As Chicago property managers, we are seeing the rise of scam applications, and with the new tools available with AI, it is getting easier for property owners and managers to miss red flags in applications that could signal con artists are applying. So as a leading Chicago property management company, what are we doing to prevent potential fraud? We have teamed up with Verifast to help run our applications. Verifast uses high-tech AI to scrub the applicant's ID and bank accounts to confirm their employment is real.
Why did we make the switch?
Fraudulent lease applications have been on the rise in Chicago, and old school background checks are getting beaten every day. For instance, the human factor of looking at an ID and determining if it's fraudulent has a 50/50 success rate at best. Do you remember being an underage college student going to a bar? Sometimes you got in, sometimes you got caught. AI can scan the ID and identify if it is real with precision and accuracy.
Identity theft is on the rise, as Chicago property managers, we sometimes see that an applicant's background check comes back and looks great with perfect credit scores, housing history, etc. But the potential scams involved in these rental applications are pure theft of all of the personal information of someone who doesn’t know that someone is doing the application process in their name. This is where making sure we are denying fake ids with 100% accuracy is a huge first step.
The second most pressing fraud issue we see is AI-generated documents that look and feel real, including fake pay stubs. By forcing the tenant to log into their bank account and using AI to scrub it and make sure that they are getting paid regularly by the company they claim to work for, it is far less likely for someone to steal someone's identity and also hack into their bank account, but it is not impossible. This is why our new screening process goes even deeper. When it scrubs bank accounts, it can tell us where they are paying rent, currently allowing us to make sure that we are speaking to the real landlord and not just someone else that is set up to answer and give canned approval answers.
As most Chicago landlords are aware, law enforcement is handcuffed when it comes to doing anything to a tenant with a lease signed by you. Although with the new law passed, they can finally remove squatters. If you sign a lease with a fraudulent potential tenant you'll have to go through the 8 month eviction process to get them out. This is why it is so vital to have a game plan to keep rental scams from ruining your profits.
For you to be better prepared, we’ve listed and discussed the most popular forms of fraud below.
Most Popular Forms of Fraud
1) The selling of approvals.
Con artists will apply to an apartment with their own credit and payment history. Once approved and given the keys, they will sell the keys to another tenant who paid them to get approval. The best way to avoid falling victim to this one is by making sure you meet your tenants and doing identity verification. Make sure they show you their ID and it matches who they are. We use Verifast to verify that the ID is not a fake ID and also make sure our in-house real estate agents are verifying that the person they showed the unit to is the person on the ID.
2) Fake pay stubs.
In recent years, AI has made it super easy to make a fake paystub, change the number to the company, or even take your paystub and change the numbers. This is why we require applicants to login to their bank account and have our AI scrub it to confirm payments are actually coming in. Our leasing process also involves calling or emailing the company to verify that the person is working the job they say they are.
3) Break in and re-rent.
We often will find our listings on social media platforms posted by someone not approved by us. The scam they frequently run is to use our photos, etc. to find an applicant, and then break into the home and move the tenant in. This is one of the few times the victim of a fraud scheme is not just the landlord. These tenants often think they paid the real landlord. This one is not a screening issue, but since it's a common scam, I thought I'd add it. The way to prevent it is to make sure the home is secure. We use an alarm system on our vacant properties to make sure no unknown person is breaking in. Secondly, if you are going to use a lock box for your real estate agents to show the property, make sure they are not opening it in front of potential tenants, and make sure they scramble the code when they go inside the home.
4) Trusting just any real estate professional.
Unfortunately, there is a big difference between hiring real estate agents to find a tenant and hiring a management company to find and manage a tenant. When you hire a property manager, you are hiring someone with a vested interest in the tenant being a good tenant because putting the right tenant in makes the job of a property manager easier for years to come than if they have to deal with a bad tenant. Real estate agents just looking for a commission often just want to get any tenant approved as quickly as possible in order to earn a commission. (No, this is not 100% of real estate agents but there are more than a handful that will do this.)
In conclusion, fake identities, fake IDs, fake paystubs, and even fake ads can cause your rental units to become victim to rental scams. And because of Artificial intelligence, the fraud conundrum stretches further than it ever has, which is why having a Chicago property manager with boots on the ground to verify potential tenants paired with AI technology is so important to keep the steady stream of fake w-2s from ruining rental housing providers ability to stay profitable and keep their rental properties a place where good tenants want to lay their head at night. Real estate fraud is at an all time high so we as housing providers need to be on the top of our game.
Learn more about our tenant screening and schedule a consultation today at https://www.chicagostylemanagement.com/tenant-screening.
