If you have been alive for more than a handful of years, you have likely experienced more than one occasion where you made a poor judgment call in regards to someone’s character. Whether you married the wrong person, took a job with a horrible boss, or were taken advantage of by a supposed friend, most humans are incapable of 100 percent accuracy in the judgment of other people’s character or intentions.
Unfortunately, when it comes to being a landlord, making a bad judgment call can cost you thousands of dollars in property damages, evictions, or unpaid rent. The good news is that in today’s digital world, we have access to more information and resources than ever before to aid in the process of Tenant Screening.
Whether you are a landlord who has never screened a Tenant and want to learn why it is important or you are looking to improve your Screening process, the following is a guide to help you understand what tenant screening is and why it is a valuable investment of time.
What Is Tenant Screening?
When we refer to tenant screening, we are actually referring to a variety of actions a landlord takes to gain a clearer picture of an applicant before renting to them. The goal of tenant screening is to weed out applicants that are a higher risk for missed payments, damage to your property, or evictions.
So what is tenant screening? Tenant screening involves all or some of the following depending on the landlord’s approach:
- A short interview
- Previous landlord references
- Employer references
- Proof of income
- A criminal background check
- A credit check
- An eviction history report
It is important to note that depending on the state you are in, there may be different laws and regulations surrounding tenant screening. As a landlord, you should ensure you are educated in these laws before you begin the screening process. For example, while it is fine in most of the country to choose not to rent to those with a criminal background, it is illegal to do so in the city of Seattle as a part of their Fair Chance Housing initiative.
One of the most important sets of regulations you should familiarize yourself with are Fair Housing Laws, including both federal and state-specific regulations. These laws prevent discrimination against protected classes and serve as guidance for what you are allowed to use as criteria for choosing renters.
The Risks In Numbers
With approximately 29.5 percent of adults having a criminal record according to the FBI, it is little wonder that landlords consider this an important part of the tenant screening process. Although some cities, as mentioned above, have taken a stance against using this as part of rental criteria, it is still a widely used screening method for landlords.
However, the risks go far beyond renting to someone with a criminal background. One of the most important reports you can read is someone’s eviction history.
Known in the landlording industry as “professional tenants” some renters know the eviction process inside and out and use this knowledge to their advantage. One quick credit check and eviction history report can save a landlord from thousands of dollars in legal fees, lost rent, and property damage.
The act of screening itself can also help to weed out less than ideal tenants. If someone knows they have a low credit score and a slew of evictions on their record, they will be less likely to pay an application fee and undergo screening.
For example, at TurboTenant, 74% of applicants fall into the acceptable range based on the following chart:
When a renter knows you will be checking into their background and credit, they are less likely to believe they can scam you. For those who still choose to undergo the screening process, you will be offered the information you need to make an educated decision about whether or not they will make a trustworthy tenant.
What Happens When You Don’t Screen Tenants?
For some landlords, their tactic has historically been to trust their gut when it comes to choosing a tenant. While you may have success for a time approaching it this way, you can open yourself up to a high level of risk.
For example, the following are real-life stories from landlords and property managers who learned the hard way that skipping tenant screening can cost you big time.
“In 2017, two evictions caused by not doing my due diligence cost me over $10,000 in legal fees, repairs, lost rent and vacancy. I will never accept a tenant without screening ever again!”
– Steve Boianelli Medford, NJ
“One of my clients contacted me when she wanted to sell due to losing money every month. By the rough pro-forma numbers, she should have been firmly in the green, but obviously wasn’t: 3 out of 5 tenants weren’t paying. We got 2 out fairly quickly, but the 3rd who was already 2 months behind really buckled down.
I did some research on the tenant to know what we’re up against. Since she turned 18, she had an eviction case every 8-12 months, each time being dropped by the landlord. I check out her Facebook and find her boyfriend’s name. He had the same type of history, but offset 6 months. So basically they’d just bounce from place to place every 6 months switching up names.
Monthly rent was $600. We offered that to be out in a week. They say they need $800. Ok, agreed. Now they can’t be out until the end of the month. The owner still won’t start the eviction process. The date comes, and they now want $1600. We say no way and file the eviction (finally). They skirt service for over a month. They go to court, and the judge gives them 2 weeks to get an attorney. Tenants walk over to a major tenant-advocacy attorney in the courtroom and he takes their case.
Next date comes and is continued for another 10 days so the attorney can “get acquainted with the case”. They file a counter complaint for violating the Chicago Residential Landlord Tenant Ordinance for the landlord giving a security deposit receipt with the improper format/information (statutory fine: 2x security deposit amount + security deposit + legal fees). The case is set for trial in another 2 weeks. They settle on the trial date with the landlord dropping the case, giving the tenants 30 days to move, and $1.5k + $1.5k in legal fees to be paid to the “tenant’. PLUS, add on the almost 6 months lost rent. Oh, and when we check out the unit after they move out, the tenants took the furnace. Nice touch.
A simple background check would have prevented all of this – the red flags couldn’t fly any higher, but instead, the landlord was still working with the old-school system of a handshake-and-cash gets the keys. The tenants looked nice, were respectful, and had small children. She had no idea of the tenant’s history or the info on them that was readily available. Eviction cases filed against her, gaps in address history, name mismatches, co-tenants who didn’t apply but clearly lived together, etc – all of that would have been caught in a matter of minutes by just processing a simple background and credit check, and at no cost as we easily collect application fees to cover these searches.”
– Matthew Olszak, Chicago, IL
These stories are representative of countless others out there. Unfortunately, people are not always as they seem and by skipping tenant screening you can set yourself up for a large amount of pain, heartache, and potentially put yourself at risk.
James Wise of Cleveland, Ohio, for example, tells a story of when a tenant actually threatened to burn his house down. This tenant had caused a slew of issues at the property, and eventually, when police got involved, it turned out he had a criminal history including a felony on his record.
While no criminal background check is perfect, taking the time to thoroughly screen a tenant is crucial for protecting your property and ultimately, yourself.
Remember, good tenant screening should involve interviews, employment verification, landlord references, and a formal screening process.
The Speed Of Tenant Screening
Historically, tenant screening was a difficult process, which led many landlords to rely on trusting their gut. However, today screening tenants is straightforward, simple, and accessible to independent landlords as well as property managers.
Here at TurboTenant, we provide quick and free tenant screening services.
- The applicant fills out our online rental application and pays an application fee so we are able to run the screening report
- You can review their application and request a screening report
- The applicant answers some identity verification questions from TransUnion for security purposes
- You are notified by email and can immediately view the screening report
We also strongly encourage landlords to perform their own interviews with tenants, as well as verify employment and contact previous landlord references.
The moral of the story is to never cut corners on tenant screening. While you may be an outstanding judge of character, it is not always possible to gain the full picture of a tenant without a little help from tenant screening tools.
The post What Is Tenant Screening? And Why You Should Do It appeared first on TurboTenant.