10-step Tenant Screening Process

Tenant screening is one of the most important tasks a good property manager undertakes.  It is incumbent for a good property manager to find a tenant that best suits the property, that will take care of and respect the property, and is a good fit for the unit.  tenant-screening-process

A good fit is important to ensure long-term tenancy.  At Full Service Property Management, we strive to make each lease a win-win situation.  We want the Owner to be happy with the care being given to his/her unit and we want the Tenant happy with the home we are providing them.  If a rental is too expensive for the prospect then they will sooner or later run into financial hardship.

The entire process is all about filtering and efficiency.  By the time the prospect views the property, there should be a 95% probability that this is the unit they have been looking for, and that they qualify for.  It rarely works that way!  But that is at least the goal.

1. Written criteria.  We are required by law (and common respect) to treat everyone equally.  We have established tenant screening criteria we follow that is posted on our website.  We strictly follow this criteria.

We use a “3-strikes and you’re out” approach.  We’ll forgive one exception to our criteria with a 25% boost in the security deposit.  A second exception will result in a 50% bump.  A third violation results in either a 100% bump in security deposit, or denial.  Some things – like sex offenses and violent crimes – are thrown out immediately.

2. Write long, detailed ad with lots of pictures.  The best way to filter prospects is to tell them exactly what we have for rent.  Each of our ads is a narrative tour of the property.  We combine that with tons of pictures so the prospect has a 99% idea of what they are considering for a new home.  While we obviously cast the property in its best possible light, we are not afraid to mention in the ad limitations to the property.  In such instances we try to turn any objection into a positive attribute.

3. Receive telephone & email inquiries.  As soon as we receive a phone or email inquiry our screening process begins.  The conversation that ensues helps us to qualify the tenant so we aren’t wasting each other’s time.

4. Show property.  This is actually one of two areas that we put heavy emphasis on in our entire process.  While the prospect is checking out the property our leasing agent is checking them out!  We engage the prospect in conversation to ascertain motivation and background.  We assess not only the content of the dialogue, but also context.  This personal interview is critical to our screening process and cannot be emphasized enough.

5. Sign Holding Deposit Agreement  When we find a prospect that will be a good fit for the property then we encourage them to put down a $500 holding fee.  This fee saves the property for the prospect.   We remove our advertising and quit showing the property.

When the applicant is approved then the fee gets converted to a deposit and credited towards their security deposit.  If the applicant backs out then we keep the fee and give part of it to the Owner.

6. Receive application   Our application is completed online.  Once we receive it, with the application fee for all adults paid in full, then we can run a civil, criminal, and credit check.  It isn’t perfect – it won’t catch everything.  Which is why we do not rely heavily on it (like some of our competitors).

7. Receive signed Tenant Release & Consent form.  We have the prospect give us authorization to run their screen on the application.  But in addition to that we also have them sign a Tenant Release and Authorization form that we can then send to present and past landlords and employers to get additional information.

8. Screen application.  But the screen does provide some very valuable information.  So we review each of the elements carefully and consider any irregularities in the context of the rest of the application.  For us, it isn’t necessarily about one item – we try to put the whole picture together to give us a good idea of what we are looking at for a future tenant.

9. Call rental verifications.  With the aforementioned signed Tenant Release & Consent Form, we are now prepared to verify current and past rentals.  We prefer past landlords because current landlords may have a vested interest in giving a false report to get rid of a problem tenant.

Like the personal interview, the Verification of Rent (VOR) is the second critical part to our screening process.  We want answers to two primary questions: 1) did they pay their rent on time,a nd; 2) did they leave the unit clean.  A third question – did they give proper notice to vacate – is of interest, but we place less importance on it.

We do not verbally verify employment unless it is a new job for the applicant.  We do require them to produce paystubs to show proof of sufficient income.  We are looking for three times the rent in verifiable, gross income.tenant-screening-process1

10. Acceptance/Notice of Adverse Action.  When we are done with our screening we send the prospect one of three emails: 1) application accepted; 2) application accepted with conditions, or; 3) application denied.  The first instance is pretty easy to understand and we move immediately into the lease signing phase.

The second and third situations require us by law to send a Notice of Adverse Action.  If we are going to accept the applicant with conditions (usually a bump in the security deposit as described above) then the notice will explain to the applicant how much the bump is and why.  Similarly, if we deny an application then the notice explains to the applicant why.

The most important thing is to do your due diligence.  Do NOT overlook this important step in the excitement to get the unit leased up and the cash flowing.  A vacant unit costs a lot less in the lnng run than a unit rented to the wrong tenants.

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Peter Nelson is President and CEO of Full Service Property Management, a Seattle-based property management specializing in managing homes, condos, townhomes, multi-plexes, small apartment communities, and HOAs.  For more information, Full Service Property Management can be found at www.fullservicepm.com.

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