BiggerPockets

Important Tenant Screening Information

You likely know that screening your applicants is not only a smart way to defray costly situations involving evictions, but it's necessary in today's market. But ask yourself this... What is it you hope to achieve from screening?

In our line of work, I often find rental sites duplicate their competition's screening techniques. Although that method is easy, does it really seek the answers to questions that are pertinent to your property or the property you manage? Duplicating other company's screening techniques may not be an effective way to meet your company's objective in managing various properties. Most Management Companies have portfolio's with a wide variety of rental sites and buildings, each different. If you do have a wide variety, have you labeled each site the same with respect to screening? The fact is, if you do have sites that differ due to geographic region, economic circumstances, quality, etc., you may want to adopt a policy that involves a residential selection criteria that best fits the needs of that site.

For example, a rental property considered to be "luxury" may only need a consumer credit report and perhaps an income verification. While other properties that do not fall in the "luxury" category may be cheating themselves by not obtaining criminal records, eviction records, landlord references, employment verifications and bank account verifications. In a number of cases, landlord references are crucial, but you have to know the right questions to ask. We often find that an applicant may not have an eviction record, but has a number of negative landlord references. This is because the landlord did not formally evict the applicant. They may have simply asked the applicant to vacate, to which the applicant cooperated. This would not yield a paper trail of an Eviction record in the Courts.

Another point to make is when you are pursuing landlord references, you should make sure you are speaking with the right party, namely the owner or Management Company. You can locate the owner of a property by contacting the County Tax Assessor in which the property is located.

Lastly if you are using a screening company for market rate rentals, you may want to adopt the policy of charging an application fee to your applicant, if you are not already doing so. This will defray the cost of tenant screening billed to you by a third party. If your property is section 8, you may not be able to charge a fee or you may only be able to charge a limited fee. You should check with the County or City offices to ensure you are able to charge a fee and if so, how much. Some cities will only allow for a certain amount to be charged to the applicant on market rate rentals. Also, some Cities and Counties require you to perform background checks on tenants, irregardless of the property type. You presumably will want to check that out as well, to stay in compliance with all applicable laws.

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