Credit Screening | AAOA - American Apartment Owners Association

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Tenant Turnover Doesn’t Add Up

Rent it Right

by Janet Portman, Inman News

Q: We hired a management company to find tenants and collect rent at our rental in a nearby town.

Over the past two years we’ve had four sets of tenants; one broke the lease and we had to file evictions on two of them. The property is nice though the market is cool now.

We’re tired of the fast turnover — are we or the management company doing anything wrong? –Jose M.

A: It sounds like the company is filling your property too quickly, perhaps without taking the time to properly screen applicants. A management company will be tempted to find tenants fast because it gets a cut of every monthly rent check: The sooner it’s rented, the sooner the checks come rolling in.

In addition, the company gets a fee every time it has to show and rent the property. It doesn’t take a genius to see that frequent turnovers and minimal vacant months are in the management company’s best interests. If an eviction is necessary, you’ll pay the company extra to handle it (of course, you’ll pay a lawyer, too, but the management company won’t usually have any legal expenses).

Balance those interests against yours. You want minimal turnover and you want stable tenants whom you won’t have to evict. Those needs translate into patient, thorough tenant screening and the willingness to go without a tenant for a month or two or three until the right prospect comes along.

True, you’ll be losing rent, but that lost rent will pale when compared to another round of turnover costs a few months down the line, let alone the cost of an eviction. But your management company has no incentive to wait it out — instead, they’ll be anxious to place a tenant and begin taking a cut of your rent.

Truly professional companies recognize that the temptation to quickly rent a place with minimal screening is not ethical. Practically speaking, too, such practices will not enhance their reputation. In the long run, they’ll become known as outfits that don’t deliver quality tenants for their owners. Maybe it’s time that you switched management companies.

Talk to other landlords and find out who has had a good experience. The number of evictions they’ve had to file and whether they’ve had hassle-free tenants will tell the whole story.

Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of “Every Landlord’s Legal Guide” and “Every Tenant’s Legal Guide.” She can be reached at janet@inman.com.
Copyright 2009 Janet Portman

See Janet Portman’s feature, How to Negotiate a Lease Buyout.

American Apartment Owners Association offers discounts on products and services for landlords related to your real estate investment including REAL ESTATE FORMS, tenant debt collection, tenant background checks, insurance and financing. Find out more at joinaaoa.

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Tags: tenant+background+checks, property+management, rental+property, rental+forms, property+managers, help+for+landlords, landlord+associations, landlord+tips

Posted by Kim Ezzell on 10.05.2009. 4 Comments »

Filed under: AAOA Forum, Credit Screening

Landlord Quick Tip

Tip #24: Stick to the Script!

Ever call up your applicant’s previous landlord, then hurry through the call because you didn’t know what to ask? Well, you are not alone!

Having a script can help you get the information you need.

Here are some questions that other landlords ask:

Have-to-Asks:

Is this a good time to talk, or should we reschedule when you have more time?

Did the tenant pay their rent on time, every time?

Did the tenant give you notice they were leaving? Are they leaving prior to the lease expiring?

Did neighbors or anyone complain about this tenant?

Did you ever have to warn the tenant about behavior?

Was the unit/property in good condition when they left?

Did you return all of the deposit?

Good-to-Knows:

Why did they leave?

Did they have a pet? Did you know they had a pet? Was the pet disruptive?

What type of unit did they rent? How much did they pay?

Did they pay by check?

It is a good practice to ask the same questions of each landlord reference, for each applicant. Create a checklist with the questions, and jot down the answers. Place the completed sheet in the tenant file.

Do you have other suggestions? We’d love to know! Share your comments below.

See last week’s Landlord Quick Tip.

Do you have a tip to share with other landlords? Contact our editor at kim@joinaaoa.org.

American Apartment Owners Association offers discounts for landlords on products and services related to your rental investment, including real estate forms, tenant debt collection, tenant background checks, insurance and financing. Find out more at www.joinaaoa.org.

To subscribe to our blog, click here.

Tags: tenant+background+checks, landlord+help, landlord+advice, landlord+tips, landlord+association, apartment+management, property+management, rental+property, rental+forms

Posted by Kim Ezzell on 10.05.2009. 4 Comments »

Filed under: AAOA Forum, Credit Screening

Landlord Quick Tip

Tip #22: The Old Bait and Switch

Tenant screening is like navigating through icebergs. Sometimes you see just the tip, but the real danger is underneath.

To detect applicant fraud you need to look for an emerging pattern -something that feels out of place, and that makes you think there may be more.

Someone with horrible credit can rehabilitate in one easy step – give you a fake Social Security Number. The number probably exists, it’s just not theirs.

Surprisingly, many fraudulent applicants are not that smart. Maybe they’ve glossed over some past indiscretions with false information, but they didn’t bother with the details. Like stealing a Social Security Number but not knowing where they are supposed to be from.

Look at the address history of the tenant, or ask them casually about their hometown. Then cross-check that information against this list of SSN states-of-origin chart provided by the government. If your California native has an Ohio SSN, someone’s got some explaining to do.

If there’s a discrepancy, you can ask the applicant why. It may be nothing, or it may be a sign that there’s a problem lurking just under the surface.

See last week’s Landlord Quick Tip

Do you have a tip to share with other landlords? Contact our editor at kim@joinaaoa.org.

To subscribe to our blog, click here.

Tags: tenant+screening, tenant+background+checks, landlords, landlord+help, landlord+tips, property+management+tips, property+management+advice, rental+property, rental+forms, discount+tenant+screening

Posted by Kim Ezzell on 09.21.2009. 1 Comment »

Filed under: AAOA Forum, Credit Screening

Don’t Botch Your Criminal Background Checks

Given the rising crime in our urban areas, property owners must be concerned with introducing a dangerous or undesirable tenant into their building.

The proliferation of drugs and gangs in cities throughout the United States has turned once beautiful neighborhoods into blighted and unsafe war zones.

It is bad enough to find that your application left their last address because they were evicted. It’s even worse if they left their previous address because they were paroled!

As a property owner, you must protect your tenants as well as your investment.

Nearly all criminal records are public. Generally, the easiest access to criminal records is through your tenant screening provider. When ordering your screening report, most companies offer an option of a criminal background check. The response varies from immediate (online) up to a couple of days depending upon the county or state you are pulling records from.

Because there is no single source for criminal background checks nationwide, your information provider must access from different repositories throughout the country. Therefore, criminal background checks are usually priced on a per county or per state basis.

Before ordering a criminal background report on a prospective tenant, it is important that you have sufficiently cross-checked the application. Once you are satisfied that the address history is accurate, you can then request the criminal background from a specific county or state.

See our feature, Sign Up For Credit Screening Before You Need It.

To subscribe to our blog, click here.

Tags: tenant+background+checks, tenant+screening, rental+property, rental+property+management, landlord+hep, landlord+forum, criminal+checks, rental+property, rental+forms

Posted by Kim Ezzell on 09.21.2009. 4 Comments »

Filed under: AAOA Forum, Credit Screening

You May be Desperate, But Don`t Let `Cash in Hand` Distract You

by Eric Boyd

I got a call on one of my vacant, available rentals today. The caller drove by the property, saw the sign, and called. They wanted to see it “right now”. Cash in hand

I told them I couldn’t get over there to show it until 4pm, as I have other engagements until then. They said, “Well, we’re headed back to South Carolina to take care of some business so that wouldn’t work.” I apologized, and encouraged them to take a look around the outside and peek in the windows.

A few minutes later, the caller’s wife called and said they like it, and asked what they need to do to rent the property.

I said that I could give them an application for them to complete. Then, I would conduct credit and background checks, and employment and rental verification.

Read the rest of this entry »

Posted by Kim Ezzell on 08.10.2009. CLICK to Leave a Comment »

Filed under: AAOA Forum, Credit Screening

Landlord Quick Tip

Quick Tip #12: Always the Last to Know?

If you receive rent via checks, make a photocopy or scan each one, every month.

Take a few seconds to compare the name from the current month’s check to the last one, and look for signs of a tenant in transition:

Joint check before, now a single name
A single name before, now joint
A different person altogether
A business

These are all signs of a change, from divorce, to a new occupant in the unit, to new job status.

Check the phone number and add it to the file if it’s new.

Then, check the bank info and note any change in the file.

Occasionally, a tenant will submit a partial payment, or write something on the back where you endorse the check. Do not deposit or cash those checks before you talk to your lawyer. Under some circumstances, that could limit your rights to collect more from the tenant.

See last week’s Landlord Quick Tip.

Do you have a tip to share with other landlords. Email our editor at kim@joinaaoa.org.

Tags: tenant+background+checks, tenant+screening, real+estate+forms, landlords, landlord+forum, landlord+blog, apartment+owners, apartment+association, property+management+tips, landlord+tips

Posted by Kim Ezzell on 07.13.2009. 1 Comment »

Filed under: AAOA Forum, Credit Screening

Your Biggest Tenant Screening Mistake

Is the Tenant From Hell Moving Into Your Unit?

You hear the stories from other landlords. “My tenant skipped out.” “My tenant destroyed the property!”

So, where do these problem tenants go?

They are out there, looking for another rental. And, chances are, they’re not telling you the whole story. Problem tenants repeat the pattern over and over because they learn how to dodge.

Do you know how to spot them?

“It’s the biggest mistake we see. And we see it over and over again,” begins Bill Gray, with Rent Recovery Services. “We get a file for collection,” Gray continues, “but the information on the application is incorrect. The references don’t check out. That’s when the landlord admits they never called, or they unknowingly got a glowing ‘landlord’ reference from one of the tenant’s friends.”

Due diligence is the single most important factor to tenant screening in today’s market. A problem tenant costs more than a vacancy. Be prepared to do some work when it comes to verifying the application.

Property managers see these problems frequently, and develop their own techniques to weed out these applicants. One manager shared with us that he has posed as a new renter when calling current and previous landlords as a guise to see if the reference is legitimate. “Once, I asked the reference if his unit was available to rent, but the ‘landlord’ said he didn’t own a rental.”

The applicant may be attempting to rent your unit before his landlord files for an eviction, or before that eviction shows up on screening reports.

Another way to catch the applicant in a lie is to order the Previous Address Tenant History report. Check the addresses listed on the application against the verifiable addresses and dates from the PATH report to uncover discrepancies.

Landlord references aren’t the whole story. Valid, current, emergency contact information is crucial to collection efforts, especially now when so many tenants are moving in with family members to save money.

If you are shy about calling references, consider hiring a property manager. You’ll save money in the long run when you don’t rent to the tenant from hell.

“I’ve always said that tenant debt collection begins when you meet the tenant,” Gray continues. “You don’t want to be trying to collect debt from a complete stranger.”

See our feature, The Previous Address Tenant History.

Tags: real+estate+forms, tenant+background+checks, tenant+screening, tenant+debt+collection, previous+address+tenant+history, landlords, landlord+associations, apartment+owners, apartment+associations, landlord+forum, landlord+blog

Posted by Kim Ezzell on 07.13.2009. 4 Comments »

Filed under: AAOA Forum, Credit Screening

Landlord Quick Tip

Tip #11: Where’s This Relationship Going?

Is your applicant planning to stick around through the term of the lease?

Not all the information you need to evaluate a tenant will come from screening reports. Hints about their intentions will come from your face-to-face interview.

Discuss the applicant’s motives for renting. Ask them why they are looking for a rental. Why are they looking in your neighborhood? How do they feel about their current landlord–do they have bad things to say? Are they leaving their current rental early?

Their answers could signal a lack of commitment. You may find out they don’t like being a renter, and are looking to buy a home. As soon as they find it, they’ll try to wriggle out of the lease. Maybe they want to land a rental before their recently filed eviction or recent default shows up on the reports.

Follow up by finding out if the current/previous landlords can confirm what the applicant tells you.

See last week’s Landlord Quick Tip.

Do you have a quick tip to share? Email our editor at kim@joinaaoa.org.

Tags: tenant+background+checks, landlord+tips, landlord+blog, property+management+tips, real+estate+forms, tenant+screening, landlord+associations, apartment+owners, apartment+associations

Posted by Kim Ezzell on 07.06.2009. 1 Comment »

Filed under: AAOA Forum, Credit Screening

The (Hidden) Advantage of Application Fees

by Robert Cain

Identity photo Application fees have the additional advantage of being “self-weeding” of bad tenants.

Tenants who know they will be rejected usually won’t apply to rent from you if they know they will lose their application fee.

If all the risk is on you, many times they will just go ahead and fill out a rental application, replete with lies, half-truths, and omissions. But if they have to risk their own money, they may just go on to the next landlord—the one who won’t be so careful whom he rents to.If you do collect an application fee you are either legally or ethically (depending on whether your state has passed a law about it yet) required to do the following:

a. Tell them what you are going to check.

b. Inform them of their rights to dispute any information you uncover. (You don’t have to wait for the disputed information to be resolved, you can go ahead and rent to someone with no black marks on his or her credit report.)

Application photo c. Tell them the name of the screening service or credit reporting agency.

d. Even if you don’t charge an application fee, but you reject them as tenants because of information you received from a credit agency or tenant screening service, tell the applicant that you rejected him or her because of the information you received, and give him or her the name and address of the service or agency.

e. You need not tell applicants the specific results of the credit report or screening report, only that it caused you to reject them. They need to contact the agency for the specifics. You can, however, give them a copy of their “consumer report,” as defined in the Fair Credit Reporting Act.

f. Do not charge a fee unless you actually have a unit available to rent at that moment or expect one within a reasonable length of time.

g. If you charge an application fee, but never screen the applicant, give the money back “within a reasonable time.”

Write all this out as an agreement and receipt that they and you will sign when they pay you the application fee.

Robert Cain is a nationally-recognized speaker and writer on property management and real estate issues. For a free sample copy of the Rental Property Reporter call 800-654-5456 or visit their web site at www.rentalprop.com.

Share your insights by commenting below. For questions about our blog, contact our editor at kim@joinaaoa.org.

See our feature, Is Your Rental Application Falling Short?

Tags: rental+application+fees, landlords, apartment+owners, landlord+associations, apartment+owners+associations, real+estate+forms, landlord+tips, landlord+tenant+laws

Posted by Kim Ezzell on 06.10.2009. 5 Comments »

Filed under: AAOA Forum, Credit Screening

5 Tenant Screening Tips for Today`s Economy

Identity photo Tenant screening is more difficult in this bad economy.

For one thing, there are fewer applicants and that forces a landlord to choose between more mediocre prospects.

But these times are also hard on landlords who rely too heavily on credit reports to make screening decisions. More applicants than ever have a foreclosure or a bankruptcy on their credit record, and landlords have to decide whether to overlook it.

Applicants with long-term job histories suddenly have been forced to change careers, and others are moving around to new cities to search out job opportunities.

While credit is an important factor in tenant screening, it is not the only thing to consider when evaluating a prospective tenant:

Talk to The Previous Landlord – Oops, There Isn’t One!

Read the rest of this entry »

Posted by Kim Ezzell on 04.02.2009. 5 Comments »

Filed under: AAOA Forum, Credit Screening

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Tenant Turnover Doesn’t Add Up

Landlord Quick Tip

Landlord Quick Tip

Don’t Botch Your Criminal Background Checks

You May be Desperate, But Don`t Let `Cash in Hand` Distract You

Landlord Quick Tip

Your Biggest Tenant Screening Mistake

Landlord Quick Tip

The (Hidden) Advantage of Application Fees

5 Tenant Screening Tips for Today`s Economy