Identity Verification Takes Center Stage as Multifamily Fraud Shoots Up 60%

In multifamily, virtual applications rocketed up in the “contactless” environment of the Covid crisis. With this came an increase in fraud.

The situation has been exacerbated by eviction bans. Once a fraudster is ensconced in an apartment but failing to pay, getting them out can cost between $5,000 and $15,000 on average in legal fees, turn costs, vandalism and other expensive line items.

And deception isn’t limited to move-in. It can take place as early in the renter life cycle as the initial property tour, and after move-in when it’s time to make payments.

The good news is that enhanced identity verification software is addressing these fraud touch points, and saving properties lots of money. All without causing them to turn away good renters through being overzealous.

An online invitation to fraud

The FTC reports that fraud in multifamily is up 60% year-over-year. This striking trend has property managers scrambling to find solutions for both their online and in-office interactions.

“There are ID verification solutions out there that are still mostly plastic-based,” says Michael Mauseth, SVP of Screening at RealPage. “You present a driver’s license or passport, which might be fake or belong to someone else, they scan it and you’re good to go. This just doesn’t cut it anymore.”

He emphasizes that RealPage’s solution, called RealPage IDV, goes far beyond the plastic. “There are many ways to verify someone is whom they say they are, including commercial and public data, government-issued IDs and mobile devices,” Mauseth explains. “The hard part is building a system that knows how to access and reconcile these things. Ours matches up the information prospects provide about themselves to what’s out there, and pinpoints any areas of doubt for deeper inquiry. It’s very smart, and very accurate.”

Mauseth is particularly enthusiastic about how much of the identity verification process takes place subtly and automatically. “There are a couple of great benefits to how unobtrusively the system works. First, the research burden is taken off the site staff – the software does the work. Secondly, most prospects don’t feel any additional friction in online leasing process – which is important so as to not add any unnecessary hurdles that may discourage legitimate applicants. Additional levels of verification are added only when necessary.”

Multiple touch points

There are three main “touch points” at which fraud can occur for multifamily, and it’s important to have all three covered.

The first is the property tour. Not only is this a good opportunity to screen out potential fraudsters – there’s also the safety factor to consider. Your property is allowing a stranger on to the premises. If they’re not who they say they are, it’s better to politely apologize at this early stage and refuse the tour than to let things progress any further.

Then there’s the application, which in the past has centered mostly on using screening to check financial and criminal backgrounds and not as much around verifying the applicant’s identity.

And finally, there are payments, for rent and other expenses. They’ve always been the prime target for fraud, mostly in the form of chargebacks, but weren’t under the umbrella of multifamily identity verification solutions until RealPage’s system was introduced.

Early successes

 “Within the first two weeks of using our solution several clients have been convinced of how effective it is,” says Mauseth. “In fact, two weeks is the mark at which one of our clients said ‘trial over’ and rolled it out to all their properties.

“In just March and April of 2020, soon after rollout, our clients saved around $6.2 million in the costs of fraud by using the solution, based on the average cost of moving a fraudster in. And this was just a small group of clients. We calculate that you save over $30 per unit, per year. The system is absolutely astonishing, and basically proves itself very quickly after you test it.”

Corissa Steinman of Thrive Communities would certainly agree. “In the short time we were in beta with RealPage IDV, we caught three fraudulent applicants which saved us $50,000,” she says. “We estimate over the next year we could save hundreds of thousands in reduced skips and eviction-related costs.” 

Interested in a trial? You can find out more about money-saving, risk-reducing benefits of advanced identity verification by clicking here.