How Multifamily Properties Can Protect Against Application Fraud

The multifamily industry has been trying to move their application processes online for years and Covid-19 accelerated this trend. As this acceleration into digital and contactless leasing has occurred, it has also opened the doors for digital frauds in the process. With the mass unemployment in place, coupled with the expiration of CARES act, multifamily executives are apprehensive about the possibility of potential residents’ attempts to sidestep their obligations in the search for secure housing.

Application fraud has increasingly become one of the top risks for multifamily real estate operators. According to the latest survey by TransUnion, the frequency of fraudulent incidents in this space has increased by 50%. While many smart property operators can identify fraud, a significant number of them have proven unable to notice red flags and have let more unqualified applicants move in.

With such staggering figures in focus, multifamily investors need to understand how application frauds operate in the real estate world and how they can identify them and eliminate them.

Application Fraud: How Does It Occur?

Online applications and leases have brought huge efficiencies to the multifamily industry. While this helped reduce costs and improve NOI across the sector, it has also brought along a lot of vulnerabilities in the system. Some of these risks are not new to digital applications, but all of them can be fought with digital tools. Operators that stay aware can reap the benefits of online leasing while avoiding the pitfalls.

One of the vulnerabilities of online and paper applications is an increase in attempts to fake the identity of the renters. These renters use someone else’s legal documents such as a driver’s license to commit the fraud. In many cases, it has been observed that renters who commit fraud steal people’s Social Security Number from the dark web or even create new identities for themselves. In simple terms, they engage in synthetic frauds.

While committing synthetic frauds, criminals build a new credit profile for an imaginary person. They later use this profile to get new credit cards and buy goods. Using the fictitious persona, the fraudsters apply for rental apartments. Seeing a clean profile, innocent operators lend their property to the new renters. In this case, the rental apartment also becomes a part of the crime.

Experienced fraudsters have become very good at disguising their identities and falsifying documentation. Hence the steady rise in reports of application fraud. Property operators need improved technology to detect red flags and protect their property. Fortunately, platforms like VERO are built from secure technology that can detect and prevent application fraud instantly.

Warning Signs of Fraud

One way to scrutinize an application for fraud is to check the emails from the applicant carefully. Applicants can falsify emails, going so far as to create fake accounts to send information from. But the red flags aren’t as obvious as they seem to be!

The ED of JPMC said, “Sometimes, the fraud attempt comes from a [legitimate] email address, and you just don’t know. Even then, identifying that an ‘m’ has been replaced with ‘rn’ can be hard to spot if you’re not looking for it.”

In the context of a multifamily real estate transaction, the following warning signs can be spotted to prevent yourself from falling into the trap:

• Remember that it is almost impossible for any party to change their banking information in the middle of a real estate transaction.
• If the buyer tries to reach you at multiple touchpoints, his/her chances of being a fraudster are high.
• If you receive emails outside of working hours, it can be a fraud attempt.

How to Prevent Application Fraud

Careful and meticulous attention is all it takes to spot and eventually avoid application fraud. As a multifamily operator, you need to understand the entire transaction process. In addition to that, you need to approach every new piece of information with an eye for skepticism.

The best way to prevent fraud is by contacting the party that reached out to you. A genuine party would not shy away from meeting you personally or online. While phone calls aren’t a completely reliable method of verification, it is always better to ring up the contact number mentioned in the email for validity. This may take several extra minutes per application.

Technology is an enabler - even for the fraudsters. They can call using software to manipulate caller IDs, phone numbers, and other necessary information. So if you receive a call from anyone regarding payments for the property, don’t trust it completely.

Another excellent way of preventing application fraud is to be present during the walk through virtual tour. Engage in guided tours with the potential residents and assess them during your interaction. Don’t let any interaction go to waste!

Use Technology to Stay Fraud-Free

Operators are increasingly turning to technology to solve the problem of application fraud. Modern leasing and application tools make it fast and easy to verify identity and run background checks. Companies like VERO, have successfully cut down the time between submitting an application and executing the lease from a week or more to a few minutes. By automating many of the processes described in the article VERO saves time and helps leasing managers avoid fraudulent transactions.

VERO has created a modern leasing platform that makes leasing as quick and simple as renting a hotel room while eliminating fraud.

To ensure quick and fraud-free leasing, VERO automatically verifies all the income, employment, and background information of the applicant in under an hour. Once the applicant receives approval, they are sent a link to complete the lease packet. The signed lease is then received by the leasing team and countersigned by the property. Using smart tools and practices, VERO has shown it is able to successfully reduce fraudulent applications by 79%.

Platforms like VERO simplify and improve workflows so that properties don’t have to take on busy work. It is designed specifically for multifamily real estate operators and uses the best industrial practices to verify identities and protect you from application fraud. All of this is done without compromising on the real high-quality rental leads.