Tenant Screening is the process of evaluating potential renters for available apartment units. Also known as Applicant Screening and Resident Screening, this process varies by landlord, apartment complex and apartment management company. In the USA today there are currently millions of apartment units scattered throughout all 50 states, collectively known as the Multi-Family Industry. This industry makes money by renting/leasing apartment units to individuals and families for specific terms, usually one year (meaning you would sign a lease for a one year contract). Rent payments are usually paid on a monthly basis and can include utilities like electricity, heat and hot water in the rent fee. These days just about every landlord and property manager perform a credit check on all applicants looking to occupy one of their empty units. Each landlord has their own criteria in which they use to evaluate whether or not they will accept or reject an applicant. This article outlines the dangers involved when landlords and property management staff only use a credit report as the sole decision making factor in their applicant screening process. This piece seeks to demonstrate why resident screening models should not just use credit checks as their only means of determining a potential renter’s worthiness to rent an apartment. It is also here to offer guidance as to what other options exist today that can be added as additional screening factors to any resident screening model. It will also bring to light the benefits of adding these additional screening pieces, and how they can aid in keeping your community a safe place to live while at the same time preventing costly evictions, lawsuits and even damage to your property.
Reasons for running more than a credit check on applicants…
Running a simple credit check on a potential resident as your entire applicant screening system is not enough anymore. Yes, running a credit report or using some resident screening company to tell you whether or not you should rent out a unit to someone (solely based on their credit report) is good and much needed within the multifamily industry, but today there are more options available for you to consider. These add-on options are criminal background checks, eviction record checks, and employment verifications. We will break down each of these additional screening components below and demonstrate their benefits.
Benefits of incorporating Criminal Checks, Eviction Records & Employment Verifications as part of your resident screening program are as follows:
Criminal Background Check – As part of your tenant screening policy (which at least is running a credit check on your applicants) it is strongly recommended that you also conduct a criminal background check before you rent out an apartment. Credit history will help you assess an applicant’s ability to pay the rent, but it won’t tell you if they are a convicted rapist or on the FBI most wanted list. With many repeat criminal offenders applying for available rental units, the reality that one of them may be applying at your community is compelling and could reflect up to 7% of your applicants depending on where in the US you are. As a landlord, property owner, apartment manager or leasing agent it is your responsibility to run a profitable operation, but it is equally your responsibility to provide a safe community for your residents to live in. The important piece to understand here is that running a profitable apartment rental business and keeping your community safe are not conflicting strategies.
Years ago running a criminal background check took several days to weeks to complete, and apartment leasing agents couldn’t wait that long to get their results back. The reason behind this is that most renters would apply to several properties and didn’t have the patience to wait weeks to get an answer on whether or not they would be approved, so they would move on to another property that would give them a decision same day or within a couple days. This is the main reason why many property managers excluded criminal history checks as part of their screening criteria. Credit reports on the other hand have been available same day for a long time now and it is just within recent history that criminal reports can be obtained within that same time frame as well. With criminal reports available as quickly as credit reports, they now can both be performed without extending current existing approval/denial decision times.
Criminal record reports can be purchased online today for reasonable fees that won’t even be noticed on most apartment complex expense sheets. Statewide and county criminal checks cost between $15 – $50 depending on the state being searched and the public records provider being used. Example: Let’s say that over the course of a year an apartment complex of 100 units processes 100 applications {this ratio is usually one to one for established apartments (not new lease ups) meaning that a 100 unit apartment will run roughly 100 applications in a given year}. Let’s say the rent amount per month for one unit is $1,000. So, by running 100 criminal checks (lets say at a value of $30 each) you are spending an additional $3,000/year on your resident screening portion of your business. To a 100 unit property that takes in over $1million/year in revenue, spending $3,000 to protect their community residents and their property owners investment by avoiding potential threats, damages, evictions and lawsuits is not much (it is only .0025 or ¼% of revenue). Spending a ¼ % of your revenue to thwart damages, avoid lawsuits and to prevent any harm to other residents in your community is a great deal and should be an easy decision to make.
Negligent Leasing is a real concern today as properties can avoid theft, violence and damages by running a criminal history check on applicants before accepting them and signing a lease. It is coined “negligent leasing” because the threat/risk can be avoided by running a simple background check, which would reveal past criminal convictions, and prevent such a criminal applicant from being accepted into the community. Repeat offenders are out there, but can be caught if a criminal check is done prior to leasing. Taking a minute to run a criminal background check after running a credit check reduces your exposure to the real risks associated with new tenants and repeat offenders.
Eviction Records – Running an eviction search on an applicant as part of your applicant screening process is pretty much self explainable. Who wants to rent a unit to someone who just got evicted from a property two blocks down the street? No one does… which is why you should at least run an eviction record check in the state you are in or the state from where the applicant is moving from. Most eviction record searches can be completed in a couple minutes online and cost from $15 – $30. As with criminal history checks, you don’t need to run an eviction check if an applicant fails to meet your credit standards, as they would be rejected simply on their poor credit. Unless you want to employ a bundled package including eviction and criminal checks with your credit check it doesn’t make sense to spend money on an eviction search until after an applicant has passed your credit guidelines.
Employment Verifications – The purpose of an employment verification is to ensure the applicant is employed with the company they said they are employed with on their rental application, and that there income is as stated. This can be done with a simple phone call by the leasing agent or can be outsourced to a company that specializes in employment verifications. Having an employment verification done on all your top qualifiers as part of your applicant screening strategy can be very rewarding. Remember, you only need to perform employment verifications on those applicants that pass all your other requirements… For instance, if someone fails to pass your credit standards, or has a rejectionable criminal history than there is no need to do an employment verification as you would reject this applicant solely because of their bad credit or criminal status. You only need to get employment verifications on applicants that pass all your other screening requirements (which may include a criminal history check and/or eviction record search). The cost for an employment verification ranges from $15 – $20 if you choose to outsource it.
Applicant Screening – Criminal, Eviction & Verifications – Summary
In summary, having good credit shouldn’t be the only factor in deciding whether or not to rent out a unit to someone. Adding a criminal background check, eviction record search and when needed an employment verification into your applicant screening criteria will help keep your community safe and your mind at ease. Landlords can now perform a criminal background check and eviction records search online in minutes for modest fees, giving leasing agents the ability to review criminal records and eviction reports within the same time frame it takes to run a credit check. The accessibility and turnaround time associated with eviction and criminal data has allowed these two components in the resident screening process to become much more widely used. The addition of criminal and eviction information being used as part of the overall applicant screening process in the USA is a growing trend. This phenomena is occurring primarily because leasing agents using criminal and eviction records can now determine whether or not a particular applicant is qualified to rent straight away, without making them wait days to weeks for a leasing decision to be made.
Landlords, realtors, property managers, property owners and apartment leasing agents should perform the following due diligence tasks before signing a lease and renting out a condo or apartment unit:
1.) Run a Credit Check to verify the applicant’s credit worthiness. To get a credit report, credit score, leasing recommendation and criminal background check for only $35 visit: www.TenantScreeningUSA.com and sign up in under a minute. What is considered acceptable credit history to one apartment’s screening criteria/policy may differ from another. It is imperative to have a consistent and fair tenant screening approach to protect yourself from fair housing lawsuits. The three major credit bureaus in the USA are TransUnion, Experian, and Equifax whose websites are as follows:
www.TransUnion.com
www.Experian.com
www.Equifax.com
2.) Run a Criminal History Check to prevent known criminals from being a threat to your apartment community. You can perform criminal background checks online at the following websites:
www.CriminalBackgroundRecords.com
www.TenantScreeningUSA.com
3.) Run an Eviction Records Search to avoid repeating the same mistake the last property that evicted this tenant made. You can perform eviction record background checks online at the following website: www.EvictionRecords.com
4.) Do an Employment Verification to ensure the applicant is employed where they said they are employed on the rental application, and that there income is as stated.
Multifamily Industry Laws and Guidelines
The apartment industry’s screening policies are governed by the Fair Housing Act (FHA) and the Fair Credit Reporting Act (FCRA). Fair Housing Laws as outlined in the FHA can be viewed online at the following URL: https://www.justice.gov/crt/housing-and-civil-enforcement-section
Pertaining to the Multifamily Industry, the FHA prohibits discrimination in the rental screening process based on race, color, national origin, religion, sex, and familial status. In a nutshell, this means that a properties resident screening criteria cannot include any of these factors in part or whole of their decision to reject a potential applicant. If a property rejects an applicant based on the color of their skin or the fact they are a woman, that property opens itself up for a fair housing lawsuit in which the potential tenant would win and of course cost the property in question lots of money. A quick note here is that convicted criminals are not a protected class, and therefore do not fall under the shield of the FHA and fair housing laws. This means that applicant screening models can designate certain “criminal convictions” as reasons for rejecting an applicant. If they do choose to reject applicants based on criminal offense information, then they must use the same criteria/”criminal offense list” regarding what criminal offenses and/or level (i.e. felony vs. misdemeanor) of criminal offense they would deny an applicant for.
