraud detection service that can accurately spot fraudulent documentation. Snappt is used by 3 of the top 6 property management firms in the US.