Seven Steps to Easy No Hassle Tenant Screening
If you manage your own properties, screening tenants may be your least fun thing to do. If you're like most landlords you delegate this task to a third party online screening service. This is fine for reviewing an applicant's credit score or finding out if that person has had an eviction. Yet these services may not call the previous landlord to ask about a tenant's payment history or if the tenant had been issued any three day notices. And unless there is a human doing the legwork, your data based service won't be able to spot a fake pay stub or photo ID. These tasks are crucial to tenant screening and need to be done either by you or a member of your team. To screen tenants well, your goal should include the following:
- To verify the applicants are who they say they are
- To verify the applicants have the source of income they say they do,
- To ensure the applicants will pay their bills on time
- To ensure the applicant will take care of the property
- To ensure the applicant will not bother the neighbors.
Yes, this IS a tall order, but it is not impossible. To help you navigate through this maze, here are seven areas to check before giving an applicant the green light.
You'll want all of your applicants to provide you an original form of identification. Acceptable personal identification should include a photo, date of birth, signature, and be issued by a domestic or foreign government agency. Compare the applicant's signature on the application to the photo ID and make a copy. If it is a domestic ID, check for a watermark and see that the date of birth matches the expiration date. If the address on the ID doesn't match where tenant is currently living, ask for an explanation. For social security numbers, know that not all applicants will have one. You can ask them for their tax identification number instead. If you use the social security number, compare it to number on the card. Don't make a copy. Finally, do a web search of that applicant's name, phone number and email to ensure authenticity. You'll want to know if your future tenant's email or phone number is associated with an escort service on Craigslist.
For starters, you must have an applicant's current address. You will need this to run a credit report and to verify current residence. If current address is not on the photo ID, ask that they provide a copy of their current utility bill with their name on it. On the application, make sure there is enough space to include the last two previous addresses. Be wary if an address shows up on the credit report but is not listed on the application. It may indicate resident had a poor rental history there. Addresses can be inaccurate on credit reports, but it is usually the current address that is not updated.
Former and existing landlords can be difficult to track down, but don't sidestep this task. . If the applicant's current or former rental was managed by a property management company, you'll want to first establish their existence by doing an internet search of address and phone number. Keep in mind, you will have better luck getting them to answer questions by using a written request you fax or email to verify applicant's rental history and payment record. Most won't give you that information by querying them over the phone. If your applicant's current or former residence was owned by a private landlord, check that the name of the landlord or his holding company matches the property address given to you by the applicant. You can do this by doing an internet search of the address on your local tax assessor's office website. When possible, do an internet search of the landlord's phone number as well to see if the phone number matches that company or name. Be aware that some applicants may give you the number of a relative or friend to "pose" as their former landlord or they may purchase a "landlord to call" on line though a service. Yes, this really happens!
To run a credit report, you only need a person's name, birth date, and current address. Some agencies refuse to run a report without providing a social security number because of liability reasons. Find one that will do a credit check without one or will do one using a tax identification number. Some applicants will bring you a copy of their credit report. Decline to accept it and run your own. Read the credit report for clues. Red flags to look for include late payments that occur in a sporadic pattern; collections on utility accounts; judgments, liens, and evictions. If the applicant has financed a car, make sure he has kept current on his payments; repossession may hinder your chances of receiving rent if he's lost his ability to get to work. Don't just look at the score. You can have a 750 credit score and the tenant could be in debt up to his eyeballs. Consider the applicant's total debt obligation and compare to monthly income. Can this person realistically pay basic expenses with your rent payment? If it's a choice between food, heat and paying the landlord, which obligation do you think a desperate tenant will ignore?
Sometimes the person applying will give you a card with their supervisor's name and phone number. The card may look authentic; however, everything can be bought online - including access to a "dummy employer." In addition, the named supervisor may be a friend or relative of the applicant. Do an internet search on the company or agency name. Call phone number listed and ask for human resources. Use a form you can fax to them to verify income and employment start date.
Rental history takes a higher priority if credit score and income are minimally met. Accepting any applicant with a previous eviction within seven years is a high risk, so avoid this. Question both the current and previous landlords. Keep questions specific that can be answered objectively supported by documentation. For example, "Was the tenant late on rent payments, and if so, what were the dates?" and "Was the tenant ever issued any three day notices and for what reason?" Avoid asking vague questions that can set you up for a lawsuit with Fair Housing such as: "So did you like the tenant?" or "Did her children cause damage to the unit?"
When an applicant hands over pay stubs to verify income, trust but verify. Be wary of pay stubs that do not show any with holdings. Fax or email their employer an employer verification form that has been signed by the applicant. If applicant is self employed, use the first two pages of the last two years tax returns including schedule C. To check non-traditional sources of income:, such as alimony, child support, SSI, Social Security, Student Education Award Grants, Student Loan Disbursements, Trust Funds, unemployment, ask applicant to produce the grant or award letter from the agency showing amount as well as 12 months of bank statements showing that amount being deposited into their account.
Remember the acronym SEP
SEP stands for "Somebody Else's Problem." Remember this when you receive an application that is incomplete and the tenant asks you to fill in the information for them. It is not your job to track down any missing information. Simply return it to them and say you will process it once it is completed.
Screening applicants is time-consuming but not rocket science. If you use a third party screening service to do ALL the background, credit checks, and income, employment and rental verification, insist that they practice the seven steps above. The lifeblood of your business - your rental's positive cash flow- depends on it.
If you have any tips you'd like to add, please share them!