New Tenant Screening, do you make the applicant pay?

29 Replies

Good Morning Everyone,

I wanted to learn what other folks are using for tenant background, credit and criminal checks. Our current process is thru a website called Avail and that has been pretty smooth but the application comes with a $45 fee paid for by the applicant. I know it's essential to get all these reports run but I feel like the $45 fee scares folks off along with the process of applying online. We switched to this process a few years ago because of the convenience on our end with no paperwork.

Would you suggest also adding a paper application back into the mix at the time of showing for the applicant to fill out? If so, would I still be able to charge the applicant for there background checks? Do you have any sites that you would recommend that do good work but have a lessor fee of $45 per applicant.

All feedback and suggestions are welcome!

@Jenna Columbus

My property management company in CT charges $50 for an application. Every person 18+ should have an application done before moving in. I think $50 is a standard and new renters are aware of. I would keep it online to minimize the time you spend. Unless you have 100s of units, it will not be any sizeable profit center by doing it yourself.

@Jenna Columbus I’ve also noticed that some people aren’t willing to pay the application fee, so they pass on my rentals. What I do now if I’m having trouble renting a property is to offer their fee back in the first month’s rent. So, two people moving in would pay the $80 application fee ($40 per person since I use Cozy) and then get $80 off their first month’s rent. As long as I have that amount in cash flow, I’m ok with doing that.

@Jenna Columbus We've always made them pay an application fee. Ours is currently $40 per adult. Sometimes we'll cut them some slack and only make a family pay for one application, but since we have to run screening on each adult individually, we generally charge each one separately. We've found that the fee helps us know people are serious, though, and that keeps us from wasting our time on people who are just fishing and applying to everything in sight without real interest in it, who then ghost on you.

We rent A and B class properties, though, so it may be different once you dip into lower income levels. Then I can definitely see the app fee scaring off some potential tenants.

Hi @Jenna Columbus , I am a Property Manager out in the Worcester County area. I currently use a system called Buildium which has been very helpful for all the properties I manage. This system runs the basics Background, Credit and Eviction check's through (SmartMove) where you can go directly to there site as well. The current fee is $30.00 per applicant. You can also check directly through SmartMove and see there options. 

Hope this helps. 

@Joe Alford hello, I started offering a refund for applications that are accepted and people seem to be happy with that solution. I was just worried I was charging folks more than what others are to apply making my properties less appealing. Thanks for the advice!

@Jenna Columbus - definitely here to help answer any questions you might have. The $45 fee is fixed for the full bundle reporting but there are other options as well; it is also worth noting that the applicant can share the application with other landlords on the platform for 30 days (since their credit score is subject to change within that time period), but this makes it so that if you were to deny their application, they'd be able to share that app with another landlord (thus, avoiding the need to pay for additional application costs). 

I think it depends on the resource you use for tenants application. If you're using a free screening platform offering you a thorough report and you don't need to anything else except reading and comparing the reports, then charging money does not sound reasonable. But if you need to spend money on screening application and also spend time and labor to double check the reports, $45 will be reasonable for every tenant. 

@Jenna Columbus

I do paper app to verify employment and last/current landlord. Also Facebook and social media sites, and state Criminal Court. That’s the free part. Then, MySmartMove at $40 per adult, paid directly to the site. Just this month I’ve had two couples go completely through process and then bail on lease. I sure am not going to eat that $160. Applicants always pay. The key is though, I don’t submit several applications at once. If they qualify, the rental is offered to them.

@Rachel Foster . We have been using the Avail site for everything. They use Experian to pull all the data for an application and they offer a discount to the applicant when they get all of the reports. We require all the reports anyway for the application. Thanks for your input. It sounds like what we are asking from an applicant is similar to what other landlords are asking and that makes me feel more confident.

I use Cozy and the applicant pays the fee directly to them. I tell tenants they are welcome to fill out the application, which is free, BUT only pay for the background and credit check if they are very seriously interested.....NO REFUNDS.......I don't see a dime of the $$, so its out of my hand.
Some tenants have the sense that lots of landlords use it as an easy $$ grab.... that's why I don't have anything to do with the fee....out of my hands.
Its also another screening tool....if you don't have $40-100 to do it, then you are running pretty tight on $$ and its not a good sign for me...

The refund for the accepted applicant is reasonable...... but I've never found it necessary and in the long run its still $$ out of my pocket

@Jenna Columbus , if all you're charging is the tenant screening report fee then it's reasonable.  $45 is definitely on the higher end of the industry.  We charge $35 and majority of screening websites are $35-40 as well.  It depends who they utilize for their reports provider (i.e. Transunion, Experian, Equifax).  I also don't know if $10 is going to make that significant of a difference.

It's not uncommon for landlords/PM's to charge for their time as well.  In Arizona, $50-75 seemed to be the going rate.  I'm a big fan that the applicants pay for the screening so they know I'm not simply pocketing their fees.  I've had several friends who had bad experiences paying application fees when the landlord basically had another applicant ready.

Personally, I only charge my leading candidates a fee.  I'll inform the other applicants that I'm running a report on another candidate and if it doesn't work out then, and only then, will I ask for them to submit an application fee.  I'd prefer to sleep better at night knowing I didn't rip off $50 from applicants I had no intention to leasing to.

This also varies market-by-market.  In crazy markets like NYC/SF, it's not uncommon for even higher fees because it's so competitive to find a place to live.

@Jenna Columbus

Hi Jenna, I usually have my tenants pay for the credit/background check. I use Experian’s service:

https://connect.experian.com/tenant-screening/landlord-credit-check.html

It’s great bc you don’t have to worry about payments. The potential tenant can go directly to the Experian website, fill out all their proprietary info, pay, and share the report with you electronically.

And, if I remember correctly, it was only $15 last time I checked!

-Adam

i use mysmartmove which is powered by transunion. does a soft credit check and background check for $40 that you can have your applicant pay or you can pay if you chose to. I like the reports it generates.

@Jenna Columbus

Application fees are for a couple reasons.

1. It's a screening tool to weed out the ones who aren't serious about signing a lease. If an applicant puts down $50, it shows they are serious and not just a tire kicker applying to everywhere.

2. Why should the landlord be paying for it? What happens if you have to reject a few applicants, are you still willing to pay for all of them?

I charge $13 for credit and criminal which is what my local Apartment Association charges me. 

There's no way I would ever eat the cost of a rental application as 80% of people who submit a rental application to me either A) disappear/change their mind or B) don't pass the stated rental acceptance criteria despite telling me they meet the requirements. 

@Jenna Columbus Just to echo what others have said, I would keep the application fee charge. Gives them a small hurdle to jump over to apply for your rental which is a good thing. With that fee in place you will get less time wasters applying who do not meet your minimum qualifications. 

@Jenna Columbus

Try ntnonline.com if I’m not mistaken only charges $18-$25 per inquiry. We used them for most of our properties but switched to mysmartmove.com allowing prospects who met our requirements to pay directly for credit and criminal checks. This process helped us tremendously as only qualified prospects who were still interested in the unit paid.

Some states like Texas you have to give prospects list of your requirements and have them sign before collecting an application fee.

@Wy Kay . Hello, I totally agree. We always have the application go thru the website and they take the fee, not us. We don't see any funds from that information pull.

I'm just happy to see that we are doing the same things as everyone else and we aren't missing anything.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here