Screening Your Tenants - The Basics

screening tenants

Rental applications, while helpful, do not relay the whole story of a tenant. Falsehoods are too easily listed and manipulation of the truth can cost you thousands in the long run. This is where the Screening process comes in and where the information gathered becomes vital.

Thorough Tenant Screening is probably one of the most important things that you can do to help ensure fewer problems down the road. Fully exploring potential Tenants within the scope of the law allows you to increase property returns, limit future damage and keep costly evictions to a minimum. Understanding what you can and cannot ask, and what you absolutely should ask in the Screening process is the first step to a successful Tenant / Landlord relationship.

Prohibited Inquiries and Actions

There are many things that you can ask and ascertain during the application and screening process, but there are a few things that you are NOT allowed to legally ask or do. It is against the Federal Fair Housing Laws to discriminate against an applicant based on race, color, religion, national origin, sex, familial status and disability. The US Department of Housing and Urban Development defines discrimination against these protected classes as:

Refusing to rent, sell or negotiate for housing.

Denying a Dwelling.

Defining different terms, conditions or privileges for the sale or rental of a property or dwelling.

Providing different housing services or facilities.

Making a dwelling or property unavailable.

Denying the availability of housing for inspection, sale or rental, falsely.

Blockbusting, defined as the practice of encouraging sellers or owners to rent or sell their. property cheaper or more expensively in order to prohibit occupation by a protected class.

Refusing access to or membership in a facility or service related to the sale or rental of housing.

None of the above actions are legally acceptable anywhere, and any questions relating to the above are also prohibited. This means that you may not ask a potential tenant about their race, sexuality, etc.

In addition to being aware of the Federal Fair Housing Laws, familiarize yourself with any laws in your area that may affect the terms and conditions of your Rental Contracts.

Minimums

Next, narrow down your MINIMUM requirements; adequate wage, clear background check, verifiable references, satisfactory rental history and Credit Check.

Adequate Wage

No matter what you charge for rent, you want to make sure that your tenants can pay it, with enough left over for their day to day expenses and other monthly charges. While there is no hard and fast rule or formula, it is generally accepted that tenants should have a verifiable monthly income of at least two times the monthly rent, though three times that amount will be more financially comfortable for all parties.

Background Check

Conducting a background check may seem a bit intrusive to some, yet when it comes to the Screening process this step is a must. Knowing if your renter has had criminal issues in the past may not automatically disqualify them from your rental roster, but it does allow you to anticipate possible future issues and decide what kinds of charges, if any, you can allow in your property.

Verifiable References

Most of us have friends and family that will vouch for us on Reference Checks, but requiring previous Landlord references and verifying current employment can make all the difference in knowing if your potential tenant really IS a good tenant.

Satisfactory Rental History

Evictions happen, sometimes for the right reasons and sometimes under misconstrued circumstances. If anyone seeking to rent your property has had an eviction in the past, take note and find out why. Tenants who have a negative history are far more likely to offer you trouble.

Questions to ask previous Landlords and Employers

Asking the right questions can lead you to the right tenant. Contact both current and past Landlords and Employers in order to ascertain a full picture.

Ask a previous Landlord:

When did the applicant occupy your property?

How long did they live there?

Was rent paid on time?

Were there any problems, or damage to the property?

At any time were you required to serve a legal notice or notice to vacate?

Would you rent to this applicant again?

Ask Employers:

How long have they been/were employed by your company?

Are they full or part time?

How much is their income?

Are they permanently employed, or is this a temporary position?

Credit Check

Having an adequate income if necessary in order to afford a rental property, yet if a tenant does not actually use that income to pay the bills, then all the money in the world means nothing. A credit check, while not the full financial story of someone's situation, can offer reassurance that they do, in fact, pay their obligations. There are laws surrounding the use of a Credit Check that need to be strongly adhered too. According to the Fair Credit Reporting Act:

"Anyone who uses a credit report or another type of consumer report to deny your application for credit, insurance, or employment? or to take another adverse action against you? must tell you, and must give you the name, address, and phone number of the agency that provided the information."

This means that while credit checks are a vital part of the Screening process, record keeping is incredibly important. If you choose to deny a rental unit to a potential tenant based on the information gleaned in a credit report, you MUST tell them why and you MUST provide them with the contact information for the credit-reporting agency used in making this decision.

Pre-screening

Many of these requirements can be ascertained during an initial phone conversation. The actual screening process is much longer than just the application or interview? it begins even prior to first contact. Listing your desired monthly rent in any marketing associated with the Property invites those who can afford it, and discourages those with a limited income. During an initial phone conversation, informing a potential tenant that you will be performing full criminal background and credit checks may also help weed out those that will not meet your requirements.

Screen Rental Application

Requiring signatures for release of information is essential, this informs the applicant with no room for confusion or misunderstanding that you ARE performing Criminal Background Checks, Credit Checks, Income Verification and contacting Referrals. Their signature indicates their awareness and permission to conduct these verification's, a step that helps protect all parties concerned.

Questions to list on the application:

Personal identifying questions; name, address, telephone numbers, Driver License Number

Social Security Number

Date of Birth

Contact information for current and previous Landlords

Employer contact information

Any prior evictions or judgments?

Signature regarding Release of Information

Denying an Applicant

Like evictions, making the choice to deny a potential tenant is one of the more difficult parts of being a Landlord, but it must be done. If the Screening and Application process eliminated a renter from consideration, make sure that you fully document the reasons why, along with a letter to the applicant explaining why they were declined. Thorough record keeping will protect you from accusations of discrimination in the future.

Screening