Rental Application Fraud Jumps As High As 50% In Some Cities.
The National Multifamily Housing Council says a survey it did recently showed owners reported a 40% increase in rental application and payment fraud.
The Wall Street Journal reported that social media is spreading word that there are even promoted ads that sell fake application packages.
Leasing fraud appears to be a fairly widespread issue. According to a 2024 study by RealPage and Dimensional Research that looked at 400 property managers in the country’s largest metros, 75% of them reported experiencing an increase in fraudulent applications.
How are they doing it?
Fake pay stubs: Using readily available online templates, scammers create pay stubs to inflate an applicant’s income. Red flags include inconsistent fonts, perfectly rounded numbers, logos that look off, and tax deductions that don’t add up correctly.
Altered bank statements: Applicants edit bank statements to hide poor financial history, such as low balances, excessive overdraft fees, or inconsistent transaction histories. They can also create fake statements from scratch. Signs of fraud include misaligned text, mismatched fonts, outdated logos, and mathematical errors.
Fake employment information: Applicants provide contact information for friends who pose as employers or list non-existent companies to give a positive employment verification. Calling a company’s publicly listed number rather than the one on the application is key to verifying this.
Stolen or fake identities: Fraudsters use stolen or entirely fabricated identities (known as “synthetic identities”) to mask poor credit, criminal records, or previous evictions. They may also use a stolen Social Security Number (SSN).
Deceptive ID documents: Technology like high-quality scanners and photo editing software makes it easier to produce deceptive identification documents that appear legitimate.
Fake landlord references: Applicants may have friends or family members pose as previous landlords to provide positive feedback. They may also falsify contact information for real landlords with whom they had a negative experience.
Eviction report freezing: Savvy fraudsters can “freeze” their eviction records with specialized reporting services. This makes their rental history appear clean even if they were evicted recently.
Fabricated rental history: Applicants with poor or no rental history use rent-reporting services to create a fake record of consistent, on-time payments, making their rental history appear perfect.
Payment scams: Some tenants may use fraudulent checks or stolen payment methods for initial deposits, which will later bounce, or even attempt illegal sublets.
What to look for…red flags ?
Evasive behavior: Applicants may refuse to provide original documents, push to sign the lease quickly, or be unwilling to provide additional verification if questioned.
Inconsistencies across documents: Fraudsters can make small errors when trying to alter multiple documents. Comparing pay stubs, bank statements, and credit reports for mismatched details often reveals inconsistencies.
Compare pay stubs, bank statements, and credit reports: Dates, addresses, and employment details should match perfectly across all forms. Be suspicious if financial details are inconsistent, such as pay stubs showing one income but bank statements revealing a much lower balance.
Check the math: A simple way to spot fake documents is to manually add up the numbers. Fake pay stubs and bank statements often have mathematical errors that an automated system would not make.
Look for formatting errors on financial documents: Inconsistent fonts, odd spacing, blurry logos, and misaligned numbers are major red flags that an applicant used a generic online template.
Be wary of perfectly rounded income figures: Real paychecks rarely have perfectly round numbers due to taxes and other deductions. Perfectly even monthly earnings or a lack of cents on a pay stub are highly suspicious.
Request multiple bank statements: Ask for at least two to three months of bank statements to identify inconsistent transaction patterns. Fraudsters may make a large, one-time deposit to cover a fraudulent bank statement.
Contact employers directly: Do not rely on the phone number provided on the application, as it could be a scammer’s accomplice. Look up the company’s main line or HR department on their official website or LinkedIn to verify employment.
Ask for an offer letter: For applicants who recently started a new job, an official offer letter from the HR department confirming the salary and start date is a good verification tool.
Vet previous landlords and property owners: Fake landlord references are common, with applicants using friends or family to provide false positive reviews.
Verify property ownership: Use public tax records to confirm that the person listed as the previous landlord is the actual property owner.
Ask probing questions: A real landlord will know specific details, such as the exact move-in and move-out dates, how rent was paid, and the property’s square footage.
The easiest path: Use professional screening tools. While manual checks are essential, the easiest and most accurate way to catch sophisticated fraud is by using modern screening tools.
AI-powered document analysis: Services like Snappt use artificial intelligence to analyze documents for signs of digital tampering that are invisible to the naked eye. This can include checking metadata to see when and where a document was created and comparing its format against a library of legitimate documents.
Third-party verification services: Tools like LeaseRunner and Truework can securely access an applicant’s payroll and bank data directly. This provides a trustworthy, independent source of income and cash flow information.