Do potential tenants balk at screening costs?

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Do potential tenants balk at screening costs?

Andy W.
Investor · Grand Rapids, MI · Member since 2015 · 24 posts · 8 votes

I'm preparing to show an apartment to several potential tenants tonight and I'd like to run credit/background checks on anyone who applies.

From the services I've explored, it seems your average suite of reports comes in around $35 per adult ($70 per couple). Do tenants ever have a WTF moment when they begin the application process and encounter these fees?

Obviously I have to run the reports, so it's non-negotiable, but curious what feedback you've encountered.

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David M.
Investor · Cincinnati, OH · Member since 2014 · 61 posts · 35 votes
10y

I collect applications with a disclaimer that I select the best candidate based on the applications, then collect their app fee before running the checks. If everything on the application is truthful, I accept the tenant, sign a lease, and apply the application fee to their deposit. If anything in the application was misleading, I keep the fee, tell them why they've been denied, and move on to the next applicant.

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  • Dana Dunford
    San Francisco, CA · Member since 2016 · 238 posts · 204 votes
    10y

    @Andy W. -- I think it depends on the demographic. In areas with lower cost rentals, I've definitely experienced tenants fight back on the cost and, in all honesty, I can see why they find the cost appears too high to them. However, I definitely recommend running a check on every single adult. It mitigates your risks and you just can't take on that kind of risk.

    When I have a tenant question the high cost, then I tell them that the cost is ~$3/mnth if they amortize it over the year lease. And, I also mention that I only run the background check once, so it's in their incentive to stay longer term (they won't have to pay $35 every year). That logic seems to put it into perspective for them.

    Hope that helps!

    3Reply
  • Tom Ott
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    10y
    Originally posted by @Andy W.:

    I'm preparing to show an apartment to several potential tenants tonight and I'd like to run credit/background checks on anyone who applies.

    From the services I've explored, it seems your average suite of reports comes in around $35 per adult ($70 per couple). Do tenants ever have a WTF moment when they begin the application process and encounter these fees?

    Obviously I have to run the reports, so it's non-negotiable, but curious what feedback you've encountered.

    Hello Andy,

    Speaking from experience, it is mixed! This is a great question, and one that I hear about a lot. 

    We only charge exactly how much it costs to run a report just like you said. It roughly comes to $40 dollars per application. Some systems allow you to run 2 or more at a time. It depends on the system.

    Sometimes I get applicants who are upset that they are spending close to $50 for a place they might not even get! Others are fine with it because they know reports are not free.

    I've even had some tenants refuse to apply because they didn't want to spend the money.

    You will run into these problems along the way, but for the most part people are normally understandable. If they are confused calmly explain to them the system you use requires a fee to run a report and you are charging the minimum. Without the report you cannot determine if they qualify or not.

    Most of the time they understand.

    I hope this helped! Please let me know if you have any other questions!

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  • Andy W.
    OP
    Investor · Grand Rapids, MI · Member since 2015 · 24 posts · 8 votes
    10y

    @Tom Ott

    What are these systems of which you speak? :)

    The biggest push back I'm expecting is when I have to run a separate report for each adult who will be on the lease, especially when it's a couple.

    It's been a number of years since I rented, but I've never been asked for an application fee so it's uncharted territory for me. I know that if my girlfriend and I had needed to pony up $80 between us it would have given me pause for thought.

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  • Tom Ott
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    10y
    Originally posted by @Andy W.:

    @Tom Ott

    What are these systems of which you speak? :)

    The biggest push back I'm expecting is when I have to run a separate report for each adult who will be on the lease, especially when it's a couple.

    It's been a number of years since I rented, but I've never been asked for an application fee so it's uncharted territory for me. I know that if my girlfriend and I had needed to pony up $80 between us it would have given me pause for thought.

    I cannot remember all of them, but I believe AppFolio might do two at a time. If not maybe I misspoke. Most do charge per-tenant. There will be push back don't get me wrong, but normally if you explain to them what it is what the program charges, they should understand.

    Tell them you can't move forward without this payment regardless. 

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  • David M.
    Investor · Cincinnati, OH · Member since 2014 · 61 posts · 35 votes
    10y

    I collect applications with a disclaimer that I select the best candidate based on the applications, then collect their app fee before running the checks. If everything on the application is truthful, I accept the tenant, sign a lease, and apply the application fee to their deposit. If anything in the application was misleading, I keep the fee, tell them why they've been denied, and move on to the next applicant.

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  • Sarnen Steinbarth
    Commercial Real Estate Broker · Fort Collins, CO · Member since 2015 · 308 posts · 151 votes
    10y

    We have had $35 applications at my management company for 5+ years with very little push-back.  

    Most of the tenants that you would probably want never seem to have an issue with a reasonable application fee.

    2Reply
  • Peter MacKercherBusiness Member
    Residential Real Estate Broker · Saint Louis, MO · Member since 2014 · 1k+ posts · 567 votes
    10y

    My PM company is in the same boat as most everyone else. It costs money to screen, so we've had an established $40 application fee for years. Having that initial cost helps screen out tenants who aren't qualified, in my opinion, since if you don't have the money to even apply then having the rent each month might be unlikely for that tenant. I explain that the fee is to cover costs when I mention the fee, and most applicants understand.

    I wouldn't sweat the issue. You gotta screen, and you don't want to eat that cost either.

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  • Brian Ballard
    Wholesaler · Prescott, AZ · Member since 2016 · 15 posts · 11 votes
    10y

    Every management company I've talked to or worked with has checked anywhere from $25-50 each application.

    If they can't afford a $35 application fee then they probably won't pass the credit check and normally leads to "I'm sorry, I dont have the rent right now!"

    2Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    10y

    I have them fill out the application , no charge , if it looks good I tell them to go to smart move and pay them . This way if the application doesnt pass muster , they have spent nothing .   The ones who dont want to pay , I just tell them " sorry then , good luck on your house hunting "

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  • Matthew Kreitzer
    Attorney · Winchester, VA · Member since 2015 · 726 posts · 387 votes
    10y

    Before I was on this side of things, I always thought that the cost was too darn high. None of my landlords had ever taken the time to explain why I was paying the fee, so I was never quite sure if they were just pocketing the money and running. Now I know better, but I think as a society, landlords should do a better job of expressing the reason behind the application fee.

    1Reply
  • Tom Ott
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    10y
    Originally posted by @Brian Ballard:

    Every management company I've talked to or worked with has checked anywhere from $25-50 each application.

    If they can't afford a $35 application fee then they probably won't pass the credit check and normally leads to "I'm sorry, I dont have the rent right now!"

    Agreed. You'll find the applicants who do not want to pay are most often the tenants you don't want. If someone really wants to live there, they will pay what it costs.

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y

    Not the serious ones. If you are doing it right as a landlord, you are prescreening them before they ever get to the point of paying the credit/background check fee. I have an in-house application that I require all applicants to fill out, that also tells me a lot of stuff that the screening doesn't care about - pets, kids, etc. If a potential tenant makes it past this stage, then I send them on to the paid stage. Someone who isn't willing to spend $35 to close out the deal isn't serious about wanting the place. 

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  • David M.
    Investor · Cincinnati, OH · Member since 2014 · 61 posts · 35 votes
    10y

    As a tenant, I would not pay $100+ to apply for three homes, to be honest...and I'm in pretty good financial shape. I'd want to know that the money I paid was going to secure the home if I meet the criteria, not that it *might* secure the home.

    1Reply
  • Andy W.
    OP
    Investor · Grand Rapids, MI · Member since 2015 · 24 posts · 8 votes
    10y

    Thanks everyone for the feedback.

    I agree with those of you who say if people can't afford the $35, then they're probably not serious contenders, but where I'm expecting push back is when I ask couples for $70.

    I take the point however some of you have made thought that I should be able to eliminate some simply by asking for information up front. Does that information typically mirror the information requested by the online processes?

    For instance, is this free form from Postlets a good example of what I should have people fill in at the time, then tell them I'll contact them via email if I want them to take the next step?

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  • Gary Hall
    Investor · Muskegon, MI · Member since 2015 · 35 posts · 16 votes
    10y

    Tenants freak out about quite a few things. So yes they often get upset about the fee. I have found that the biggest reason they get mad is they think they are not going to get approved and it will be a waist of their money.

    I have seen that if you will let them know what your leasing requirements are and what on those reports would disqualify them and they will leave if they wont pass instead of getting mad.

    1Reply
  • Chase Gochnauer
    Investor · Des Moines, IA · Member since 2015 · 380 posts · 201 votes
    10y

    I agree that you should take the applications with no fee, vet the applications to narrow it down to your best candidate and then run the check to verify their application is accurate. 

    1Reply
  • David M.
    Investor · Cincinnati, OH · Member since 2014 · 61 posts · 35 votes
    10y

    We need to be careful about the word "afford." I can "afford" to buy a $100 cup of coffee a couple times a month, and my life wouldn't be demonstrably worse. That doesn't mean I see it as a good value. Likewise, be wary of alienating tenants who can "afford" application fees but don't see them as a great exchange of money for just a "possibility" of renting the property.

    1Reply
  • Francisco Feliz
    Boston, MA · Member since 2015 · 93 posts · 32 votes
    10y

    So, given your other post on SmartMove vs Cozy, @Andy W., is there a service that you think is a good balance of affordability and quality? Those, AppFolio (mentioned above), or any others? I know that I am with the person above who would not want to pay money to apply to a place I may not get, and I am fine financially. But, if I can get it down to $30-35 as a landlord, maybe that's the best that can be done..

    Also, in service to those with other real estate strategies like renting to Section 8 tenants, it's important to discuss this screening cost issue more broadly as well for others on BP to benefit.

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  • John Vietmeyer
    Investor · Johns Island, SC · Member since 2014 · 120 posts · 41 votes
    10y

    In general I have just sucked up the cost of the screen myself as cheep insurance. If you follow the screening process you should know if folks have issues before doing the screen. 

    From a personal stand point the only time I want to charge is if they lie on their application.  

    As such, I have also set it up such that they pay and I credit them the cost in the first months rent as long as things check out. 

    1Reply
  • Ronald PerichPro Member
    Investor · Granite City, IL · Member since 2014 · 658 posts · 301 votes
    10y

    It's amazing to me how many "really interested" viewers of the property will never actually fill out an application once I tell them of the screening process, which includes criminal, background, and eviction checks with the fee paid for by them. These are usually the same ones who ask a lot of "interesting" questions on the phone like "What utilities do you pay for because I really need to keep my costs down?". If they are truly interested and are going to be good residents, they'll happily pay the fee.

    Now I don't charge them any extra. They pay my screening company directly. And I let them know that as well.

    1Reply
  • Justin Spaulding
    Real Estate Investor · Milton, WI · Member since 2015 · 52 posts · 14 votes
    10y

    Mine is only $20, I use experian or Zumper. Works great. All I do is make sure they have 600 credit score or better, no late bank payments, and reference letters from previous landlord/management company. Have had nothign but great tenants!

    2Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    10y

    Its when they complain that they have applied at 5 different places and have been turned down for each one ....................................And I ask why? did they turn you down ?    

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  • Francisco Feliz
    Boston, MA · Member since 2015 · 93 posts · 32 votes
    10y

    Wow @Justin Spaulding, how is Zumper only $20? Does it miss out on anything? I see the credit check with Experian, but how about evictions/criminal/background/etc?

    Also, to the broader thread group, might there be any way where maybe you can do the application fee as a credit towards the security deposit if they get admitted? Maybe that can make it easier for people to be okay with the fee? By this I mean that they would have to come up with $35 less (if that's the fee) for their security deposit, for example...Thoughts?

    1Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    10y

    I've never had one prospective tenant give pushback on an application fee. People know it's apart of the application process. 

    Think about it. Wouldn't you want to live in a building where the tenants screened applicants? Consider the alternative.  

    1Reply
  • Kay Kay Singh
    Rental Property Investor · Fort Wayne, IN · Member since 2016 · 258 posts · 177 votes
    10y
    Try smart move by transunion that is little cheaper .
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