Landlords & Property Managers often highlight the importance of applicant screening when renting out your property. It is seen as the key to minimizing your risk when leasing to a new tenant. However, the current way most Landlords screen applicants for their rentals is flawed.

In the past two years I have talked to dozens of Chicago landlords that have fallen victim to these scams. We even fell victim back to back on these scams in 2022 before we knew what I am about to tell you here. These are lessons that can help you spot a fraudulent tenant application and save you six to twelve months worth of problems.

We as a community are not sharing enough information regarding the problems that are occurring. The scams target everyone, even professional Landlords, Realtors, and Property Managers. I have my pulse on the Chicago and Chicago suburb rental market, but I am hearing about these scams around the country as well. Maybe these housing providers are blinded by the "too good to be true" applicants. Or, maybe they are afraid they could violate Fair Housing Laws by asking too many questions. In this article, we will talk about the Stolen Identity Scam Applicant (SISA). We will cover what you need to know when underwriting a tenant. We will also cover screening tenant applications.

What Is A Stolen Identity Scam Applicant (SISA)?

With the dark web, social media, and currency such as bitcoin, it is easier to find people sellers of fake identities online that are located all around the world. When someone purchases these fake identities, it typically includes a Social Security number, Driver's License, and a personal story behind it for the scammer to use. The applicant commits fraud by using this stolen information in submitting a 100% false application to you as the Landlord.

Why Chicago Landlords Fall Victim To Stolen Identities?

When an application is submitted, at first glance it may seem attractive to underwriters because the data looks perfect. Often, the stolen identity has an 800+ credit, a high income, and a house the scammer claims to own or is currently selling. They also provide a fake bank statement with hundreds of thousands of dollars sitting in the account, making the underwriting of the application feel pretty good here.

Chicago Rental Applications That Are Too Good To Be True

These applicants will apply and seem super nice and very accommodating. They often apply sight unseen with some lie that runs along with the story of their stolen identity. As an example, an applicant that came through last month had a home for sale in Michigan. She had to quickly rent a place because that house was closing. She created the out-of-state scenario because it was a great story. It made sense and explained why she was applying without seeing the unit. The story was logical on the surface. The address on the application was one we could find on the internet. The property was under contract for over 30 days on Redfin.

Who Is The Actual Applicant?

These situations are terrifying. The approved applicant in name who really has a house for sale in Michigan won't move into your property. In fact, the identity of the actual person living in your unit is completely unknown to you as the Housing Provider.

What Are The Red Flags Chicago Landlords Should Look For?

Chicago Landlords often miss what become very clear red flags in hindsight. These are issues that with more due diligence and questioning of the applicant would have poked holes in the story. Housing providers often fail because they were impressed by a strong application and rushed timeline creating the feeling that if I don't approve this application I might miss out. This leads you to skip steps in their various checks or overlook inconsistencies in employment, rental history, or credit reports.

Fake Drivers License - The ID or Driver's License will include the applicant's photo and stolen identity information. We recently updated our software. Now, applicants must scan their face and ID. However, this method isn't foolproof. We also check for errors, like the wrong background color, birthdate, or address. Identifying fakes becomes harder with IDs from other states. We then need to understand those states' ID formats.
Other IDs & Matching Signatures - Not everyone has this option but if you can use face scanning software, review the state-issued ID format, or request further identification to prompt them to reveal any missing documents. Keep in mind, the applicant might present extra forms of ID like a Social Security card or work ID, so thorough investigation is crucial. If they claim to own a home, look up the signature on the mortgage or the deed (public records) and see if the signature matches the application or Driver’s License.
Fake Pay Stubs - When an applicant submits their income proof, check pay stubs carefully. Look for correct deductions, watermarks, and check numbers. If you spot issues like wrong deductions or missing logos, address them promptly. For example, an ADP pay stub should show the ADP logo. Be thorough to ensure accuracy.
Dig Deeper - Research payroll companies' standard templates. Check that the math adds up and net income matches what was put on the application. Or, you can do what we did. Invest in a document scanner. It will highlight documents that are not original or have inserted text.
Applicant’s Employer - Often, job details and pay stubs can be fake. So, be careful when checking. Does something raise any suspicions? It should. Now, use Google to research the applicant's employer. It is a red flag if the employer’s email ends in “gmail.com”.
Dig Deeper - If a quick search doesn’t turn up the supposed employer or if an elderly person answers the “business” phone confused about why you’re calling, get suspicious. Sometimes when you ask for additional documentation like a W-2, the scammer knows you’re onto them, and they vanish.
Information On Applicant Incorrect - It sounds funny, but the scammer often messes up. They put the wrong information on the application or tell a story that doesn't line up with the applicant. Recently on an episode of Straight Up Chicago Investor Podcast, guest Victoria Barkate told us about a bad tenant experience where the application said the prospect was 57 years old but the person that showed up was 37 years old. At the time she thought it was an easy typographical error or she doubted herself thinking she didn’t read the applicant correctly. In hindsight, the tenant messed up the story. Right there on the show we explained to Victoria and the audience what a SISA was.
Dig Deeper - As an applicant human error comes often when red flags are overlooked so don't let any red flag of information that seems off get past you without digging deeper.
Connecting With Prior Landlord - You might not reach the old Landlord or call a number with little information. If the applicant rents, ask for clear proof of electronic payments or cleared checks. You can even ask for proof they paid their mortgage in lieu of rental payment proof. Often in this scenario an applicant feels they are avoiding the step of having to provide proof of previous rent paid by saying they own a home.
Dig Deeper - Applicants often own a home. Their mortgage might not be on their credit report. Or, they claim ownership without debt. If they are homeowners, the deed is public. It shows their signature. This signature can be checked against other documents, like their state ID or driver's license.

Other Red Flags Chicago Landlords Should Pause To Think

Adults with over $100,000 in their bank account often avoid using the Cash App for all their payments.
People won't claim they're moving closer to work for just a few miles' difference.
SISAs aim for quick approval. They may turn aggressive if you ask for more information. We've seen a SISA threaten Fair Housing violations to pressure approval.
Initial funds might come from someone else's account. It's a red flag if the name doesn't match the new tenant. This is especially true when move-in funds come from a friend or sister.
Credit reports often show employment history. If an applicant claims to work in the trucking industry but the report lists a medical facility, it's a red flag.
Always verify the landlord's identity. Applicants might provide fake contacts, not related to the property.

What Can We Do To Prevent The SISA Trap

To avoid this trap, take action by setting up a rental screening system. This system goes beyond just checking credit and background.

Our process involves a risk assessment, contacting previous landlords, checking income, and reviewing payment history. We also assess their future payment potential. It seems like a lot of work, but investing time initially makes future business easier. We use a scoring system to assess risk. Anything unproven increases our risk.

To reduce risk, consider hiring a local Real Estate Broker. However, Brokers who rarely handle rentals might miss scam trends. They often learn about scams only after falling victim to a SISA scheme. This is not a criticism of local Brokers. If you're working with a Broker, share this article with them. If you're a Managing Broker, encourage your team to read it.

What Happens If I Have A SISA In My Property Now

Not all SISA's move in with the intent to avoid paying. Some manage for 14-18 months before rent issues arise. Often, people want to do the right thing. Yet, they know they can't get approved for a quality place so they go this route out of desperation. They buy a fake identity to boost their chances. Despite good intentions, they lack the proper qualifications to rent. As time passes, this becomes clear. It shows through late or missed payments, disorderly behavior, or neighbor complaints.

Being Firm On Your Collections Policy

Be sure you have a delinquency policy and hold firm to it. If someone stops paying and your policy is to deliver a 5 day after Day 6 of being late, and evicting once the notice expires, then stick with that plan and limit second chances you give.

If you suspect someone in your property is a SISA, consult with an attorney for guidance. Regrettably, there are limited options for addressing criminal charges, and you will probably need to pursue eviction proceedings.

Hiring a Property Manager reduces risk, making it a smart investment. Firms like ours, GC Realty & Development, LLC, have adapted after facing these challenges in the past. We’ve improved the showing and screening process to catch issues every time. Our technology includes face recognition, connecting the application to their bank, and fraud detection.