Due Diligence

Preventing Rental Fraud

• by Justin Lieberknecht
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How to Protect Your Properties from Potential Fraud By Justin Lieberknecht Fraud is out there. Whole call centers in India devote themselves to software fraud, bank fraud, gift card fraud, and rental fraud. According to the FBI’s Internet Crime Complaint Center, 11,578 people reported losing more than $350 million to fraud in 2021. The losses are likely much higher, as many scams go unreported, and some are stopped before money changes hands. Protecting your properties from potential fraud is an undertaking that requires diligence, attentiveness and awareness of what techniques are being used. Gathered here are what Poplar Homes has seen and what we and our affiliated companies have done to mitigate the risk of fraud. Where Does Fraud Begin? Most fraud cases start with a rental listing ad offering a “too good to be true” low monthly rent and then the situation escalates from there, up to and including the renter signing a fraudulent lease agreement, wiring the first month’s rent and deposit, and then eventually getting evicted by the “real” owner or property management company. Scammers will frequently take ads from legitimate websites, grabbing photos from Zillow, Apartments.com and others, and then reposting them on Craigslist, Facebook Marketplace and other listing sites as a rental with their contact information. The ads can have slight changes to the address, such as an added apartment number or unit number, or a change from “Street” to “Avenue.” We have seen ads with the numbers spelled out, so that 123 Main Street is listed as One-Two-Three Main Street. This is to try and keep the fraudulent ad from being detected by the real owners. The ads may have watermarked images or poor descriptions of the home. They may represent the actual company managing or owning the property, but they all have the scammers’ contact information. Major listing sites, such as Zillow, have made huge strides in eliminating these from their site, while no progress has been made on Craigslist and Facebook Marketplace. The unmoderated nature of these sites allows for fraud and places the burden on the property manager or owner to track their listings. Several companies, including FirstKey, American Homes for Rent and Progress, regularly scan these sites for illegitimate listings by checking the addresses of their own properties. Once a scam is found, it is reported by flagging it to the site, and then the scammer’s contact info can be used to search the site for additional listings that are fraudulent. To alleviate concerns over the often-low rent being charged, the fraudster, sometimes in the ad or sometimes in the first communication, will use a variation of a “need and reward” based storyline. The most common of these are:  The Religious // The scammers will represent themselves as religious and say that they are either changing churches or going on a mission trip, and thus the opportunity to rent the home. They compound this by presenting that they are looking for someone holy. This preys on the need to believe in a better-than-usual opportunity and helps potential renters move past the issues surrounding the unusualness of the situation. The Military // The scammers will represent themselves as an enlisted member of the military who has been assigned to a new base. This move has placed him in a situation where, because of the military housing subsidy, he can offer below market rent. The scammer will often advise that he is looking for someone with military-level cleanliness. This preys on the perception of the target that they are unusually clean and tidy, which is irrelevant to the situation. Steps to Prevent Fraud Scammers are getting better and better at walking people past yard signs, fraud alerts and even phone calls with the property manager or owner. The claims vary, but the scammer will advise the potential renter that they are working with the company and bypassing them will save money. Scammers have also claimed to be a part of the listing company and generate fake leases with the company information on it. When trying to stop this fraud, there are physical, technical, and engagement methods to put in place. Poplar Homes has found great success by having the following restrictions in place when generating codes:  »         No VOIP numbers (these are common for scammers as they can be generated easily).  »         A requirement for credit card, ID, and selfie (this adds friction and awareness to the shopper and eliminates the ability of the scammer to generate their own codes).  »         Numerous in-app messages and automated emails educating renters to never wire money for payment and to make all payments through Poplar’s platform.  »         Physical signs placed around the property (these state “this property is managed by Poplar Homes and if you are being advised otherwise, please contact us immediately.”) This can also be an automated text during the showing.  »         An attempt at direct contact (if you can contact the shopper while they are at the home and verify their situation, they can clarify any third-party involvement). When encountering someone who has been defrauded, Poplar Homes will first attempt to qualify them for a home we have available or even the home they are currently in. We have had success with this. We also offer assistance with reporting the incident to the appropriate authorities. In the case of fraud, it is necessary to insert as many points of friction as possible for the renter to bring their attention to the possibility of fraud. Each of these insertions will decrease the number of people who are fully defrauded. We get reports of fraud and do all we can to report it on the platforms hosting it. Poplar Homes places awareness moments throughout the process, and when someone is defrauded, we do all we can to avoid eviction. For the successful alleviation of fraud levels, a standard statement of prevention should be given to the press when any event occurs. It is possible to continue to reduce fraud as we have seen drastic