Renters demand an online application process, and property management companies have obliged. Unfortunately, as a result, the industry has seen a spike in fraud — and most companies are woefully unprepared to deal with it.
That’s what the findings of a new study conducted by Forrester Consulting and commissioned by TransUnion revealed. In fact, 95% of companies surveyed experience difficulties identifying, mitigating or preventing fraud.
You should definitely read the full report, but here are a few eye-opening takeaways:
97% of property management companies have experienced fraud
“We’re encouraging everyone to lease an apartment online, get their credit checks online, sign the lease online. We love being off paper, but sometimes we don’t meet applicants until they move in, so this increases the risk for fraud,” says one regional VP at a property management company.
No kidding. In the last two years alone, 97% percent of respondents said they experienced fraud in the multi- and single-family properties they manage. However, perhaps even more alarming is that fraud is rarely an isolated event: 80% said they’ve experienced fraud up to 20 times!
It’s not just about dollars and cents
You’d think decisions-makers would be most concerned about the cost of fraud. After all, evictions really take a toll on the bottom line. It can take up to five months to evict someone, and the loss of rental income, plus the cost of legal fees can reach well into the thousands.
However, a VP says, “One of the biggest concerns is how [fraud] impacts our reputation. There’s a very high cost, and it’s not so much about the monetary implications as it is about reputation.”
Fifty-nine percent responded that fraud had hurt their company’s reputation — so you can see how prevalent the damage is. The loss is hard to put a number on, but one thing is certain, once a company’s reputation is tarnished, it’s very difficult to gain back the trust of customers.
Fraud is usually detected after it’s too late
Seventy-three percent of respondents didn’t detect fraud during the application or background process — only doing so after the fraudster moved in. Seventy percent identified the fraud within the first six months after move-in, leading to forced turnover well before the typical end-of-lease cycle.
Ultimately, dealing with the aftermath of fraud costs more than it would to invest in the right tools to combat it in the first place.
Companies aren’t going far enough
The key to detecting and stopping fraud requires deeper insight. Identity verification, a history of an applicant’s activity and transactions, and consortium data (other instances of confirmed fraudulent activity) are critical, especially when it comes to online applications.
Unfortunately, property management firms just don’t have the resources or time. Fifty-four percent say it takes too much time to pinpoint discrepancies, which is likely why 50% aren’t fast enough to respond to ever-changing fraud tactics.
So how can property management companies protect their reputations, keep and gain new clients — and avoid declining revenues? Ninety-four percent of the respondents believe it starts with investing in a sound fraud technology solution. As one director of real estate told us, “If you can’t point to a robust solution to prevent and identify fraud, you’re not going to have a good sales pitch to a client.”
For more insight, including the three steps you can take now to prevent rental fraud, download the full report.