The Time Wasted on Rental Fraud – A Detailed Calculation

Leasing agents go through a multi-step process to turn prospects into residents. The steps involved can be tedious and time-consuming. 

Unintentionally approving a fraudulent individual for move-in, therefore, can be a tremendous waste of leasing agents’ time – time that could otherwise be used to help legitimate prospects and existing residents. 

We interviewed Melissa Meyer, Director of Property Management of NMS Residential to dive deeper into the amount of time wasted helping a fraudulent applicant, taking into account the leasing and eviction process, from start to finish. 

Touring

The leasing process begins with leasing agents giving a prospect a tour of the community. This includes showing prospects the amenities, the model units, and the options available for their targeted move-in date. According to Melissa, this process takes up at least thirty minutes of a leasing agent’s time. 

Application and Background Check

After the initial tour, the follow-up steps are for prospects to complete their rental application. Leasing agents have to ensure that all necessary paperwork is collected. This includes the application, deposit, paystubs, etc. 

Then, a credit check with a third-party is performed. As expected, all applicants are screened by a third party to ensure that they have no criminal history or that they are credible for the commitment that they’re making. 

The most tedious and time-consuming part of the application process is scrutinizing the application. This includes tasks such as calling the applicant’s employers to verify their employment and paystub information, calling their previous landlords to check on their rental history, comparing application details to find any discrepancies. 

If the applicant has all the required paperwork and passes the background check, a lease document is sent out as the final step. Altogether, the process takes anywhere from one to four days.  

Moving in

Following the application process is moving the renter into the community. Leasing agents’ responsibilities for this process involves collecting any final documents such as a copy of the lease, first-month rent, renter insurance, information regarding utility billing; making sure to read over the documents and that all required signatures are present; walking the community and ensuring that the unit is move-in ready; and finally, handing out the keys to the unit. The process can take up to one hour and twenty minutes, even when leasing documents are already signed and collected online, according to Melissa. 

Eviction

When leasing agents realize that the renter is a fraud, eviction has to be filed. Eviction is a lengthy process that demands time and effort from both the leasing agents and the landlords. 

The typical indicator for a fraud case is unpaid rent that prolongs for one to two months. In most fraud cases, a fraudster would pay for the first month of rent. After that, there will be a delay in payment. Leasing agents would do their best to serve notices and warnings to mitigate the situation, and the fraudster would promise to pay rent by the end of the month. Such promise is made to prolong their stay at the property. To learn more about how rental fraud is committed, visit our previous blog post here.

The time it takes from when an eviction is filed until the case is settled is anywhere from three to six months depending on whether the fraudster is challenging the case in court and where the case is filed. 

State and local laws that are designed to protect renters – called Renter’s Rights – can be exploited by fraudsters to prolong the eviction process and extend their stay at a community. In California, for example, renters are encouraged to file responses to the court so that they can occupy the space for a longer time period. Being aware of this law, many fraudsters file responses or even go to the extent of hiring an attorney that can help them defend the case. 

In these events, landlords have to spend time gathering shreds of evidence to counter the fraudsters’ statements. This involves hiring third-party vendors to acquire professional inspections and documents, which can take up to hours or even days.  

In some counties in California, eviction cases can take up to one year. In fact, Melissa is currently dealing with a case that has taken her company one and a half years. It is a long and painful process – and “in reality, [landlords] are not going to recover very much,” said Melissa. Because of the time and effort required to serve an eviction, Some landlords decide to forego the process altogether and rather negotiate with the fraudsters only to get back their possession. 

Putting it all together

Unintentionally accepting a fraudulent applicant wastes leasing agents’ 

and landlords’ time – time that could be spent helping residents, helping legitimate prospects, and taking care of the property. At CheckpointID, this time is conservatively estimated to only include thirty minutes of tour time. However, we’ve demonstrated how the time it takes to deal with a fraud case goes beyond that needed to tour a community. It also involves the time spent processing applications, the time spent helping fraudsters move in, and the time spent evicting them from the community. 

Putting these together, a fraud case can cost a company…

On average:

30 minutes of tour time + 2 days of application processing + 1 hour 20 minutes of move-in work + 2 months of occupancy with unpaid rent + 4.5 months of eviction = 6 months, 17 days, and 1 hour 50 minutes – that is more than half a year. 

On a conservative measure, these add up to:

30 minutes of tour time + 1 day of application processing + 1 hour 20 minutes of move-in work + months of occupancy with unpaid rent + 3 months of eviction = 5 months, 1 day, and 1 hour 50 minutes.

On a more extreme measure, these add up to: 

30 minutes of tour time + days of application processing + hour 20 minutes of move-in work + months of occupancy with unpaid rent + months of eviction = 8 months, 18 days, and 1 hour 50 minutes.

Final Notes

CheckpointID has scanned over 1.5 million IDs. Within 2019 alone, we identified more than 11,000 fake IDs leading to potential fraud cases.

Given that each fraud case takes an average of 6.5 months to resolve, 11,000 cases of fraud works out to be 71,500 months or 5,958 years. This is the amount of time that multifamily would have wasted if fraudsters were not stopped at the door. 

A fraud case can take 6.5 months to resolve, but verifying IDs before tours only takes a few seconds. It is easy to see the benefit of ID verification and why it is critical to verify IDs before tours. 

Credit

Melissa Meyer, Director of Property Management of NMS Residential.