A rental applicant who offers to pay in cash may seem like the dream tenant. No worries over bounced cheques. In reality, cash payments are a red flag. Rather than streamlining the leasing process, a landlord needs to use extra vigilance when screening these applicants.
Here are four reasons to scrutinize tenants who offer to pay in cash:
1. A common reason that tenants offer cash is that they have bad credit. Offering to pay in cash — especially paying in advance — earns that applicant a pass on a tenant credit check. The landlord won’t know this person’s true financial situation for several weeks — and by then it’s too late to avoid income loss. If this person is not relying on continuing income or investments to pay rent, what happens when the cash runs out?
2. There is no good way to verify whether the cash the tenant is offering was obtained legally or whether the tenant has legal income. Offering cash is the calling card of a tenant who is involved in criminal activity or running a scam. That puts the property — and the landlord — at risk.
3. Accepting cash eliminates the ability to see information on cheques — address, phone, bank — that may not mesh with the photo ID, rental application, or previous cheques.
4. Handling cash creates unnecessary risks and attracts crime. Leasing agents who accept cash payments need to take special precautions to avoid being targeted by thieves. This can increase a landlord’s costs. Renters who pay cash may suffer the same risks. Accepting cash also exposes the landlord to false claims that the rent was paid.
While there are tenants who may rely on savings or choose not to use banks, these cases are outside the mainstream and a landlord must exercise due diligence to avoid scammers. For instance, if the person is claiming to be so wealthy they carry that kind of cash in their wallet, does it make sense that they’d be renting the specific property? Can they provide any proof of funds along with a photo ID? Does that information track with the tenant credit check?
An applicant who has sufficient income to pay rent is going to be able to substantiate that with documentation, whether it’s a letter outlining benefits from government assistance, pay stubs, automatic deposit records, trust disbursement records, or a savings account statement. Anyone who can’t provide a paper trail likely is telling stories.
That’s why it’s crucial to run a tenant credit check on the final applicant after the information in the rental application has been verified. Otherwise, it may not be possible to catch someone who is using a fake identity or misstating income. Even a seemingly wealthy applicant may have a history of not paying bills on time. The risk of tenant fraud is too great to take someone’s word for it.
This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).
Click Here to Receive Landlord Credit Reports.
Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.