Landlording & Rental Properties

The Compleat Tenant Screening Process: Pre-Screening

Expertise: Business Management, Landlording & Rental Properties, Real Estate News & Commentary, Real Estate Marketing, Personal Development, Real Estate Investing Basics
105 Articles Written
tenant-screening-tips

OK, before anyone says anything silly: yes, “compleat” is a word. It’s just a little archaic, but it has a meaning I really like—it’s very close to “complete,” but it specifically refers to a person who has all of the skills they need, or a set of skills that includes everything a person needs in order to be considered fully competent. This guide is intended to convey everything you need to know to become a compleat tenant screening expert.

Why Tenant Screening?

We chose to write this tenant screening guide because in a high-risk/high-reward market like one of the markets we operate in (Detroit), the number two factor that makes or breaks an owner’s investment is the quality of the tenants that move into their properties. (The number one factor is and will always be the quality of the property itself, of course.)

So, let’s get started!

It All Begins with Criteria

The tenant screening process needs to start with the end in mind—specifically, what are you willing to accept as a “minimum viable tenant”? There are lots of metrics that people can and do use in order to make that assessment, but we’re not even worried about metrics at this point—we’re talking about the most fundamental attributes here, the really non-negotiable bits:

  • Functionality: The prospect must be able to function independently in terms of accomplishing the basic goals of daily life, or they must be applying alongside someone who can do that and is trained to help them get by. (Told you we were talking fundamental attributes here.)
  • Financial Viability: The prospect must be able to show that they have sufficient income to pay rent regularly, or if they don’t, they need to submit and get approval for a plan showing how they intend to pay at least the first few months’ rent while they get their feet under them. They must also submit letters of explanation describing why any previous credit issues shouldn’t remove them from consideration.
  • Residential History: The prospect must not have been evicted for any ‘dealbreaker’ reason like destruction of property and must submit an acceptable letter of explanation for any other type of eviction.
  • Criminal History: The prospect must not have been convicted of any ‘dealbreaker’ crimes like arson or drug dealing and must submit a letter of explanation for any felony whatsoever and/or any misdemeanor that might indicate a poor tenant, such as vandalism or possession with intent to deal.
  • Personality: Finally, the prospect must not have left behind a trail of former employers & landlords, and other references that have only negative feedback. When you chat with them, they must not make you wonder how they survived to their current age.

tenant-questions

Related: 7 Types of Tenants Who Cause MAJOR Landlord Headaches

Some companies might want stricter, more numerical standards like “must have a credit score above 620” or “must make at least 300% of their rent in income each month,” and you can certainly set those kinds of non-negotiable standards as long as your socioeconomic environment supports them. Just remember that once you set them, those standards should be rock-solid, no-exceptions standards to avoid potential HUD discrimination lawsuits. Realistically though, what we have above really is the absolute minimum any landlord should be looking at in order to accept someone as a tenant.

Sidebar: Know (and Follow) the Law

When putting your criteria together (and throughout the tenant screening process), you must always keep in mind the Fair Housing Act (FHA), the most significant U.S. law that dictates what you can and can’t do during the screening process. According to the FHA, you cannot consider any of the following when screening applicants:

  • Race/Color/National Origin
  • Religion*
  • Gender*
  • Marital/family status*
  • Disability

When we say you “cannot consider” those factors, what we mean is that you cannot:

  • Include any mention of any of these attributes or anything directly related to these attributes in your advertisements. So not only can you not say “no kids,” you can’t even say that the backyard is “perfect for games of tag.”
  • Require different rules for applicants in or out of one of these groups (for the same unit). For example, you can’t up the security deposit for a Latino applicant or an applicant with five children.
  • Steer particular applicants toward or away from a given unit due to these factors. That includes anything from saying “we can find something more appropriate for you” to lying and saying a unit is off the market when it’s not.

And importantly, because there’s almost no way to prove exactly why you’re treating different applicants differently, it’s 100% always the best idea to treat all applicants identically until you’ve figured out one or more of the “non-negotiable bits” above that gives you a solid, legal reason to do otherwise.

limit-liability-landlords

Related: What to Do as Soon as You Deny or Approve a Prospective Tenant

Pre-Screening

One of the most annoying aspects of the tenant screening process is that the more competitively-priced a home, the more likely you are to get genuinely bad applicants—people who know they’re not going to get into a mid-market rental, but figure that if you’re desperate enough to  underprice it, you’re probably desperate enough to ignore some minor details like joblessness.

To circumvent this process, be very upfront with your applicants about what your basic requirements are.  You have a few opportunities to do this.

  • First, in the ad itself, you can put simple blanket statements like “No convicted felons, no registered sex offenders, and no unemployed applicants please.” Also no matter what blanket statements you decide to include, you should always use the ad to inform applicants of your application fee. Just knowing that they have to pay $X non-refundable dollars is enough to turn off a lot of poor applicants.
  • Second, when the applicant reaches out to you, you can look for signs that they might not be great tenants. But more importantly, you can warn them what you intend to ask for as part of the application process. Convincing a substandard prospect to not apply at all because they don’t want to give you their bank statement and SSN, saves you a lot of time.
  • Finally, at the showing, you can have your showing agent assess their demeanor in more detail, and importantly the agent can get a look at their personal habits. Most importantly, they can get a look at their car. There are few betters ways of identifying someone who will trash a house than seeing that they flagrantly drive around in a trashed car.

Remember, every tenant you can turn away before they submit a full application is one that you don’t have to waste time and money screening!

That’s it for this bit—come back next time for an in-depth dive into the central document of the tenant screening process: the application.

How do you prescreen tenants? Any questions about this process?

Leave your comments below!

While in the mortgage business, Drew rose to a VP position at the first broker he worked for and then started his own company. In the pursuit of excellence, he obtained several mortgage designations and joined mortgage & several affiliate association Boards. He also did WebX presentations and public speaking. It was during this time he started personally investing in single-family rentals, leading him to also start Royal Rose Property Management with two partners. He also joined the Board of a local real estate investors association, eventually becoming its President. The real estate crash led to an offer from the banking industry to manage a Michigan bank’s failed bank assets they acquired from the FDIC. The bank acquired four failed banks from the FDIC, increasing from $100M in assets to over $2B while he was there. After that, he took over as President of Royal Rose Property Management. Today, he speaks at national property management conventions and does WebX presentations.

    The German
    Replied almost 11 years ago
    I believe that the best real estate sales happen in the country side. It is a win-win situation and that is a market that can never slow down. In an area like rural Germany or France, the vistas are so beautiful that people can’t resist it. And the price is also pretty realistic. Nice article and all the 4 points make sense. Thanks 🙂
    Crystal Tost
    Replied almost 9 years ago
    I find the advertising in other countries and in mediums that are not real estate related a waster of money and time. I think targeted advertising coupled with good pricing and proper presentation will get the house sold to a local buyer that is likely out there as we speak. Why focus on an audience that you are not even sure exists in mediums that are not targeted?
    David Grbich
    Replied over 8 years ago
    Setting a realistic list price at 10% below market may lead to a very lonely existence as a realtor – not many sellers in the California market have the equity to price 10% below market – but yes that should get the home sold. Great point overall – thanks.
    Katie Rogers from Santa Barbara, California
    Replied 4 months ago
    Just because a tenant will not give you their bank account or SSN does not mean they are a sub-standard tenant. Ask the very last landlord I ever had, and from I rented the unit for 5 years and left it not only :broom clean” but move-in ready. There are good reasons to give no one your bank statement or SSN.
    Drew Sygit from Birmingham, Michigan
    Replied 4 months ago
    @KATIE ROGERS: thanks for your input. There’s an exception to every rule, but statistically, a tenant not giving their SSN or bank statement is a red flag.
    J Henderson
    Replied 4 months ago
    You mean adults don’t play games of tag in the back yard?
    Drew Sygit from Birmingham, Michigan
    Replied 4 months ago
    @J HENDERSON: not usually, but we have heard of adults doing lots of crazy things while drinking.
    Mike Muccino from Royal Oak, MI
    Replied 4 months ago
    Hi Drew, very informative article. Thanks for sharing. This one was right up my alley as I’m hoping to get into a first deal this year. I’m currently saving and creating some internal processes for screening potential tenants, as this seems to be where many landlords get into trouble by getting bad tenants. I’m actually just around the corner from you at 14 and Crooks area in R.O.
    Drew Sygit from Birmingham, Michigan
    Replied 4 months ago
    @MIKE MUCCINO: Thanks for reading our post and glad you found it useful! Highly recommend attending one of the local Real Estate Investor groups. REIofOakland.com, MREI.com, MacombREIA.com or check for others on Meetup.
    Robert Hsu
    Replied 4 months ago
    Thanks for the article! I’ve been using this website called finret.com to screen my tenants and I had a quick question- they are partnered with Transunion and sell their reports for $5, which seems very cheap compared to what I am used to. How can I verify they are reputable?
    Drew Sygit from Birmingham, Michigan
    Replied 4 months ago
    @ROBERT HSU: Checked out their site and doesn’t appear you’ll get a lot for the $5. That might be fine for higher-end properties and prospects , but if you’re dealing with lower demographic areas, you may want to pay for the extras of the Background Check and Eviction Reports. So, now the cost i $15/report. Reply Report comment
    Drew Sygit from Birmingham, Michigan
    Replied 4 months ago
    @ROBERT HSU: Checked out their site and doesn’t appear you’ll get a lot for the $5. That might be fine for higher-end properties and prospects , but if you’re dealing with lower demographic areas, you may want to pay for the extras of the Background Check and Eviction Reports. So, now the cost i $15/report.
    Drew Sygit from Birmingham, Michigan
    Replied 4 months ago
    @ROBERT HSU: Checked out their site and doesn’t appear you’ll get a lot for the $5. That might be fine for higher-end properties and prospects , but if you’re dealing with lower demographic areas, you may want to pay for the extras of the Background Check and Eviction Reports. So, now the cost i $15/report.
    Mike Lowry
    Replied 3 months ago
    Social Security Number ??? What a foolish qualify ! Oh… your actually having the prospect show you a SOCIAL SECURITY CARD >>> ?? How would anyone verify such ?? Ever deal wth the SSA ? No way will they verify any such thing… ! A driver license or state I.D. is the only real identity verifier and make sure to get a photo copy and a signed statement from the tenant they agreed to allow you to have such in your possesion. If not you are a fool . Good Luck with such ignorance as stated above …
    Drew Sygit from Birmingham, Michigan
    Replied 3 months ago
    @MIKE LOWRY: not sure if you are being sarcastic or serious, so we will try to address your response. Social Security Numbers can verified in several ways: 1) We don’t just have the applicant show us their social security card, we require a copy of it. We confirm against their ID and other documents. 2) Many credit reports will confirm if the SSN entered matches other records about the applicant. 3) We ask for a W-2, which will also display the SSN. 3) It isn’t that hard to obtain a letter from the Social Security Administration. Yes, an application should include the applicant’s signature and language to authorize & protect the landlord as required by federal, state and local laws.
    Katie Rogers from Santa Barbara, California
    Replied 3 months ago
    I have been a tenant in three countries including the US. I have never provided a social security number or a driver’s license number. I redact the social security number from my W-2. If pressed for a photo ID, I give landlords a copy of the ID page from my passport. Nor have I ever paid an application fee. Besides, some of the best tenants have no W-2s, like visiting professors and international students or someone who is moving to take a new job or a first job. If I am asked for a bank statement, I redact the account number. Too many landlords take advantage of the power deferential to be intrusive. In these days of frequent identity theft, landlords should respect the tenant’s desire to follow the FBI advice to never divulge the SSN and ID number, and certainly never together. (PS, Never give your SSN to a medical provider. It is not required, no matter what the receptionist says). When I was overseas, landlords never asked me for ID of any kind not even my passport.. I have been next door to lousy tenants who did provide all that stuff. I learned that yes, screening is essential, but the usual screening methods do not actually tell you whether you will have a quiet tenant who pays on time and keeps the unit clean.
    Drew Sygit from Birmingham, Michigan
    Replied 3 months ago
    @KATIE ROGERS: there is an exception to every rule, so congratulations on finding landlords willing to cooperate with you:) We do doubt any corporate landlord would rent to you without your SSN or ID. Regarding your recommendation to follow the FBI’s advice, legitimate landlords are required to follow federal regulations about protecting confidential information they receive. While we doubt a DIY landlord even knows about these laws, corporate type landlords do. Regarding redacting information from all provided documents, we would not accept them and would deny your application. Tenants are given legal possession of a property worth hundreds of thousands of dollars, that they can do significant theft & vandalism to. So, we don’t think it’s too much to ask an applicant to share their personal info, as most do not have assets anywhere near the value of the homes they rent. You are correct that a credit/financial profile does not GUARANTEE how a tenant will take care of a home or what type of neighbor they will be, but statistically it actually is a pretty good indicator. We do get feedback from a small percentage of applicants that complain about what we ask for and state they’ve never been asked for this info by past landlords. Most of their applications show their rental history has only been with DIY landlords, so we’re not surprised by their complaints. We receive similar complaints from tenants that are consistently behind in their rents — they often state we’re too strict and wonder why we won’t work with them like their DIY landlords. Can’t think of any tenants that pay on time that ever make this complaint. Thanks for your input and make it a great day:)
    Katie Rogers from Santa Barbara, California
    Replied 3 months ago
    I have no idea if any of my landlords were “corporate” landlords. If you mean property manager stand-ins, I l;earned to avoid them like the plague. They have all kinds of unreasonable policies and when challenged, always claim it is not their policy—they are only following the owner’s instructions, a claim that I found suspect, but could not verify at the time. Blaming the ‘owner” is the same as not having a satisfactory reason. “It’s the policy” is never a satisfactory answer because policies must have a reason for their existence. Later, after I gave up on applying to any unit with a property manager, a friend of mine asked me to help her evaluate a bunch of contracts. You see she was headed oversees with her military husband, and they wanted to hire a property manager and rent their house. Nearly every contract double-dipped, charging BOTH the tenant and the owner fees to screen tenants. In addition, most contracts had a clause stating that the owner was giving the property manager the right to set the policies. Property managers are the last people anyone should entrust their personal information to. And good luck proving who the culprit was after your information has been used. Relying on an often toothless law is foolhardy. Yes, the tenant is taking possession of a valuable piece of property. Yes, some tenants, especially poorly screened ones do a terrible job of taking care of the property, and yet most of these same tenants passed a credit and background check. I could tell you horror stories about a 60-unit complex I used to clean between tenants some twenty years ago. However, the tenant is giving a substantial portion of their hard-earned income to the landlord in order to rent a home for themselves. Landlords should provide homes, not substandard places because they are “just tenants after all.” (Actually said by some landlords right here on BP). Personally, I screen my tenants well without taking personal information, and I treat them as I longed to be treated when I was a tenant. The Golden Rule prevents a multitude of problems. And what about the question of tenants who CANNOT present a SSN or a Drivers License?
    Drew Sygit from Birmingham, Michigan
    Replied 3 months ago
    @KATIE ROGERS: The only applicants who will not have a DL or SSN, would be foreigners. They would have a passport and some type of visa. They also should have legal employment, so should be able to supply an ITIN and an employment letter. Those here on a Student visa should be able to provide a passport, visa, proof of enrollment and document they have funds in a US bank account. Those on a Travel visa shouldn’t be signing a 12-month lease. Those without a passport & visa are most likely here illegally and would be high-risk. Many illegal immigrants actually get a DL and often use a fake SSN, so they may pass through “normal” screening undetected as here illegally. You seem to be passionately against any type of logical method to screen applicants, which is a great counter-point to our screening methods:) The bottom line is to ALWAYS use what works for you:)
    Katie Rogers from Santa Barbara, California
    Replied 3 months ago
    Did I say “no ID?” No, I said no SSN or Driver’s license. I have both of those, but as I said, I submitted a copy of the ID page of my passport. It is a legal photo ID and must be accepted. It is also safe ID that generally prevents your personal information from being used fraudulently. Since I am a former IRS enrolled agent, you are in my wheelhouse when it comes to ITINs. Illegal immigrants are not generally using fake SSNs. Their first US employer usually gives them an invalid SSN. It belongs to nobody which is why these SSNs do not interfere with the Social Security Adminsitration’s records of people with valid SSNs. The reason employers give them these invalid SSNs is so that the employer can submit a W-2 to the IRS. The system will not accept a W-2 without some kind of SSN, but the IRS knows from the get go which are valid and which are invalid, so they are not fooling anybody, nor are they trying to. If the employer does not submit a W-2, then the employer will not be able to deduct the salary as a business expense. In effect, the employer would be paying income tax on the illegal immigrant employee’s behalf. Employers would rather not, so they submit these W-2s. Illegal immigrants bring these W-2s to someone like me, and we help them get their ITIN. Depending on the state, illegal immigrants have both an ITIN and a legal Driver’s License. I am not opposed to screening, but I am passionately opposed to giving out personal information, and most landlords are as well when it comes to their own personal information, law or no law. It is foolish to trust that your information is protected simply because there is a law. People break laws all the time. (There is a landlord in my community who property has been put into receivership because of all the laws he has broken). Tenants do not deserve to be forced to put their financial lives at risk. Besides, landlords have been screening tenants long before there were such a thing a credit reports, and landlords still screen without credit reports in other countries. So apparently there are logical ways to screen tenants without collecting the sort of information that landlords themselves are often loathe to provide. It’s just Golden Rule stuff.
    Katie Rogers from Santa Barbara, California
    Replied 3 months ago
    I have no idea if any of my landlords were “corporate” landlords. If you mean property manager stand-ins, I l;earned to avoid them like the plague. They have all kinds of unreasonable policies and when challenged, always claim it is not their policy—they are only following the owner’s instructions, a claim that I found suspect, but could not verify at the time. Blaming the ‘owner” is the same as not having a satisfactory reason. “It’s the policy” is never a satisfactory answer because policies must have a reason for their existence. Later, after I gave up on applying to any unit with a property manager, a friend of mine asked me to help her evaluate a bunch of contracts. You see she was headed oversees with her military husband, and they wanted to hire a property manager and rent their house. Nearly every contract double-dipped, charging BOTH the tenant and the owner fees to screen tenants. In addition, most contracts had a clause stating that the owner was giving the property manager the right to set the policies. Property managers are the last people anyone should entrust their personal information to. And good luck proving who the culprit was after your information has been used. Relying on an often toothless law is foolhardy. Yes, the tenant is taking possession of a valuable piece of property. Yes, some tenants, especially poorly screened ones do a terrible job of taking care of the property, and yet most of these same tenants passed a credit and background check. I could tell you horror stories about a 60-unit complex I used to clean between tenants some twenty years ago. However, the tenant is giving a substantial portion of their hard-earned income to the landlord in order to rent a home for themselves. Landlords should provide homes, not substandard places because they are “just tenants after all.” (Actually said by some landlords right here on BP). Personally, I screen my tenants well without taking personal information, and I treat them as I longed to be treated when I was a tenant. The Golden Rule prevents a multitude of problems. And what about the question of tenants who CANNOT present a SSN or a Drivers License?
    Mike Lowry
    Replied 3 months ago
    Social Security Number ??? What a foolish qualify ! Oh… your actually having the prospect show you a SOCIAL SECURITY CARD >>> ?? How would anyone verify such ?? Ever deal wth the SSA ? No way will they verify any such thing… ! A driver license or state I.D. is the only real identity verifier and make sure to get a photo copy and a signed statement from the tenant they agreed to allow you to have such in your possesion. If not you are a fool . Good Luck with such ignorance as stated above …