The How to Guide for Implementing a Tenant Screening Process
As a property manager or landlord, your rental properties are significant investments, and the tenants you choose to occupy them are vital for maintaining their value and ensuring a steady flow of rental income. An essential component of this is implementing a robust tenant screening process. This fundamental step safeguards your investment while fostering a positive, secure, and profitable leasing environment. By adequately researching applicants, landlords can avoid dealing with timely and often costly tenants. That’s why nearly 90 percent of landlords reported they screened potential tenants in one form or another in 2022.
Continue reading and explore the importance of a comprehensive tenant screening process, the key elements to include, and what tools can help you along the way.
Why is it Important to Screen Applicants?
Profit margins can be slim, and every dollar counts. Without meticulously vetting prospective tenants, you can end up paying considerably more than you may want, causing harm to your reputation and your wallet. Below are the top 5 issues that can arise without the proper tenant screening process.
Late Payments
One of the main issues landlords face is dealing with late rent payments. Every property manager has dealt with it before. It starts with rent showing up a little later than usual, and the next thing you know, it doesn’t show up at all. Losses add up monthly; before you know it, the eviction process starts.
Sadly, there is also no guarantee that the tenant will pay back the rent once they are evicted, forcing many landlords to hire a third-party debt collector to make up for losses as much as possible.
Property Damage
As a landlord, you may encounter tenants who are careless in their treatment of your rental property. They might leave holes in the walls, misuse appliances, and cause significant damage to your investment. Although the security deposit will cover some expenses, it might not be enough for all the necessary repairs.
Prolonged Vacancy Time
You must still fill the vacant space even after a harmful tenant leaves. Usually, a landlord will have a longer vacancy period due to extensive repairs to get the property back in order. Keep in mind that rental vacancies in principal cities are rising and increased by 17.2% in 2022.
Legal Battles
There is a chance that the tenant could take you to court, resulting in a costly legal battle. To avoid legal disputes, it is essential to always comply with your local real estate laws and eviction procedures and work with tenants to avoid common disputes like the ones listed below:
- Habitability
- Accessibility
- Occupancy Rules
- Necessary repairs
- Housing discrimination
Eviction Fees
Sometimes, the only solution is to evict a troublesome tenant. This process can be lengthy and costly, but in the end, it might be the only way to free yourself from the issue. The entire eviction process can take 3-4 weeks to go through and costs on average $3,500.
Coming Up With a Tenant Screening Process for You
It can be overwhelming learning about the different screen processes. Costs, time, and accuracy are essential in determining the right product for you. To help make it easier, we’ve divided the process into two categories: formal and informal.
Formal vetting processes landlords can conduct
Property managers and landlords can perform several types of screenings to vet out potential tenants. For instance, they can search records, including:
- Civil records to see if the applicant has had any bankruptcies, liens, judgments, evictions, or suits, which can provide insight as to whether they’d be a reliable tenant.
- Criminal records to determine if tenants have a history of illegal activity.
- DMV records to help validate that the applicant-provided information is accurate.
- Employment and education to assess the validity of an applicant’s employment and education history.
Please note that you must inform the candidate a background screening will be performed. Additionally, many property managers and landlords run credit checks, which the applicant must approve before conducting.
Informal vetting processes landlords can take
Even if a tenant passes the formal screening processes, it can’t hurt to use alternate methods to help assess if they’ll be good tenants. To adhere to Fair Housing rules, be sure to ask standardized questions to all tenants.
- Ask the potential tenants if they have pets so they can be informed of any pet policies or additional charges.
- Inquire if the applicant plans to have a co-applicant or co-signer so they can also be screened.
- 3red flag if the tenant is trying to hide something.
Property managers and landlords can also contact previous landlords to find out if the tenant paid their rent on time, took appropriate care of the property, and got along with their neighbors.
Making a decision after screening
If any negative screening results surface during the application process, landlords should allow the applicant to explain. Perhaps the issue has been resolved, or there may have been mitigating circumstances. Any information gathered during this process can be valuable in making an informed decision. It is essential for landlords and property managers to ensure that they follow the legal guidelines when denying an application. The reasons for rejecting an application must be lawful, which include:
- Income cannot support the rent.
- Payment history is unfavorable, and credit score is poor.
- Work history isn’t sufficient or is unverifiable.
- Previous rental history shows a problem with evictions, paying rent on time, or having problems with neighbors.
- Criminal history shows the candidate may be a potential risk.
It’s important to remember that when using screening processes, treat each candidate equally in the vetting process. When checking credit, be sure to adhere to the Fair Credit Reporting Act.
MicroBilt has been helping businesses assess and manage risk for over 40 years. To learn more about our comprehensive screening tools, contact us today.
