How and Why to use a Holding Deposit Agreement

In sales we are told to “strike while the iron is hot”.  Your prospect is looking good.  You’ve just shown them a property and they love it.  Are you really going to let them walk away?

Maybe they are on their way to view another unit where the leasing agents are on their toes and trained to close the deal.  Maybe your prospects will cool off by the time they get home.  Or maybe they will simply lose the contact information to make that application.  Any number of things could happen to turn that hot prospect into a cold block of wasted time.  You and your leasing agents need to take action — NOW!!

When you are showing a property and find an interested prospect that you like, go for the close.  Mention (at least twice) during the showing that they can reserve the unit with a holding deposit.  The fear of losing something is usually greater than the fear of not having it.  So remind your prospect that you continue to receive interest in the unit and will continue to show it to other prospects unless they would like to put down a holding deposit today or this evening.  Don’t be pushy about it.  woman-holding-money-smaller

Don’t “sell” them on the holding deposit. Simply remind them of the benefits of doing it now.  They like the unit because __________ (fill in the blanks here based on your conversation with them).  They won’t have to keep looking for a place anymore — the hunt is over — as you will be reserving the unit exclusively for them.  You won’t show it to anyone else anymore (even though you have received considerable interest in it).  They can give notice where they are currently living (if they haven’t already) which will usually be a positive thing.  And they can start getting excited about this new chapter in their life!  I would avoid using the word ‘moving’ in your conversation as that usually has negative connotations associated with it.

Our leasing agents are trained to take a $500 holding deposit from prospects interested in reserving a vacancy.  WA state law require us to explicitly include certain information on this agreement (which also serves as a required receipt).  So check your state and local laws governing this contract. Our leasing agents MUST get a signed agreement anytime they take a holding deposit.   You can go to our website at www.fullservicepm.com for a copy of that agreement.

Our holding deposit essentially says we will hold a particular unit exclusively for them, and we will take it off the market.  If they bail on moving in, or cannot come up with the required move-in monies by the agreed date, then we keep the full $500.  But if we deny them for not meeting our rental criteria, or the unit is unavailable to them by the agreed date, then we refund them the deposit.  (In the latter case we usually are successful in simply delaying the move-in.)

A paragraph we added in our holding deposit agreement says that if they falsify information on the application we may, at our discretion, retain $200 of the holding deposit.  This is designed to slow down the number of people using their friends as landlord references!  If it is an honest mistake we don’t usually invoke this — we aren’t trying to leverage this document as a profit-making tool!  Criminal activity is a common area.  The prospect might say they do not have any criminal activity but something shows up anyhow.  Small infractions can do that.  At least, that is our take on it.  So we’ll usually cut them some slack.

But if we get the impression they deliberately tried to hide something from us then we most definitely withhold the $200.  Maybe they will be a little less likely to lie to the next landlord!  Putting down a false landlord is a big one.  We’ve busted two applicants just this year for it!  We cross-reference the property owner against county records to confirm we have the right prior landlord.  If we suspect anything fishy then we usually bait the “landlord” into lying for the applicant to confirm our suspicions.  We do not (nor cannot) hold them accountable to anything they say.  So if they lie to us verbally, shame on us for believing them!

In summary, holding deposit agreements are a great and efficient way to lease up property.  But they can also be tricky legally, so be sure to check local and state laws.  With a properly executed holding deposit and agreement in hand, your leasing agents are free to concentrate on leasing up other vacant units.  And you can rest assured that anyone ponying up $500 (or whatever your deposit is) on a unit is serious enough to make that application!  Success is at hand!

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