Did you know that in a brief survey I've found that 9 out of 10 landlords do not properly screen their new tenants? Granted, the term "properly" is somewhat arbitrary. Here's how I define a proper tenant screening.
First and foremost it's absolutely vital you know the criminal history of your new tenants. Do you want the liability of renting to a convicted felon in your property? A proper background screen will give you address history for your new tenant, which is good for verifying the legitimacy of their application as well as knowing just where to run criminal background reports on. Did you know the typical "nationwide" criminal report is simply a compilation of that particular screening agencies information? More often than not it seems, those nationwide reports do not include any records. That's why you see "no data for subject" so often when running them. For this reason it is absolutely vital to run the background reports based on the address history of the subject.
The second thing I want to know is has this tenant ever had any judgments, liens, bankruptcies, or registered evictions. If they rented in the past and defaulted or caused a hardship on a previous landlord they most likely have a judgment or eviction filed against them. If bankruptcies, liens, or evictions show up in the tenant history it also gives a good example of how responsible they have been with their bills in the past as well. If evictions show up, you know it will take an act of the courts to get this tenant out if something happens during their tenancy.
There are a couple really cheap supplemental reports which are optional, but often a good idea. Performing a SSN validation usually only costs a couple dollars and confirms this person is who they say they are. A good SSN validation will also include complete address history. You can also search the federal government maintained terrorist database if you are so inclined.
Running a credit report used to be on my list of must have reports; however, rules have recently changed which prevent private landlords from running credit reports. If you have the ability, I find verifying a tenant's current bills, including their new rent payment, vs their income is useful to see if they can afford to rent.
So why is it that 90% of landlords aren't properly screening their tenants? It usually boils down to choosing the wrong screening vendor, or product. From my research, most landlords run what is usually referred to as a "nationwide criminal" report because it sounds like it searches the whole country, and usually is fairly cheap. The unfortunate part is, these reports often do not do an exhaustive search of every state's records and therefore do not have complete or accurate results. They more often than not are very old databases as well. It is vital to know your tenant's address history so you can choose the correct databases to search.
The second important thing to know is if the records you received valid. If you receive a hit on a statewide search, it is absolutely critical to check with the county in which the record originated to ensure validity. In fact, a landlords use of non-public information is dependant on this step. You must verify a record with the county prior to using the information as a basis for rejecting an application. Your screening agent should be able to do this for you.
Finally, one last critical point to address. Run background reports on every applicant. This includes husband, wife, roommates, co-signers and anyone over the age of 18 who is going to be living in the household. Most landlord charge an application fee per-person to cover these expenses. It is completely expected nowadays.
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Nathan,
Thanks for that information. I am currently working on a lease, my first one, and this information certainly gives me something to think about and act on!
all great info, but one piece to add is to show up where they live to see how they treat the property
Nathan,
thanks for the great info
Robert,
I couldn't agree more! And of course checking in with their previous landlord(s). If they previously rented from a private landlord, it's often very easy to tell from talking on the phone with their prior landlord if they were good tenants or not.
I've never been a property manager, but I know several people who are. To a person, they always stress that proper upfront screening can save the landlord time, money, and aggrevation. I guess it's like hiring a person to work for you. Know what you are getting into before you make the renting or hiring decision to reduce the chances for later pain.
I was not aware that landlords were being denied credit report information in some areas. That's going to hurt.
Yup, the cost of a typical tenant screen is $20-30, but can save thousands. Most landlords pay for it with applicatoin fee's, so it's a wash too. It's an investment that cannot be overlooked.
On the restrictions, there's no landlord out there that can afford the direct connections to the big 3 credit bureau's, it's simply cost prohibitive. And about 80% of the resellers of credit data have limited credit use to registered companies only and no longer allow individual private landlords the ability to run credit. The remaining 20% are following suit, just slow to update their systems.
So just to clarify. Landlords who have registered their property management business as a corporation (even a LLC) can run credit. Private landlords generally cannot; however, private landlords can obtain lien, judgement, bankruptsy, and eviction reports. Generally those are the items many landlords look for in credit reports anyways.
Hi Nathan - What would you suggest be done when an existing tenant wishes to sublet room(s)? Screen the incoming additional tenants as though they were nwe ones? What if they are from overseas?
I definitly would recommend screening any new roommates. It is as important to screen them as the original tenant(s).
Although I have resources for US criminal records, I don't have much experience with international. I'm sure there's a resource; however, I don't know how accurate it may be. If you need a quick answer contact the guys at Intellicorp (www.intellicorp.net, 800-539-3717) and if they can't do it themselves can probably point you in the right direction at least.
Thanks for the valuable input and information, Nathan!
Reports are nice and vital, but I have been 100% accurate with the system of walking a client to their car. If their car is a mess, so will be their house!
