So here's my dilemma and I'm not sure how to handle it. I had a prospective tenant. we will call them Tenant #1, come see one of my units and start the application process. During the credit/background portion, they were locked out of the system because they forgot they froze their credit. Tenant #1 has no problems completing the credit/background once the system is unlocked and I have already verified employment and references so I don't see any red flags per se but they haven't completed the application process. Tenant #1 also negotiated a lower rent than what we had listed. On top of this, they agreed to give us a security deposit to hold the property until they can complete the application. I told her until I receive funds I will continue to show the property. All this was negotiated through text and I have not accepted any funds yet.
Enter second prospective renter. Today, I had another prospective renter come to see the property just this morning. She loved the place and immediately after leaving filled out the application and completed a credit/background check. From what I can see on the credit report she has a much better debt to income ratio than prospective tenant #1 and a great rental history. She agreed to our full price rental listing and did not try to negotiate the rent down. I mentioned to here that tenant #1 is also in the application process but had not completed it yet. She said no problem but let her know because she is ready to move in.
So I guess my biggest concern is whether or not I'm obligated to take Tenant #1 since we agree to terms (nothing signed) but hasn't they completed the application process where Tenant #2 has already completed the application process (and arguably looks better on paper) and has agreed to full price rent?
Go with tenant #2. Until that lease is signed it's fair game. I can't even tell you how many times people have told me they wanted to rent (after I run their credit) and then they disappear or changed their mind.
Don't be in a situation where tenant #2 finds another place and then tenant #1 blows you off. The first person who signs the lease gets the place. I hope you call tenant #2 and set up a lease signing, stat!
I agree with @Karl B. You're not obligated to anyone yet. I always tell all my applicants that I will continue showing the property and accepting applications until I have a signed lease and all move-in funds have been paid (I do both of these things at the same time).
There are a lot of flaky applicants out there and you don't know if/when applicant #1 will ever actually follow-thru. Don't let them leave you on the hook like that, especially when you have a better applicant potentially lined up.
It'd be one thing if you had some sort of commitment from applicant #1 (i.e. paid security deposit/holding fee) and they were better qualified. But they haven't committed anything yet and they're actually a worse applicant who negotiated a lower rent. Can't think of a better reason to move on.
The only time I'm holding a property for someone is if the tenant has paid their "deposit to hold" which turns into their security deposit upon move in. If they haven't signed anything and haven't paid anything, I'd definitely be going with tenant #2 in this scenario. I love when prospective tenants take the initiative to get their application and credit/ background checks in as soon as they leave.
My vote is for tenant #2! Good luck
Thanks to everyone for the responses. I'll be taking your advice and moving on to tenant #2.
@Gerald Barron , you go with the first qualified applicant. Qualified means submitting all documents.
Tenant #2. Regardless of their better history.
You are not in a binding situation. You also want to avoid a preferential treatment to Tenant-1 in case Tenant-2 is one of the protected FHA classes.