Get the Perfect Tenant (On Paper, Anyway)
Screening potential renters.
Completing a thorough tenant screening is complicated and time-consuming, but it is an essential process in selecting a tenant who is a good fit, and to maximizing your returns as well as your overall experience as a landlord.
Selecting the right tenant means less chance that they will leave your rental property destroyed when vacating (saving repair costs and time the property cannot be rented), have habitual payment issues, or become any number of other problems for you and other tenants you may have. As landlord you are able to obtain more than just a credit report, you can also obtain an applicant’s eviction history; and verify details like employment, income, and rental references. At Utopia Property Management, we thoroughly screen hundreds of applicants each year, and have compiled the following guide with suggestions on how to make the best-informed decision when picking your next tenant.
Before You List, List
Determine your criteria ahead of time.
Make a list of the restrictions and requirements for renting your property (income, policy on pets/smoking, etc.) in advance. This serves a few purposes: it ensures that you have all the information in one place for easy reference, it will aid in selecting your pre-screening questions, and it will keep you compliant with discrimination laws by establishing your rules and restrictions before the real estate property is even advertised.
After You List, Pre-Screen
You can save yourself time by completing a pre-screening via phone before showing the property.
When you receive interest in renting your property, contact the potential applicant to conduct a pre-screening, and ask questions to verify they will meet the basic requirements before you meet to show them the property. To stay compliant with discrimination laws, you will need to ask the same pre-screening questions to every potential applicant, meaning you will need to determine which questions to ask (confirm they understand pet policy, ask if they currently meet or exceed income requirement, etc.) before you actually speak to anyone.
A note on
FAIR HOUSING & DISCRIMINATION
The federal Fair Housing Act (FHA) was put into place to ensure that tenants (prospects, applicants, and current) are treated fairly based on their status within a “protected class.” The seven protected classes are race, color, religion, national origin, sex, disability, and familial status (presence of children or pregnancy). An applicant can be rejected for many legitimate reasons, but it must be unrelated to any protected class.
California State Law also prohibits discrimination in housing due to a person’s source of income, sexual orientation, marital status, age, arbitrary characteristics (tattoos, hair color, etc.), and gender identity & gender expression.
The key to staying FHA compliant is consistency, so you’ll need to establish a standard process for screening and selecting, and apply it in full to any and all applicants.
For more information on fair housing laws, see
State of California:
REMINDER: Be sure to include a consent form for the background check with the rental application, and verify it is returned signed.
Paying For It
Rules for application and background check fees.
– You are able to pass the cost of obtaining a credit report on to your applicant, along with any reasonable, direct out-of-pocket expenses caused by obtaining reference and/or background information. The maximum amount billable to each applicant is around $30 (updated annually).
– An application fee cannot be charged if there are no units available or known to be coming available soon, unless prior approval and agreement is given in writing by the applicant.
– If your direct expenses for obtaining background information are less than you charged the applicant, you must return the difference.
– The landlord must provide application with an itemized receipt for expenses incurred.
– Note that if the applicant requests a copy of the credit report obtained, the landlord must comply.
Get the Info
Run the reports.
When looking at background check providers, be sure to verify that they are Federal Credit Report Act (FCRA) compliant.
FitSmallBusiness.com has completed a comparison of some of the top screening services here https://fitsmallbusiness.com/best-tenant-screening-services/
Say Yay or Nay
Approve or legally deny.
Hopefully the background check will come back with no surprises, and you’ll be able to congratulate your new renter and move on to the lease!
However, if you choose not to accept an applicant, you are required to send an adverse action letter. The letter will need to include the name and contact information of the landlord, the applicant, and any screening or reporting services that returned negative information used in the denial. Your applicant has the right to obtain a copy of the information you received but will need to contact the reporting service directly within 60 days.
In an ideal world, anyone interested in your rental property would exceed every qualification and be a great fit for your property; unfortunately, that is almost never the case. Establishing and completing a comprehensive tenant screening process will give you the opportunity to catch red flags before you end up with a problem tenant. Utopia Property Management’s professionals have years of experience in asking the right questions and checking reported information for consistency and accuracy to select the right tenant for your property.
For Stockton Property Management Contact Utopia Management today by calling us at (800) 294-4656 or click here to connect with us online.