Six out of 10 Property Managers Experienced Fraud in Past Two Years
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Insights
The recent findings by TransUnion highlight a significant issue within the property management sector that could have implications for the broader real estate market. The rise in rental fraud poses a direct threat to the financial stability of property management companies. Increased evictions and bad debts, as reported, suggest a strain on resources and potential losses in revenue. The fact that 38% of property managers fail to detect fraud until after tenancy begins is indicative of a systemic problem in risk assessment methodologies currently employed.
For stakeholders, this translates into a need for enhanced screening processes and possibly the adoption of more sophisticated technology to preemptively identify fraud. Companies that provide such technological solutions could stand to benefit if the market reacts by seeking out their services. Conversely, property management companies that fail to adapt could see a negative impact on their bottom line, reflected in their stock performance.
From a financial perspective, the report's indication of a 27% increase in bad debt due to fraud suggests that property management firms may face deteriorating credit profiles, which could affect their ability to secure financing or lead to higher interest rates on loans. This could also impact investors' perception of the risk associated with these firms, potentially leading to a reevaluation of stock valuations in this sector.
Investors should monitor how companies in this space are responding to these challenges, as proactive measures could mitigate risks and protect revenue streams. Firms that are quick to integrate advanced fraud detection systems may gain a competitive advantage and investor confidence, potentially resulting in a positive impact on their stock prices.
The rise in rental fraud has legal implications for property managers. The process of eviction is not only costly but also legally cumbersome and increased eviction rates due to fraud can lead to a backlog of legal proceedings. This can further result in a drain on company resources. Moreover, a company's reputation could suffer if it is seen as unable to protect its residents from fraudulent activities, leading to a potential loss of future business.
It's important for stakeholders to consider the legal costs associated with late fraud detection and the potential for regulatory scrutiny if fraud becomes pervasive. Companies that are able to demonstrate robust fraud prevention and detection measures may be better positioned to avoid these pitfalls, which in turn could have a favorable impact on their stock market valuation.
TransUnion research finds outdated risk assessment methods leading to alarming levels of late detection
CHICAGO, April 04, 2024 (GLOBE NEWSWIRE) -- As the rental market grew over the past couple years, fraud naturally followed. Six out of ten property managers experienced fraud in the past two years, according to research from TransUnion’s tenant and employment screening business.
More concerning,
“Once fraudsters become residents, the dangers and damages only compound,” said Maitri Johnson, senior vice president of TransUnion’s tenant and employment screening business. “Delinquencies and evictions are expensive and take significant time and effort to enact. In the meantime, the other residents might be at risk with fraudsters nearby.”
The report found
Property managers appear almost evenly split with their approaches to mitigating fraud risk. About one third (
“Those who rely on their instinct, rather than a formal methodology, may put themselves at risk,” said Johnson. “Not only is that not effective for detecting potential fraud—especially as fraudsters become increasingly sophisticated—it also risks denying housing based on the property manager’s biases.”
The report found that even in-house manual risk assessment processes left vulnerabilities to potential fraud. For example, manually scanning driver’s licenses, checking credit scores and verifying employment might not protect against fraudsters using synthetic identities.
Comprehensive, identity-based solutions are powerful in helping defend against rental fraud. Such technologies help detect red flags that indicate fraudulent applicants before they move in. These solutions also streamline the process for legitimate applicants, getting them approved quickly.
“There is no one-size-fits-all approach to solving fraud. Ultimately, multi-layered, identity-based fraud solutions improve the customer experience by creating efficient processes for applicants and protecting residents from would-be fraudulent neighbors,” added Johnson.
TranUnion’s TruValidate™ ResidentID solution is designed specifically for multifamily operators, using multilayered, data-driven defenses to help stop applicant fraud.
Click here to read the Multifamily Report: Fraud Continues to Be a Growing Threat.
Research Methodology
This online survey of 98 property managers was conducted between October 23, 2023 - November 17, 2023, by TransUnion. Property Managers were surveyed via email through an online research platform. Survey questions were administered in English. The sample includes property managers who oversee a variety of housing types, number of units, and locations. These research results are unweighted and statistically significant at a
About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company with over 13,000 associates operating in more than 30 countries. We make trust possible by ensuring each person is reliably represented in the marketplace. We do this with a Tru™ picture of each person: an actionable view of consumers, stewarded with care. Through our acquisitions and technology investments we have developed innovative solutions that extend beyond our strong foundation in core credit into areas such as marketing, fraud, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good® — and it leads to economic opportunity, great experiences and personal empowerment for millions of people around the world. http://www.transunion.com/business
| Contact | Dave Blumberg |
| TransUnion | |
| david.blumberg@transunion.com | |
| Telephone | 312-972-6646 |
FAQ
What did TransUnion's research find about fraud detection in the rental market?
What are the key findings of TransUnion's Multifamily Report?
Who is the senior vice president of TransUnion's tenant and employment screening business?
What percentage of property managers saw increased evictions due to fraud according to the report?
What are some consequences of fraud in the rental market mentioned in the PR?
