Published April, 2013 in NARPM’s Residential Resource magazine.
Screening for Better Tenants
Most lease-ups result in entrusting a rental unit to a total stranger. The only method we have to mitigate this risk is to try to check the background of the prospect using the best tools and technology we can. This background check can include credit, criminal, and personal references. This process can lead to three results: the applicant is approved as-is, approved conditionally (where they may be required to increase their deposit or provide a cosigner), or rejected.
The Application Process
A prospective tenant completes an application, pays an application fee and, depending on your criteria, pays a deposit to hold the property. Your rental application collects the personal information of the applicant that you will need to screen the prospective tenant. This information includes their social security number, date of birth, address, employment, and criminal/eviction history. The applicant’s signature attests to the accuracy of the provided information, their agreement to any terms and conditions, as well as their consent and acknowledgement to obtain a screening report. Be sure to comply with the Federal Trade Commission’s (FTC) identity theft Red Flags Rule since you are collecting personal information. Much of this application process can now be handled online. The advantages of an online application process include:
- Supports applicants in remote locations.
- The process can be tailored to more/less detail based on answers provided by the prospect.
- The ability of the applicant to fill out the form at home where the applicant is more likely to have all the information the form requires.
- Less time spent by your agents helping applicants fill out the forms.
- Digital signatures prevent trying to chase down multiple occupants to get all the signatures.
- Online payments.
The Screening Process
Before you screen any applicants, you must first determine what selection/approval criteria you will use when screening applicants. It is absolutely essential that you apply this criteria routinely and fairly to prevent any potential charges of unfairness. The best approach is to let your credit reporting agency utilize technology to automatically apply your criteria to their reports and give you an automated yes/no/ maybe decision. This approach limits any liability you have for decisions made and also prevents rogue employees from approving/rejecting applicants for personal reasons. There should also be a mechanism in place by your provider to seamlessly change these factors based on any criteria you would update, such as lowering or raising credit scores based on occupancy.