Application fees, yes or no?

Question

Kyle J. · Answer

There are valid arguments to be made both for and against charging application fees, but I find that it usually comes down to what the norm is for your local market.  With that being said, I do charge an application fee and here's a list of some of the reasons why:

1)  I incur a cost to run a credit check so the application fee just offsets this cost (I don't make money off the application fee, I just charge according to what it actually costs me so I'm not out any money).

2)  It helps weed out the tire kickers who may turn in an application but aren't serious about renting the property or those that might turn in an application hoping you won't find out something that would disqualify them (I give all applicants my criteria stapled to the application so they know exactly what I'm looking for, and not looking for).

3)  It's another screening tool (if the applicant can't afford the application fee, how are they going to afford the rent + security deposit?)

4)  Other landlords/property management companies in my local market charge application fees so it doesn't hurt my chances of getting a tenant if I charge one (if no one in my local market charged an application fee than I would probably reconsider charging one as I'm sure it would result in less applicants applying).

I'm sure others will have different reasons for either charging them or not charging them, and they all probably have some merit.  Like I said initially, it often comes down to what the norm is for your specific market.

Nathan Gesner · Answer

It screens out some of the time-wasters. I only charge a $20 application fee per person and you'd be amazed how many people tell me they don't have the money.

My application fee covers a complete credit/criminal background check. It verifies identity, checks rental/employment history so I can cross-check what they've provided on the application, gives me a complete credit report and score, and lists any criminal history.

Some people charge higher, like $40 per and spend only $20 on the background check. This is another income stream but it's useless if you have a small operation. I processed 369 applications so far this year. An extra $10 per applicant would produce an additional $3,690 income but I don't bother with it.

Jenifer Kynor · Answer

Hi Alyssa,

I always recommend charging an application fee.  If you do not have a fee, tenants wouldn't have serious intentions when they apply to your property. They could potentially apply to their top 5 or 10 places as an example. Once you go through the applications and screen them, it is a lot easier for them to decide they are no longer interested. Also, if you charge a fee tenants are more invested. Only the applicants that assume they will qualify, apply. It it a lot less time consuming to you as the landlord.

If you insist on waiving their application fee, one idea is to reimburse your tenant. Have them pay the fee, then take that amount off of the first months rent. This will be a good way to start a respectable relationship with you tenant.

I hope this helps!

Bill Hampton · Answer

Yes, the fees cover your costs, which can add up if you have several applicants. It also weeds out the ones that are not serious or can't afford the fees. If the can't afford application fees, they can't afford to rent my house.

Russell Brazil · Answer

I have the tenant pay the credit screening service directly, and do not collect any fees from them myself.

John Thedford · Answer

Always: it shows intent. Also, to expand a little further, I provide a qualification sheet during showing. It specifically states criteria and also that the app fee is NON-refundable. In five years, I have only had one person apply that did not qualify. I prefer that to wasting my time on people without adequate income, etc.

Brandon Brown · Answer

I charge the background check fee.  I prescreen before the check so as long as there is no surprises the tenant is usually accepted if they make it to the application.

Roger S. · Answer

We only charge what the actual background check costs, and once we select a candidate, anyone else in line whose background check hasn't been ran gets their application fee back.

Deanna McCormick · Answer

TO get applicants in ,, we would say Free applications,, with signed lease.. so if they qualified, we'd credit the cost of application back to thier account,, they all still had to pay the application fee,, we just absorbed the cost if they signed a lease...

Russ M. · Answer

Check your states landlord tenant laws.  In WI, we cannot charge an application fee of more than $20 to cover the cost of a credit check.  Most get around this by having the tenant pay for the service.

Application fees, yes or no?

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