I would normally vet the basics (rental history, income, etc.) prior to actually having applicants pay and run credit and background checks (these would be last step).  However, I made the mistake of forgetting to tell a couple applicants to disregard the credit/background check portion of the application (through Cozy), and they both completed them ($40 per applicant).  

Both are nearly qualified (a couple more prior landlords to call tomorrow), however I can only proceed with one.  They're both excited about the unit based on my conversations with them, however I will need to tell one of them they did not get the unit.

Should I refund the losing party their credit/background fee since I forgot to tell them not to request the checks, or is that somewhat standard that they might lose out on that money? 

You don't have to refund them the money. When they pay they know there is a chance that they won't get accepted. It's pretty standard practice. However, I will say that if there is any application that has been submitted and it looks like a strong application you should probably let people know before they submit another application. I'm pretty sure you don't have to do this but I myself think is morally wrong. In your case it seems they both kinda did it at the same time so there wasn't much you could do.

@Wade Penner You can but don't have to. Just a business decision on your part. Im not familiar with cozy but do they get a copy of everything you see for the fee? I know smartmove does this so I assume Cozy does too.. If it helps you sleep, they at least got something for their money and may be able to submit it to another landlord.

That's a choice you have to make.

My application includes a few basic instructions at the top of the application. One of the first ones is that the application fee is non-refundable. Once I run the credit/criminal, that money is spent. If they don't want me running it, they shouldn't give me the money. However, I'm running nearly 1,000 applications a year. If you only do 4-5 a year, maybe it's not a big deal to refund the money.

See if Cozy has a way for you to provide instructions. If not, consider printing off the application instructions and handing it to people that express interest during a showing. If you warn them in advance that the fee is non-refundable, it takes away the guilty feeling. 

Appreciate all of the insight - that's all very helpful information.   I was already thinking I might just create an instruction form for future listings/applicants, so glad to hear you say that @Nathan G. . 

I did uncheck the "required" box for the credit/background checks in Cozy, but forgot that the applicant could still purchase them anyway, which in this case they did.  Moving forward I'll have more clear instructions prior to sending them the application link.

Still on the fence as far as the refund goes, but I've got enough information to make that decision now.  Thanks!

Refund them

Originally posted by @Wade Penner :

Appreciate all of the insight - that's all very helpful information.   I was already thinking I might just create an instruction form for future listings/applicants, so glad to hear you say that @Nathan G. . 

I did uncheck the "required" box for the credit/background checks in Cozy, but forgot that the applicant could still purchase them anyway, which in this case they did.  Moving forward I'll have more clear instructions prior to sending them the application link.

Still on the fence as far as the refund goes, but I've got enough information to make that decision now.  Thanks!

 If both applicants meet approval standards, go with the first one that submitted their completed application. Tell the second applicant that they were qualified, but you had two applicants. Tell them the other application came in first, so they got priority. This avoids appearance of discrimination of bias. 

As far as whether to refund, you probably don't need to. If they are angry or feel you misrepresented information, I probably would refund in that case. The $40 isn't worth having people out bad-mouthing your business.