As Real Estate Fraud Becomes More Prevalent, Technology Can Help

Late last year, the FBI issued a notice titled “Criminals Use Generative Artificial Intelligence to Facilitate Financial Fraud,” in which the agency warned about the use of “generative artificial intelligence (AI) to commit fraud on a larger scale.” AI, according to the FBI, “increases the believability of their schemes.” The technology behind ChatGPT and sophisticated co-pilots is also making it hard to determine what’s real and what’s not.

As the Washington Post reported, criminals are deploying these tools in real estate transactions. The Post focused on home sales, but this trend may be even more prominent in the rental housing industry. In a RealPage survey, 75% of property managers saw more rental fraud in the past year, and 58% reported prospective tenants attempting to use fake or manipulated identities. RealPage did not explicitly attribute the increasing prevalence of fraud to AI, but participants in a recent Multifamily Insiders event devoted to combating fraud in the tenant-screening process did. 

According to participants, the burden tenant-applicant fraud imposes on property management companies in the form of money, labor, and time can be enormous. 

Some of the warning signs participants reported include: 

The use of cell phone numbers, not business phone numbers, to verify employment.
The use of a Google Voice number (i.e., a number which reroutes to a different number).
Fake Social Security Numbers

There are groups online, participants reported, that will sell an applicant an entire fraudulent packet of information. 

Some property management teams are checking documents and backgrounds manually. The effort is time-consuming. One respondent created training videos on fake documents and brought in an expert to look at forged Social Security cards. Another said some tenants who gained access to a unit under false pretenses caused property damaged that increased the building’s insurance costs.

The consensus was that these were not edge cases. Rental application fraud, in their view, is mainstream and widespread. 

Fortunately, the right technology can help. There are three prime examples within Camber Creek’s portfolio. 

There Are Solutions

PetScreening automates the process of validating documentation of emotional support and assistance animals, makes it easier to enforce pet policies, and gives pet owners access to pet-friendly resources—all at no cost to the building owner. Since its launch in 2017, PetScreening has helped owners and operators capture nearly $300 million in pet-related revenue that otherwise would have been lost.

100 partners with CLEAR, the company that provides stringent identity-verification for airport travel, on a Verified Renter Network. Tenants are pre-screened before beginning the rental application process.

And Proof uses a range of digital identifiers and online behavior to confirm the participants in a range of online transactions, including the titling process for single-family residential sales.

In the near term, fraud within the real estate sector may become more prevalent, but there are ways to combat it.

Photo by Dillon Kydd on Unsplash