Taking the risk out of renting your property.
Thoroughly screening your potential applicant is the first - and most critical - step to your success as a landlord. Careful qualification helps to ensure that your applicant is willing and financially able to pay the rent.
Where can you find the information you need? The same resources used by companies like NHP and Southern Management, the nation's largest property management firms, are also available to you. Look for a company that specializes in providing the following industry specific information: computerized landlord-tenant public records, rental payment histories and credit reports from all three major credit bureaus: CBI/Equifax, TRW and Trans Union. "Sample" reports and/or verbal service explanations should be available upon request for any information you receive.
Pre-Qualify Your Rental Applicant
You can begin the qualification process by "pre-qualifying" your applicant. Start with the rental application itself. Make sure it is filled out completely and in detail. Make sure that current and previous addresses are provided and that the dates your applicant lived at those addresses are continuous for the last three years. Check for obvious discrepancies: wrong area codes with addresses, salary seems unreasonable for type of employment, tenancy dates don't match lease requirement, etc.
Next, verify any address or employment phone numbers by using a phone book, crisscross directory, Apartment Shopper's Guide (includes many apartment complexes in your area) or directory assistance. This step will also help you fill in any incomplete address or phone number information. Review the application before the applicant leaves your office. This will afford you the opportunity to ask any pertinent questions about the application or clarify any items that have been omitted.
Always get a driver's license with a picture to confirm the identity of your applicant. Always verify your applicant's social security number with one of the following sources: Social Security Card; Paycheck Stub; Recent Tax Return; Driver's License (only if that state uses the social security number as an identifier).
Verifying your applicant's social security number is very important. If the social security number you submit is not accurate, you'll end up wasting time trying to process the application, since a prerequisite for running a credit report is an accurate social security number.
With the applicant's driver's license, check the address against all addresses listed on the application. If the driver's license address is not on the application, write it down so you can later cross-check it with the addresses listed on the housing and credit reports. You'll need to find out why the applicant forgot to provide this information. They could be hiding something that happened while they lived at this address. Be aware.
A personal check is also a good source for address information, although it cannot be used for verifying an applicant's identity. Cross-check the address just as you did with the driver's license.
Whenever you get any additional identifying information from your applicant (driver's license, social security card, personal check, etc.) make sure you make a copy and include it in the applicant's file.
Investigate Your Applicant's Rental and Credit History
Reviewing all 3 qualifying documents the housing report, the credit report and the application. Check to make sure that the names and social security numbers on all three match. If they do not, check and make sure that the information you provided was accurate. Remember to make allowances for maiden and married names.
With the sample reports provided by your resident selection agency, review the documents for the following information: public record items including collections, failure to pay rent notices, evictions and money judgments. Also check for positive rental records, inquiries, credit balances (your applicant must be able to afford the rent!), payment histories and status. Each piece of evidence must be weighed, compared and analyzed to confirm consistency with your prospect's application. The agency you work with will be able to help you interpret the data for you over the phone and give you tips on landlord and employment verifications - just ask for Customer Service.
Fair Housing Strategies
Clearly defining and documenting your reasons for accepting or denying an applicant can drastically reduce the risk you take in evaluating an application. Since you may have to rely on your records in a Fair Housing investigation, rental records are often key evidence in defense of a housing discrimination claim against you. To avoid problems, it's important that you secure the following for your file:
* Documented reasons for accepting or denying an applicant.
* Housing report and credit report used to process each application.
* Date and time of the application.
* Name of the person who accepted and processed the application.
* Date and time that each rental requirement was verified.
* Date and time processing started and ended.
* Name, title, phone number and address of the person providing the requested information.
* Summary and date the information was provided. Reason for denial, if applicable.
Standardize all questions on your applications, as well as any you ask in person or by phone. Avoid discussing impermissible topics with applicants who start to ask questions or volunteer information regarding age, race, sex, religious preference or disabilities. When these topics come up, to avoid any possibility of discrimination charges, tell the individual that such information is not a factor in selection and stop such conversation immediately. Maintain all records for a minimum of two years, since a lawsuit can be filed up to two years from the date of the alleged act of discrimination.
Denying Housing to Your Applicant
If your applicant is denied housing based on information supplied by housing or credit reports, they are legally entitled to dispute the information contained within their file. Under no circumstances should you disclose any specific information about what is included in the applicant's file. Simply state, "Your application has been denied based on a report supplied by (name of reporting agency)." The agency who supplies the housing and credit reports to you will provide a list of reporting agencies with contact information. Refer your applicant to the appropriate bureau for further instructions.
Inadequate information or inconsistent screening methods can cost you a great deal more than the average credit granter: lost rent, property damage, exposure to Fair Housing issues. And, according to Steve Dabbs, owner of a Dallas collection agency, "Inadequate applicant screening is the most common factor we see in skip delinquencies."
Whatever criteria you choose to select residents for your property, it is critical to evaluate each application with accurate, complete information on your prospective resident, then apply standards consistently - it's the safest method of doing business and securing rent income for the future.
(Stephen Rabbitt is owner of The Registry, a tenant screening agency offering comprehensive court and credit information to landlords and property managers nationwide. For more information call 1-800-999 0350)
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|Publication:||Real Estate Weekly|
|Date:||May 10, 1995|
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