For a landlord, a lot rides on the screening and the selecting of tenants. The mistake of choosing a bad tenant can be costly — resulting in unpaid rent, property damage and eviction fees. We all wish the screening process was a science, but when it comes to assessing individuals, it’s far from it.
With the stakes being so high, it’s vital that landlords avoid missteps when screening potential clients. Yet time and time again, landlords cut corners and overlook critical signifiers. This article will cover the most common mistakes made during the screening process and show the correct way to select tenants.
The Wrong Way: Fully bypassing the screening process
It was difficult deciding whether to put this first, last or to discard it completely. While this article is about the specifics of screenings, it’s important to note that some landlords elect to skip the screening process altogether. Why? Some choose to trust their gut, while others are just in a rush to fill a vacancy. Both courses of action will most likely come back to bite the landlord in future.
Sure your gut instinct may serve you well, but even the best judge of character gets things wrong. Most people are confident in their ability to read people, however it is much more reliable to judge character based off background documentation and their track record of behavior in previous living situations.
Rushing to fill a vacancy may be even worse than trusting your gut. Some landlords are so focused on making sure rent is paid that they fail to think of the potential disaster of a terrible tenant. Certain landlords may skip the screening process to avoid the fees that generally accompany online screening software. Opting for the easy short term option instead of investing in the long-term is a problem that has plagued landlords since the beginning.
The Right Way: Take the time to do a complete tenant screening
The only way to minimize the risk of choosing a bad tenant is to collect all the information you can — including a credit check, background check, landlord payment history, and landlord & employer references. First impressions vary, but a person’s past is concrete. While you should listen to your instincts, confide in facts as opposed to a gut feeling.
If the excuse is not wanting to pay for a tenant screening service, online options such as Turbotenant( https://www.turbotenant.com/?utm_campaign=Rentometer&utm_source=Rentometer%20Signature), are available for little to no cost.
The Wrong Way: Forgetting to screen co-applicants
Even though most people live with roommates, it’s a common practice to only screen the person/people who have their name in the contract. Can you see where this can go wrong? It doesn’t matter who damages the property or fails to pay rent, the landlord is responsible for it. The primary applicant may be an angel, but if his roomates are demons the landlord’s life is going to be hell!
The Right Way: Screen everyone who plans to live on the property
Girlfriend, brother, friend, or stranger — everyone residing in the property needs to be properly screened. The general rule is that co-applicants are no different than primary applicants, both are capable of wrongdoing. It is also a good idea to screen co-applicants because their background can tell you more about the primary applicant. As the saying goes, “you are who you surround yourself with,” so it is important that landlords protect themselves by making sure everyone living on the property meets their criteria
The Wrong Way: Ignoring federal or state laws
Despite what you’ve heard, laws are not meant to be broken or ignored(at least as in real estate). For a landlord, it can come with some heavy consequences including steep fines and penalties. Some legal mistakes are easily made, especially if a landlord is uninformed on the current legislation. For instance, landlords are occasionally punished for trying to use a generic online application form when it is not in compliance with their state laws. This could all be avoided with a little research.
The Right Way: Be informed of the most up-to-date laws and regulations.
Take a little extra time to get familiarized with both federal and state laws; it goes a long way. All Landlords should be well versed in the Fair Housing Act (https://www.hud.gov/program_offices/fair_housing_equal_opp) and how it is being applied in their state. In addition, stay informed on the changes in local legislation.
When screening applicants, it is important to make sure all advertisements, rental applications, and tenant selections align with the legal guidelines. Landlords that are unsure of which laws apply to them or their tenants should contact an attorney.
The Wrong Way: Not covering all your bases
Just like how one piece of information can’t tell the whole story, the same goes for screening tenants. Generally, landlords prioritize the credit report, which shows how much debt the person has and if they have a history of late payments. Yes, a credit report gives landlords a better sense of a person’s financial situation, but more information is needed to make a wise decision.
The Right Way: Check every applicant’s credit report, criminal background, landlord payment history & eviction and landlord & employer references
The more information you know the more likely you can make an informed leasing decision. Screening is the opportunity to catch red flags before a person can put you or other tenants at risk. It is essential that you know someone’s criminal history to assess whether the applicant is too risky for your property or neighborhood.
An eviction report shows the likelihood of a landlord’s worst nightmare of repeating itself. An applicant with a history of evictions is almost always a no-go. Covering all your bases is the responsible thing to do to ensure that you are protecting everyone involved in the property.
The Wrong Way: Failing to check references and employment history
Applicants can look fine on paper, but be still be liability for the property. Maybe the applicant follows all the rules, but likes to blare music all night pissing off his/her neighbors. Or maybe the applicant is constantly getting fired, moving one job to the next. None of that shows up on the credit report.
The Right Way: Check the applicant's references and employment history
References and employment history are an additional layer of risk mitigation. While references shouldn’t necessary, they are a helpful endorsement for the applicant. A reference, which is a unique human perspective, is sometimes more trustworthy than a piece of paper.
Why does the applicant’s employment history matter? The landlord has to make sure the applicant in the prescribed financial position to reliably pay rent on time. The employment history not only shows if the person can manage a steady flow of income, it also shows the industry that person works in, which can be volatile based on the time of year. If a person is working freelance, ask for pay-stubs. This should provide a good idea of how much the applicant makes and if they can afford to live in on the property.
As mentioned above tenant screening is not a science, but maybe you should approach it as such. Collect all the information you can, refuse cut corners, and aim at making the most educated decision. Landlords -- whether due to laziness, ignorance, frugalness or arrogance -- make mistakes that almost always cost them in the end. The key to having great long-term tenants is devoting the time to conduct the screening process the right way. Trust me, it’s worth it.