5 Tenant Screening Scams and How To Avoid Them
“Here are all the things you asked for!” says the tenant eagerly with a courteous smile as he hands you a neatly compiled folder of papers. As you quickly flip through the folder, everything looks in order—the rental application is completely filled out, proof of residence and employment are all there. So you take a security deposit and the first month’s rent.
You’ve been busy, so it’s a month later when you notice that the checks bounced. Uh oh. You inform him of what happened, he apologizes, and writes you a new one. Okay. Maybe he just forgot to put money into his account that first time. Relief washes over you, as you feel reassured he’s given you a check to a working account. To your dismay you find the checks have bounced. Again.
Now he’s withholding rent from you, complaining that the property is deplorable. What nonsense! You file for his eviction but the process does not go as quickly as you hoped. Someone is now living in your property for free and you’re coughing up the dough to cover the rent he should be paying while you wait for his eviction to process.
This is a complete tenant screening horror story. (Interested in other tenant horror stories? Read this.) Even if this may not be the case with all tenants, there are still many scammers waiting to take advantage of a vulnerability in a landlord’s screening process. Trying to find the perfect tenant is difficult, especially when there aren’t so many perfect tenants and so many more pretending to be the perfect one.
To make matters worse, scammers are becoming progressively clever and professional in their methods. Thus, proper screening and rental applications are a crucial and rudimentary component of taking in a new tenant.
So what are some of the things to look out for to avoid getting scammed?
Back when you flipped through the documents the potential tenant handed you, you briefly managed to see the credit score: 650. Wow! That’s great! You managed to land that nice tenant with a fair credit score! No nightmares for you. Done.
With the boom in the rental market, tenants will usually apply to multiple rentals and in turn, come prepared with their own credit report in order to save on the fees landlords charge for a credit check. One of the mistakes a landlord can make receiving one such credit report is simply skimming through it and focusing only on the credit score.
Credit scores sometimes provides validation that a tenant will be financially responsibility, but not always. This being the case, it’s crucial to understand how to interpret a tenant’s credit report. In other words, don’t just stop at the credit score. A tenant’s payment history is just as central to the report as is his credit score.
What else? It is a good cautionary measure to do your own credit report check. Yes, doing so will take additional effort on your end. But no worries! Rentalutions has its own convenient and easy to access credit report service.
Accepting the tenant’s credit report or not is ultimately the landlord’s call, but enforcing a policy which requires that the landlord does a credit check will better legitimize and professionalize the property for rent. Don’t skip the step of analyzing a tenant’s credit report.
Among the other documents in the folder were the tenant’s last month’s electric bill as well as his tax return. That’s good, right? Sure it’s a good start, but is it necessarily reliable? As with the credit report, the answer is no.
It might seem cynical to so quickly doubt the information that the tenant has provided you. But considering the lengths to which people go to give falsified information, it’s not so unreasonable to question the truthfulness of the documents provided. Unfortunately, a market where people sell check stubs and proof of employment documents exists. These check stubs and other documents are easy to access as some are advertised on domains such as Craigslist, which some tenants utilize to scam landlords.
Let’s be honest. At a glance, there may not be anything discernible between a real or fake document. The key isn’t to be able to know immediately between a real and a fake, but to acknowledge that the documents provided may not be entirely true. Of course, requiring the tenant provides these documents is a good first step. But the landlord needs to take an additional step and confirm whether or not these documents are true.
Do the research on the documents provided. Does the company or workplace even exist? Is this a real employer? Is this the tenant’s real previous residence? Try to get in touch with the tenant’s employer or previous landlord. If the documents are genuine, there will be faces to pair with them.
Electronic or impersonal exchanges regarding your property are perhaps one of the trickier aspects of being a landlord. At one point you might receive an e-mail or perhaps even a phone call regarding the property you listed in which the tenant will explain his employer is moving him to the area of your property. In the case that you continue with the exchange, he may send you an “employer’s check” which is much larger than the amount you require. He will ask that you return to him the difference which happens to be where the scam takes place.
The truth is that in this situation, there is and was no “employer’s check”. It was a fraudulent check and by the time he cashes the check you sent him, he will be long gone. Boom. A couple thousand dollars gone right there.
Firstly, any overage on the amount you request is a red flag. There should be absolutely no reason that your tenant pays you an amount exceeding what you require. Ensure that the amount you receive is what you requested and in that way you are held accountable only for what you originally listed.
Secondly, any exchange or transaction that takes place solely over the phone or e-mail is asking for trouble. An offer from a tenant who has not even seen your property yet is suspicious. Even if a tenant is moving from out of town, you need to meet face to face with them. Moving from far away should not exempt the tenant from a proper screening process.
So after an internet exchange, you finally meet with a tenant you have been talking to. Perhaps he is very content with the property that you’ve shown him and wants to move in immediately. He offers you the first couple months’ rent in advance to really convince you that he’s committed to moving into your place. Sounds amazing, doesn’t it? After all, you’ll get a hefty sum of money up front and if he’s going to be living there, he’ll continue to pay the rent.
In this case, a silent red alarm should be going off in the back of your head. Consider looking at the proof of employment that your tenant provided you. Are there any inconsistencies? If the amount he’s willing to pay exceeds the amount that he makes in a month, there’s obviously something wrong.
Even if the tenant’s income and the offer make sense, it’s still worth considering why the tenant is so eager to convince you to let him move in so soon. Perhaps the tenant’s last landlord is evicting him and he needs to find a place to stay. If that is the case, he will be trouble.
Of course, not all such cases signify that your tenant is a professional trying to scam you. But again, take the time to enforce a legitimate process. A landlord needs to take the time to consider the applicant, research the documents provided, and perform a background check. As a landlord, enforcing a consistent tenant screening process as your own personal policy will create a stronger screening process and ward off scammers who are looking for a weak spots in your screening process.
Your new tenant finally settled into your property. You’re happy things worked out well for both you and him. But then the check for this month’s rent doesn’t come in. Why is rent late? You give it a day more, then you finally talk to your tenant. When you knock at the door, someone else answers it. You assume it is your tenant’s friend and you ask for your tenant. “Who?” the stranger asks with a blank expression. You explain that you are the owner of this property, but the recipient of your explanation is completely dumbfounded. She says that she has another landlord to whom she pays rent.
So what exactly happened here? The tenant you happily moved into your property was actually a professional who scammed you. After he moved in, he posed as the landlord of your property, advertised it, and moved another group of tenants in and took the first six months’ rent in advance all in cash. He not only took off with the tenants’ money, but what could be considered your money as well.
Can the police find him? Maybe. But chances are he gave you a false name and identity and since he took cash from the tenants living in your property now, the money can’t be traced back to him.
Well, let’s take a few steps back. What could you have done to avoid this debacle? Again, creating and sticking to a rigorous tenant screening process is key. While a rental application, proof of employment, and proof of residence are all important, one final crucial component is identification.
In 2014 alone, 17.6 million U.S. residents were victims of identity theft. Does your tenant’s proof of residence say his name is Dr. Dre? Does your tenant look like Dr. Dre? Who is to say the tenant you met with is not using someone else’s identity? This is the reason why it’s always important to take two forms of ID. One of these should be a photo ID and the photo is absolutely necessary primarily because it serves to match the tenant with the person he or she says he or she is.
Ensuring the identity of your tenant is not only important in terms of protecting your property, but also in regards to preventing him from further committing fraud in the case he is indeed using a stolen identity.
In light of all these potential tenant scams, the fundamental component to tenant screening is to take time reviewing and processing any applicants for a rental property. While it may take additional time, energy, and effort to properly go through the entire screening process, it will be worth it in the end.
Place weight on every phase of the screening process. For instance, a rental application is not simply a piece of paper. Treat it as a legal document. Any information you put on this document which a tenant signs, he or she is liable for and if that includes a credit score check or a background check, your tenant needs to understand that.
View yourself and your property as professional. Don’t assume you have an instinct for spotting “good” tenants. Don’t assume a reference from a friend of a friend of a friend makes the tenant trustworthy. Don’t take shortcuts for any matter. Reinforcing a structured approach towards how you take in and manage tenants will ensure a greater level of accountability for not only yourself but also for your tenants.
Learn more about tenant screening by reading our post debunking 10 common tenant screening myths. Now that you know the importance of a thorough, quality tenant screening process, why not check out how Rentalutions can make tenant screening so much easier for you?