Any time you advertise a rental property online, there is a risk someone is using it to create a fraudulent listing or rental scam. While prospective tenants are the primary victims, there are real and serious consequences for your property management business as well.
Rental scams were up 59% year over year in 2020. A survey by Apartment List from 2018 estimated that 43% of all renters have encountered a suspicious listing. As many as 5.2 million U.S. renters have lost money from rental fraud.
Based on recent trends, those numbers have only increased since the report was published.
How Rental Scams Work
There are a few patterns rental scams typically follow. Usually the perpetrator is outside of the U.S. and they use Facebook Marketplace and Craigslist to post fake listings.
The goal is to manipulate desperate renters who can’t find housing in their price range. The scammers get renters to pay the application fee, then the security deposit and first/last month’s rent. We’ve even seen cases where renters have paid six months’ rent because it was such a great deal.
The scam starts when a legitimate property gets published. The scammer finds property photos online, copies them, and uses them for their own fake ads on Craigslist or Facebook Marketplace.
As people see the fake advertisement, they’re immediately drawn to it, because it’s posted for just a fraction of the cost of other listings.
When someone inquires about the fraudulent ad, the bad actor then contacts the legitimate property manager. Posing as a prospective tenant, they arrange a self showing and receive the lockbox code.
The scammer shares the lockbox code with the tenant, which gives the appearance of legitimacy and boosts the renter’s confidence. After viewing the property, the tenant submits a rental application and soon the scammer has collected the application fee, the security deposit, and first/last month’s rent.
Sometimes the tenant even moves in.
Related: Self-Showings for Rental Properties: The Pros and Cons
Any property can be used in a rental scam, but you’ll find a high concentration of scams in certain markets. These conditions are ideal for fraud:
- High competition among renters for properties
- High rent costs
- Desperate tenants
For example, one heartbreaking rental scam happened after a tornado ripped through Nebraska a couple years ago. It devastated the area and many residents lost their homes. Scammers started targeting this region, because they knew there were a lot of displaced people and fewer housing opportunities.
Rental Scams Hurt Your Business
In the best-case scenario, every time you have to deal with a rental scam creates operational drag on your business. There’s cleanup work to be done, undesirable communication with tenants who have been scammed, and communicating with the property owner about the situation.
One conversation you never want to have with the owner is to let them know someone got scammed using their property that you advertised through your unsecure software.
You could even lose property owners as clients.
If your property is used in a scam — whether it’s successful or not — it can hurt your reputation. Over time, scams can affect your ratings on Google and Yelp! You don’t want to be a housing provider with reviews that complain about scams.
We’ve seen many examples of property managers whose reputations have taken a hit from rental scams. It’s one of the biggest reasons that customers switch to Tenant Turner from other property management systems. They’ve been taken through the ringer and they’re looking for relief.
In the worst-case scenario, you have to deal with squatters. The scam has gone all the way through and a renter takes up residency with a fraudulent rental agreement. You only discover the scam when you stop by the property and discover someone living there.
You might have to deal with squatters that aren’t willing to move. They’re angry, they’re desperate, and they have nowhere else to go. Depending on the situation, the police may need to get involved. In some states like California, it’s very difficult to evict the victim, even though there was never any agreement between you and the squatter.
If the victim is agreeable to leaving, it could still take weeks or months before the property is vacant again. The squatter has probably been put in a situation where they can’t afford to move. They’ve already given the scammer their security deposit and first/last month’s rent, and they’ve paid movers.
Both you and the victim are stuck.
Tenant Turner Protects Your Property Listings from Rental Scams
Most property managers won’t find out about a rental scam on their property until they’re notified by a prospective tenant who noticed something fishy.
Fortunately, Tenant Turner software can detect these scams before they hurt anyone. Tenant Turner is constantly monitoring for suspicious activity and notifies you of any suspicious activity.
Tenant Turner uses several sophisticated methods to proactively prevent rental scams:
- Artificial intelligence — While a prospective tenant goes through the leasing process, we use AI to verify that they’re legitimate prospects and not bad actors phishing for your lockbox codes. Behind the scenes, Tenant Turner collects dozens of data points about a tenant lead. The data is processed through a real-time risk scoring algorithm to instantly weed out scammers.
- Post-event monitoring — Tenant Turner continues to monitor data associated with each tenant lead’s online transactions. If we detect risky activity where there was none before, we will immediately shut that person down and revoke any access that was previously granted.
- Proprietary blocklists — We maintain a massive database of compromised contact information and IDs that were previously used by scammers, squatters, and scoundrels to ensure they don’t get access to your codes or properties.
While AI is great, sometimes you need a human eye. Our fraud team is notified immediately if our system identifies anything that may or may not be 100% legitimate. We’ll investigate the flagged event and determine if they’re legitimate. If not, we’ll either notify you or shut them down completely.
Tenant Turner also watermarks your property photos so that they can’t be reused in a scam.
Related: The Business Benefits of Property Management Software
List Your Properties with Confidence
While rental scams may be increasing, you can reverse the trend for your own properties. Tenant Turner software gives you peace of mind that your properties — and your reputation — are protected, 24/7.
Get more tips about listing your rental property for better results. Download Tenant Turner’s Advertising Your Rental Property Guide for 2022.
