Snappt released the 2020 Effects of the COVID-19 Pandemic on Residential Rentals Survey. The survey shows that more than half of residential tenants are struggling to pay their rent, mostly driven by the COVID-19 pandemic. This is driving a 75 percent increase in evictions, with a current eviction rate of 21 percent. Many of these evictions are awaiting the expiration of moratoriums, with the typical building having 15 evictions stacked-up.
One in four of these evictions are associated with application fraud, where applicants fraudulently alter their financial documentation (such as pay stubs or bank statements) to fool property managers into accepting their application. “The survey shows that nearly a third of applications now exhibit application fraud,” says Daniel Berlind, CEO and co-founder of Snappt. “That represents a nearly doubling since the pandemic hit.”
Survey results showed that application fraud is widespread. Property managers reported that 85 percent have been a victim of application fraud, up from 66 percent last year. And, the culprits are upping their game. Pre-pandemic property managers felt just one in ten fraudulently altered applications went through undetected; they now say one in four application fraud attacks go undetected.
Property managers surveyed report more than half (53 percent) of tenants are having trouble making rent. In fact, a quarter are paying late, one in six (17 percent) now pay less than full rent and one in nine (11 percent) have stopping paying at all. With the increase in tenants not able to pay rent and increase in application fraud, the COVID-19 pandemic has cost the typical building $71,500 since March.
The full ‘2020 Effects of the COVID-19 Pandemic on Residential Rentals Survey is available at https://www.snappt.com/survey-covid-19-residential-rentals. The free report includes a list of top strategic tips property managers can take to detect fraud and decrease evictions.
Catalyst Case Study
Our nation’s nurses, teachers and first responders increasingly struggle to affordably reside within the communities they serve. This growing crisis is especially prevalent in California, which accounts for 40 percent of the least affordable cities for middle-income households1.
Larkspur, a California-based Catalyst Housing Group is tackling the middle-income housing crisis head on, working tirelessly to cultivate innovative capital solutions that spawn stable and perpetually affordable rental housing for California’s essential workforce. One example of Catalyst’s work is the recent acquisition of the Annadel Apartments in Santa Rosa, California. Partnering with the California Community Housing Agency, Catalyst is allowing Sonoma County’s essential workforce to remain local by reducing Annadel’s rents and restricting the income levels of new tenants to 120% of median income. “People who can’t pay rent where they work are commuting upwards of an hour or more in each direction and that is detrimental for everyone,” says Laine Gomez, a partner at Catalyst. Catalyst retained FPI, the industry’s fifth-largest property management firm, to manage Annadel.
High Rate of Fraudulent Documents
One of the challenges FPI faces across its portfolio is a high rate of fraudulent applications. “It’s surprising, but fully 26 percent of our applications include financial documentation that has been fraudulently altered,” says Nicole Ballard, Community Director at Annadel Apartments. To protect themselves from such fraud, Catalyst and FPI have partnered with Los Angeles-based Snappt. “We take the original financial documentation—such as a pay stub or bank statement—and with the help of our data-driven detection algorithms, we can tell whether or not a document has been tampered with or not,” says Daniel Berlind, co-founder and CEO of Snappt. “We’re essentially looking for digital fingerprints that point to fraudulent financial documents.”
What, Exactly, is a Fraudulently Altered Financial Document?
In some cases, it is an authentic document that has been altered digitally. An example might be a bank statement showing a balance of $1,803 that has been Photoshopped to add two zeroes. Voila—the applicant now has a balance of $180,300.
Another common tactic is to create a bogus paystub that appears to be 100 percent authentic. The applicant may be unemployed, but the paystub may show an annual income of $75,355.
A direct line can be drawn between application fraud and an increased chance of non-payment. As the average cost of processing an eviction tops $7,500 nationally, it is critical that owners like Catalyst leverage cutting-edge technology to properly screen tenants as they apply.
“We used to vet applications by hand,” says Ballard. “That took upwards of three days, and we had a high number of applicants bowing out as a result. With Snappt, we’ll submit the resident’s information and we have an answer in less than a day—often just an hour.”
Catalyst’s Gomez is thrilled with how Snappt is working out. “It’s simple, inexpensive and accurate,” says Gomez. “Our onsite team is happy. And that means Catalyst is happy.
AOA: For more information on how to check your applicants for fraud, visit www.aoausa.com and click on the “Document Screening” banner. After you log in, you’ll find a “Document Screening” tab right next to the “Tenant Screening” tab. You can follow directions from there.
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 three of the top six property management firms in the U.S.