People keep backing out! What is your process?

Question

I keep getting these people who want and qualify for an apartment but can't move in until 2 weeks from now or whatever. I collect the nonrefundable retainer of $250 (half of deposit), and then at the last minute they back out. So, when do YOU have people sign the lease? Do you make them do it now if they aren't moving in until 2 weeks from now, or on the 1st? What is your process? Thanks much!

John Underwood · Answer

I also have them sign the lease once I qualify them and they pay the deposit. They don't get keys until all the move in money is paid.

Or - Keep collecting that $250 deposit a few times per month on people that never move in and raise the deposit a little. That would be a nice income.

Mike S. · Answer

My reservation fee is one months rent (holds the rental and I take it off the market).  It becomes the SD when lease is signed and 1st months rent is paid. I'll only hold 2 weeks out from lease signing during peak season and up to 4 weeks when it's slow.  On the one hand, if you're getting that many flaky people, it may be you and how you're screening.  On the other, half the rent may not be strong enough.

Nate Burgher · Answer

I personally require the security deposit and first + last months rent at signing of the lease, assuming they're moving in within 28 days. Tough for them to back out at that point.

Jimmy Dudley · Answer

I mean money for nothing aint bad. You should have them sign the lease when they pay the deposit. Also consider collecting the full deposit, people will be more likely to commit. If they don't move in at that point you just double your free money.

Mike S. · Answer

Just be careful of your jurisdiction.  A deposit, in some jurisdictions, implies refundabilty.  A fee more clearly states the nature of the transaction.

Max T. · Answer

If I have to hold for a while (marketing well before move-in) then I take a full month deposit. It will convert to security deposit when the lease gets signed. At that time I collect first and last month.

So just increase your deposit to a full month rent! More skin in the game. If they still walk at least you aren't out any money.

Michael Dang · Answer

I get the security deposit and first months rent during the signing of the lease.  No holding of the unit unless they have a long good history with me.

Mike H. · Answer

I actually use the same process as you do. Hold deposit is $500 but my rents are greater. In the 8 or so years since I started doing that, I've only had one person back out. They got a job in another state.

One thing you may have to do is require the hold deposit to be the entire security deposit amount. Apparently the $250 just isn't enough to prevent them from walking away.

But I think you're doing it the right way.

Typically, a tenant is locked in and then needs to give their 30 day notice to their existing landlord. But we don't want to hold a house for 30 days without a deposit.  That being said, I don't think you'll have too many renters that would be able to come up with the entire move in amount a whole 30 days before they're going to move in.

To me, I think you're approach is correct. I would probably suggest bumping your hold deposit up to the same amount as your security deposit so it will be harder for someone to walk away from that number.

I think that will fix the problem.  And it could be that you just had a crazy run of bad luck too. And maybe you're fine where you're at.

Lynn McGeein · Answer

My policy is first qualified applicant to pay security deposit + first month's rent and signs lease gets the unit.  I do not allow them to sign a lease until they've presented certified funds for security and first month's rent (usually at start of lease-signing appointment, or I'll send lease electronically once funds are deposited-- Google wallet works great for that).  The lease they sign then states they must show proof of all utilities scheduled in their name, required renter's insurance policy, and have met the requirements of any addendum (pet, fireplace, etc.), before possession will  be granted.  It works much better for me than holding a unit for a specific tenant, even with a holding fee, while missing good qualified applicants in the meantime.   I do get some angry calls complaining that they paid for their online credit check and passed but didn't get the unit, but I explain that my application clearly states my process, and they didn't get it done fast enough while someone else did.   As I do not charge an up-front application fee and have them pay the online credit check service directly, there is no application fee to worry about refunding.

Shawn Q. · Answer

I always have them sign when I collect the deposit. I'm willing to do a future start-date (so, we're signing 01/15 with a 02/01 start as an example) but I generally collect the prorated first month at that time as well. Then it's just a matter of meeting them on the day to give them the key and let them start moving in. I would also collect the full deposit - if this happens frequently it sounds like the amount you're collecting is to small to keep them motivated.

People keep backing out! What is your process?

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