Risk Mitigation Moves to Front Burner as Fraud, Other Risks Increase

The fourth and final session of a recent four-part webcast series on the prospect experience took a bit of a curve towards a subject that impacts both renter and rental property: mitigating risks such as fraud, evictions, property damage  and other costly events.

It’s the part of the renter experience right up front, as prospects are screened and identity- checked and insurance is put in place or verified – ideally, with the least amount of disruption, delay or friction. But it’s just as much about protecting the property as protecting the renter by shielding them from potential liability.

Risky times for multifamily

Recent market dynamics have driven leasing velocity higher; lots of people are moving around. And more leasing than ever is happening online, due both to convenience and the “touchless” aspect accelerated by the pandemic.

Mike Mauseth, who serves as SVP of RealPage’s screening business, states that the good news is that solutions are available to mitigate all of these risks. “Every portfolio is unique and risk mitigation programs can differ a lot, so it’s important to work with a partner like RealPage that offers the whole array of options so you can customize your program to your business.”

Trends in resident screening and ID verification

With the FTC reporting a 60% increase in fraud in multifamily over the previous 12 months,  ensuring that the person who is applying is the person they say they are and will be a good, on- time paying resident is extremely important. Even more so when you realize that the average eviction-related expense runs between $5,000 and $15,000.

The most significant recent advance in screening has been the introduction of artificial intelligence, as embodied in RealPage AI Screening. “AI does a better job of predicting future behavior than previous screening methods,” explained Mauseth. “It taps into a huge rental history database and tells you who’s likely to pay their rent regardless of income; people who have always paid their rent in the past will find a way to pay now.

“When we built AI Screening, we predicted our clients would see loss prevention savings of about $31 per unit, per year. But when we looked at first-year usage, it actually came to $39 per unit.”

On the ID verification front, RealPage Screening Identity Verification uses comprehensive and dynamically updated identity intelligence and pattern recognition to detect potentially fraudulent rental applications instantly. This helps protect you from risks of non-payment, crime, eviction, lease-breaking or other potential problems.

From the standpoint of the renter, it’s essential that screening and ID verification happen in as “frictionless” a way as possible – in other words, quickly, in the background, and not disturbing the progress of getting a signed lease unless there’s reason to worry about the applicant.

“In 90% of cases the identity is confirmed and the applicant moves on to the next step,” Mauseth explains. “You don’t need site staff to verify Social Security cards or documents or anything else. In the 10% of cases where there’s a speed bump, we interact with the applicant online for further validation; we make it simple so if they can’t take these steps, you’ve probably just prevented a fraudster from moving in.”

Renters insurance improvements

“We put the value of a first layer of resident-funded insurance at $40 per unit, per year,” said RealPage’s Adam Falkauff, one of the webcast moderators. “The savings are driven by the owner having fewer incidents that force them to file an insurance claim, paying out-of-pocket deductibles and adding to the upward creep of their insurance rates.”

RealPage’s renters insurance, eRenterPlan, is built right into the leasing process, so they can get coverage for personal liability, personal property, water damage, pet damage and more immediately and conveniently – meanwhile protecting you from potential costs they can’t cover. And it’s automatically monitored so you’re alerted if anyone’s coverage lapses, taking a big burden off your people.

RealPage also offers a gap coverage policy for the properties themselves called RenterProtection, further protecting the property from unforeseen, unpaid costs caused by renters.

The evolution of security deposits

To help renters get moved in and free up money to help move the economy, new laws in many states are requiring properties to either accept security deposit alternatives or spread deposit payments over time.

Smart multifamily operators are embracing alternatives to large, refundable up-front deposits. RealPage’s Deposit Insurance product, for example, offers renters the choice of a traditional deposit or a low-cost alternative that transfers the risk to a third-party insurance company.

Bottom Line for risk mitigation

“What we’ve been talking about in this series of webcasts is the renter experience from the time they first learn about your property to the time a lease is signed,” Mauseth summed up. “Risk mitigation is an important part of it, and you want it to be as smooth and easy as possible, while still protecting the property and its income. Your goal should be to integrate all these various pieces and parts into a streamlined flow that starts your relationship with the renter off in an ideal way.”