Renter Application Fraud: Protecting Your Property

Are you worried about becoming a victim of fraud when you’re screening tenants and reviewing rental applications?

When you’re renting out property in the growing Winston-Salem rental market, you’re likely getting a lot of interest from potential tenants. Do you get the ick when a tenant is too eager? Are you worried that some applicants look too good to be true on paper? 

Those are instincts you may want to trust. We’re always talking about the importance of leaving emotion behind and focusing on the data when you’re screening tenants and renting out homes. But what if that data has been manipulated? What if you’re looking at an application that reflects someone else’s information, or has been filled out in a way that’s dishonest and fraudulent?

The process of selecting tenants is one of the most crucial aspects of protecting your property and ensuring the success of your rental investment. Unfortunately, rental application fraud has become an increasingly common issue. With so much at stake, you can’t afford to overlook the importance of verifying applicant information thoroughly. From fabricated income statements to fake references, fraudulent renters can put your financial stability and peace of mind at risk.

But it’s not just about avoiding scams and scammers. It’s also about staying compliant with fair housing laws and a willingness to establish good relationships with tenants even when they’re in the application stages. It’s harder to deceive someone who takes an active interest in the people who are applying for their property. 

As Winston-Salem property management experts, we know that the key to avoiding application fraud is to build a robust, legally-compliant tenant verification process that protects your investment while respecting the rights of all applicants. We’re sharing some information that we hope will help you identify fraud and avoid it. 

Remember, working with a professional property management team like ours is one of the best ways to manage your risk.

Quick Summary: Fake or Inflated Income (Verify income details to avoid overstatements). Fake References (Watch for untrustworthy or overly glowing landlord or employer references). Fake Identification (Ensure that IDs and Social Security Numbers (SSNs) are legitimate). Eviction Concealment (Conduct comprehensive national eviction checks to catch hidden histories). Overpayment scams (Always require certified funds in the exact amount that’s due).

How Fraud Shows Up on Rental Applications

How can this even happen, you might be wondering. And that’s a good question. But these types of fraud and the scammers who embrace them are, unfortunately, getting smarter. Rental application fraud can take many forms, each one requiring different tactics to detect. Here’s a deeper dive into some of the most common fraudulent behaviors landlords face.

1. Fake or Inflated Income

One of the most prevalent forms of fraud is misrepresenting or inflating income details. Renters may claim higher salaries than they earn to appear more financially stable. If landlords don’t verify this information, they may end up renting to someone who cannot afford the rent. Red flags to look for include:

• Vague employment details. For example, maybe there’s no company name or contact information. 
• Unverifiable pay stubs or income documents. You want to make sure the applicant earns what they say they earn. If the documentation looks hand-made or altered, you should dig a little deeper.
• Discrepancies between income claims and the job position. A seasonal retail employee claiming to earn $80,000 per year might be an exaggeration. 
• Titles that don’t come with documentation. For example, an “entrepreneur” could mean anything. 

There needs to be verification. Always request two forms of income verification, such as recent pay stubs and bank statements. Contact the employer directly to confirm the applicant’s job and salary. You’ll have to get permission on the application to do any sort of reference or background checking. Remember this.

2. Fake References

Have you ever called for a reference and felt like you were talking to someone who had never rented out a property in their lives? This is a huge part of rental application fraud, and it can be maddening for a landlord who just wants to talk about what it’s like to rent to a particular person.

Fake references are often used to mislead landlords about a tenant’s past rental history or character. These references might come from a fake or nonexistent landlord, a family member posing as a property manager, or even a friend pretending to have rented a home to the applicant years ago.

Fortunately, the red flags are pretty easy to see with this type of fraud. First, if an applicant seems hesitant to give you any reference information at all, you should wonder why. When references are too glowing, too positive, and just too perfect, you may not be talking to an actual landlord. You want to hear that the tenant paid rent on time and took care of the home. When you speak with someone who cannot stop gushing, you might wonder what’s really going on.

There are also references from people who have vague or generic details. You can’t quite see when or where they rented out a property. Or, their information does not match the public records on file for the address provided by the applicant. 

Invalid or unreachable contact information is also a problem. It tells you that the applicant does not want you talking to anyone they have rented from in the past. Why?

Verification Tip

Always verify references with a direct phone call. If the landlord or employer cannot be reached or gives inconsistent information, proceed with caution. Don’t be afraid to ask for a second reference if something feels off.

3. Fake Social Security Numbers and Identification

It’s not uncommon for fraudsters to provide a fake or stolen Social Security Number (SSN) or a counterfeit identification card. These tactics are used to conceal criminal backgrounds or poor credit histories. There might be inconsistent names or addresses between documents that you’ve collected. You might have poorly printed or low-resolution IDs that look altered. A social security number provided by an applicant may not pass online verification checks. 

Use online services to cross-check SSNs. Request a government-issued ID (driver’s license or passport) and confirm that the details match the applicant’s information.

4. Concealing Eviction History

Not a lot of tenants are going to admit to an eviction, especially if they have reason to believe that you won’t bother checking the national eviction database. 

Always check the national eviction database.

Some applicants will try to hide past evictions by either omitting this information or providing false statements. As a landlord, this can be especially damaging as tenants with eviction histories may cause long-term problems. Watch out for missing information regarding past residences. Be wary of applicants who are vague or defensive when asked about previous rental issues. If there’s an unwillingness to provide details on past leases, you should wonder why.

5. Overpayment Scams

In addition to fraudulent rental applications, there are also the scams that terrible people will try to run after they’ve expressed interest or even been approved for a home. One that we want to call your attention to is the overpayment scam. This one is pretty well-known not only in the rental industry but all over. 

Here’s how this scam works: once a rental application is screened and the tenant approved, you may ask for a security deposit and/or the first month’s rent. So, that would-be tenant may send you a check or money order for more than the rent amount, often with a follow-up message apologizing for the error. The scammer will then ask you to refund the difference. A few days later, the check bounces, and the tenant is long gone with the money you refunded.

It seems impossible to fall for this one, right? But, plenty of smart rental property owners do. Our advice is this: never agree to refund any money. 

Beware of any tenant or even any applicant who sends you a check or money order for more than the agreed-upon amount. You might get a $5,000 check for a $3,000 security deposit and first month’s rent, and then they’ll call you in a panic, claiming they made an error. After requesting a refund of the $2,000 “overpayment,” the scammer will ask for the money to be wired or sent via a non-reversible method. By the time the bank catches on and the check is flagged as fraudulent, the scammer has already vanished with your money.

This is a terrible way to fall victim to fraud during the application and leasing process. If you’re going to collect any move-in funds or rent, ask for certified funds in the exact amount that’s due. No exceptions.

Preventing Renter Application Fraud: Best Practices for Winston-Salem Landlords

Now that we’ve covered how fraud shows up on rental applications, let’s discuss how to safeguard yourself and your property from fraud. Implementing a comprehensive and legally compliant tenant screening process is essential in minimizing risks.

Develop a Robust Screening Process A thorough tenant screening process is the foundation of fraud prevention. This should be a systematic approach that includes identity verification. Cross-check the applicant’s details with credit and background reports. Review those credit reports carefully. Pay attention to past bankruptcies, high levels of debt, or late payments. Always verify income. Ask for multiple forms of proof, such as bank statements, tax returns, and recent pay stubs. Confirm employment with the employer directly. Conduct those rental history checks, too. Contact previous landlords to verify the tenant’s rental history. Be sure to ask about late payments, property damage, and any past disputes.

Use Secure and Reliable Online Platforms Paper applications are not only cumbersome but also more susceptible to fraud. Instead, leverage online application platforms that automatically verify key information and offer secure, digital storage of records. These platforms often have built-in features to validate SSNs, run background checks, and verify references, all crucial in ensuring that your applicants are legitimate. Choose an online platform that complies with tenant screening laws and provides detailed audit trails of all application activities. Work with a property manager when you don’t want to seek out new systems and third parties. We have all the technology already in place.

Confirm SSNs and IDs Verifying an applicant’s SSN and identification is crucial. Use an online SSN verification tool to confirm that the number is legitimate. Request a government-issued ID (such as a passport or driver’s license) to verify that the applicant’s name and other details match.

Keep Detailed Records In case of disputes, it’s important to maintain accurate and complete records. Keep documentation of all application activities. This includes the date the application was received, how it was processed, and any communication with the applicant.

Trust Your Instincts

Finally, always trust your instincts. If something feels off about an application or an applicant’s behavior, take the time to dig deeper. Whether it’s a reference that seems too perfect or an ID that looks a little too blurry, don’t rush through the process.

Why Is Rental Fraud on the Rise? And What’s the True Cost Here?

Several factors contribute to the increase in rental fraud that we’ve been seeing not only in our own market, but in rental markets all across the country. 

• For starters, just about anyone can access impressive technology. Artificial Intelligence (AI) can be beneficial for a lot of reasons, but it can also muddy the waters between what’s real and what’s invented. Falsifying documents can be done on a smart phone. While online applications are far more efficient and complete, they’ve made it easier for applicants to submit fraudulent documents without verification. There are even social media influencers who sell a fake identity that will let otherwise unqualified renters look great on an application. The fraudsters are working faster and harder than ever before.
• This is also a tight and competitive rental market. Applicants know they are fighting a lot of qualified renters for the best rental homes in the area. That can lead to lies and more than a little bit of desperation. 
• Landlords are trying to do it all themselves. When you’re in a hurry to get a tenant placed and rental income flowing, it’s easy to overlook a red flag or avoid digging too deeply into an applicant’s background. Generally speaking, DIY landlords are most often victimized by fraud and dishonesty. Independent property owners may lack the tools or experience to identify fake documents or red flags. This allows bad applications to slip through the cracks, especially if screening procedures aren’t as strict as they should be. 

Rental property owners need to understand that letting a fraudulent applicant into your property can have serious consequences. You may be dealing with unpaid rent. If a tenant lied about their income, they may quickly fall behind on payments. This could lead to evictions, which are costly and time consuming. Not to mention stressful. 

You may have to go through the leasing process all over again, too, and this time with lost revenue and additional wear and tear on your property. Taking preventive steps before handing over the keys is so essential.

Working with a Professional Property Management Team in Winston-Salem

Screening tenants and preventing fraud can be a complex process, especially if you are managing multiple properties or new to the rental business. If you’re feeling overwhelmed or want to ensure that your application process is thorough and legally compliant, consider partnering with a property management professional.

At Capstone Realty Consultants, we are experts in tenant screening and fraud prevention. We utilize state-of-the-art technology to perform background checks, verify income, and ensure that only legitimate applicants are approved. Our team is familiar with all state and federal rental laws, so you don’t have to worry about legal missteps.

By partnering with a professional property management company, you can reduce the likelihood of fraud, avoid costly mistakes, and ensure that your rental business runs smoothly and profitably.

We know that rental application fraud is a growing concern for landlords, especially in places like Winston-Salem, where demand for rental properties is high and a lot of the rental homes around here are self-managed. 

You don’t want to stress yourself out or risk your income and ROI. By developing a comprehensive and diligent tenant screening process, utilizing reliable online platforms, and maintaining consistent documentation, you can minimize the risk of fraud and protect your investment.

Remember, fraud prevention is not just about avoiding financial losses. It’s also about ensuring that you have reliable, responsible tenants who contribute to the long-term success of your rental business. With vigilance, a solid screening process, and the help of experienced professionals, you can safeguard your property and enjoy a smooth and profitable rental experience.

We are here to protect you and your Winston-Salem investment properties from fraud and loss of income. Let’s talk about how to manage this risk and establish better screening and application systems. Contact us at Capstone Realty Consultants and we’ll help you with your Winston-Salem rental home.