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.
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.
First of all, I pre-screen the tenant to see if they have some minimum qualifications before I move on to the paid part of the screening. Is the income 3 times rent? Have you been evicted? etc. Some will lie about the eviction, only to show up on the report, but that's another story.
When I collect the application fee, I explain to them that I do not make a dime off of it. It is simply what the screening service charges me. Most prospects are ok with the fee when I explain this to them. You can do the ground work to keep prices down by consistent shopping of services. Also, you could get the necessary reports and do the calling of employers and past landlords instead of opting for that higher price option where the screening service does everything.
I disagree with not collecting the fee. There are many "tire kickers" and you could end up paying unnecessary fees and wasting time on phone calls for someone who will not or cannot rent from you. Collecting an application fee shows that the prospect actually has the intention of following through at that moment. Money talks...and you know what walks.
In another thread, I posted that i charge $75. I was the most expensive one (that admitted it):) If they want the unit, they will pay. I charge the higher fee to weed out people. I have never charged an applicant and then denied them. I have a requirement sheet I hand out at showings. It lists items such as criminal histories, employment, income, animals, etc. Laying it out to potential applicants in advance helps in my opinion. As to your question about the cost, and their comments or concerns, I would not worry about that. You are only going to rent a single unit to one person, and your goal is to get the most qualified. As another poster stated, if they complain about $30, what else will they complain about?
I had push back once when I was showing the property to 2 different families at the same time. They knew that one would end up paying and not getting accepted. Consequently only one completed the app.
I explained that they send it to the background check company and I do not get any of that money.
As others mentioned, if you are concerned about the fee, tell them if the application is correct and truthful you'll deduct the fee from what they owe on the deposit or first month's rent.
The applicants who balk at a $35/person background check are probably people you don't want as tenants. There are ways to make it seem like less of a barrier.
Often the landlord or broker will charge the application fee and the background check fee just to apply for the apartment. Instead, don't charge the fee unless the applicants are the ones you've decided on based on their applications.
This way, you're up front that there will be a background check. Yet, they don't feel like they're paying for a background check when they might not even be first in line for the place. They know they're only paying for the check if they're probably going to get the place.
Also, some jobs require background checks. You could waive the fee if someone can provide an official background check like teachers providing theirs from the department of education, etc.
If they balk at the fee they aren't potential tenants for me. Every step of advertising to move in is screening. I only advertise online to get computer savy tenants. Those people tend to have jobs. Then I list my minimum requirements right in the ad, black and white so there is no excuse not to know. I require online rent payment because they have to have a bank account and again be computer savy. Bank account usually means job. I then have anyone still interested fill out an app and I send them a link to Smartmove. I tell them it's $25 per adult and leave it up to them to pay. From there I select and you have to have the money for deposit and prorated rent.
If they can't afford the screening fee, I probably don't want them.
Form my experience I do agree with Dana Hoffman that it all depends on the property. We have changed our investment strategies over the years and moved from C/D areas to A/B areas. The A/B tenants do not have a problem with it. I look at it as the cost of renting and as long as people are going to be renters and not owners they have to pay for backgrounds.
Kind of like closing costs on loans. It is the cost/expense of doing business.
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?
Hopefully $20 still gets you what you are looking for! If that works maybe give it a try.
For years I never charged an application fee. I was concerned that taking money from someone would make it harder if I denied them, which it could. If you deny someone after taking their money, they have more invested than if it was free to apply.
Over time I noticed I was getting lots of applications from unqualified people. I determined some people just apply everywhere they can, hoping someone will accept them. If you charge a fee, those people will go away. Better yet, if you say you charge a fee in your advertisement, they will probably not even call you.
Now my process for applications is to review the application before taking their money just to make sure they look good on paper. If they don't have two references or sufficient income, I reject them and give them their money back. I don't incur any cost beyond time, so no big deal. I am not trying to profit from applications.
I charge $35 per adult and I tell prospective tenants that after their application is accepted, I will credit the fee to their first months rent.
You will get objections to the fee and you may get less calls. Just keep in mind you are looking for quality and not quantity.
Some balk, but if they have a problem kicking out $35, how will they handle the rent?
I charge $50, it costs me $20 per tenant, if they pass, I credit their first months rent, if they fail (and did not lie to me) I give them their money back.
So I only keep the $50 from the people who 1) make me go through the process and do not take the apartment 2) try to trick me into getting the apartment.
I sleep well at night, and the smart tenants see this as fair.
@Andy W. Our reports were $40 for the first applicant and $20 for each additional. I tried to set expectations first, telling potential tenants a few things.
1. If you have any evictions, don't bother applying.
2. If you have any felonies in the past 5 years, don't apply.
3. If you have any drug with distribution charges or crimes of a sexual nature don't apply.
I also try to emphasis that it cost money paid to the companies who conduct the actual checks.
Some balk, but if they have a problem kicking out $35, how will they handle the rent?
I charge $50, it costs me $20 per tenant, if they pass, I credit their first months rent, if they fail (and did not lie to me) I give them their money back.
So I only keep the $50 from the people who 1) make me go through the process and do not take the apartment 2) try to trick me into getting the apartment.
I sleep well at night, and the smart tenants see this as fair.
The ones I see who are the fence are the applicants who know something is on their credit report that might disqualify them for the unit. Maybe their score is good and they have a few marks on their report, but you might still rent to them.
I've had applicants who were hesitant because they thought their report was going to be bad so they did not want to waste the money. After reviewing their reports they ended up being fine! Sometimes you never know.
I charge $25 for each adult. Compared to the big property management companies in town, I am very reasonable, so people are happy. This barely covers my cost, and of course doesn't cover my time, but I am not worried about squeezing an extra $10 or so profit from the application process. My primary goal is to gain a quality long term tenant.
I don't charge anything. I have them complete the application and then I try to verify the information on the application by making phone calls and looking at public records along with pay statements.
@Jassem A., newbie question - where can we find these public records? and which records, specifically, are you referring to?
@Rex King, so do you charge the application fee in C/D areas still? What do you think about my suggestion here about crediting that fee towards their security deposit as a way to mitigate the balking, especially in those areas?
@Francisco Felix (I wish I knew if that notified you) If you are not charging for backgrounds, especially in C/D areas, I think you are making a huge mistake. I had my last rental in a B area and I went through 3 applicants before finding the right person. At $30-40 per I am not wanting to eat that expense. The renters should have paid for them because all of them hid something from me when I asked if anything was going to come up. We will find it whether credit or criminal.
I think it would be a decent idea of crediting their deposit however we just changed our policy and now require 1.5x rent for deposit plus 1st month rent and ALL certified funds.
@Rex King, you missed me by a letter! (Once you start typing my name, it comes up on the bottom of the text box, so you don't have to type the full name out for a mention) I'm glad I'm thinking along the right lines in thinking that that type of credit could be attractive to low-income applicants. I *certainly* was not thinking of eschewing the background check; I was trying to find a middle ground where it could not be an unnecessary deterrent. So, I'd run the check and they'd pay, but they'd know it's going to their security. I just hope Massachusetts doesn't have any weird issues with that because this state is very tough on that deposit.
No problem but be careful using beenverified for tenant screening. You can use it to find out where to start your search on the court websites but the app itself has a big disclaimer that it should not be used for tenant screening. All the information it finds is from public sources anyway so I'm not sure why it matters.
@Rex King, you missed me by a letter! (Once you start typing my name, it comes up on the bottom of the text box, so you don't have to type the full name out for a mention) I'm glad I'm thinking along the right lines in thinking that that type of credit could be attractive to low-income applicants. I *certainly* was not thinking of eschewing the background check; I was trying to find a middle ground where it could not be an unnecessary deterrent. So, I'd run the check and they'd pay, but they'd know it's going to their security. I just hope Massachusetts doesn't have any weird issues with that because this state is very tough on that deposit.
Francisco, I see you are in Massachusetts. If your properties/tenants are in MA.....be careful as any other fees besides, F, L, SD, and lock fee will get you in big trouble.
there is so many out there. google Massachusetts landlord and tenant laws....checkout the mass.gov sites first. LMK if you need me to get direct links for you.
I have only had complaints when they get denied that I don't refund the application fees. Then again I only pull the credit and background once the rest of the criteria is met.