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!

The 7 Biggest Mistakes of Private Landlords

We have been renting out property for over 27 years.  We’ve heard hundreds of war stories from and about  other landlords.  And now that we are a professional property manager now were we inherit ‘sick’ properties from other landlords for a variety of reasons.  This list, while certainly not complete, represents the most common mistakes we see individual landlords make.

1. Rental is not taken seriously.  We’ll admit it, we didn’t take it seriously either in the beginning!  It wasn’t until about the 3rd or 4th property in our portfolio that we realized “Hey, this is some real money we’re dealing with here!”  Well, if it is good enough when you have 4, it is just as valid when you have one!  Treat your rental like a business instead of a hobby.  Hobbies you do for pleasure and lose money at.  Does that describe your rental?  I didn’t think so!!  (OK, maybe the losing money at!  lol)

2. Not enforcing the lease.  We did this early on, too.  Then we realized the tenants didn’t know which elements in our lease were “hot points” for us and which ones we would let them slide on.  We found it was a whole lot easier if we just followed the lease — and enforced ALL of it.  Not just paragraph 24, but ALL of it!!

3. Letting rent slip.  I can’t believe how many owners come to us and tell us their tenants are 3 or more months behind on rent!  Tell me you are kidding, right?  Tenants will test the waters — either consciously or unconsciously.   You owe it to them, your spouse, to everyone to enforce the terms of the lease.  (See item 2 above.)  When our tenats are late we put them immediately on a payment plan that they specify.  We then hand them a 3-day Pay Rent or Vacate Notice and tell them that as long as they stick to the plan we will not pursue the notice.  The choice is theirs after that.

4. Not maintaining the property.  Look, you are going to have to fix it sooner or later.  So you have two choices.  You can fix it now and keep the problem from getting bigger and keep your tenants happy OR you can bleed the property, make the tenants unhappy and/or attract undesirables who don’t care where they live and risk an even bigger fix later on.  If it takes you longer than 2 sec. to choose then please go to the back of the line!!!!

5. Minimizing the legal.  Many landlords fail to understand that tenants have rights, too.  They think they can make up their own rules.  Wrong!  Discrimination is a big no-no.  But so is making up your own rules contrary to the law.  If you are going to make up rules, then you had better also study up on ones you can and cannot make up!

6. Not screening the prospects thoroughly.  In our hurry and greed to get the property rented, we ‘overlook’ issues, or hurry through the process, or don’t even complete it.  We end up with lousy tenants instead of good tenants.  You’re not happy.  Their probably not happy because you are nagging on them.  No one is happy.  Save everyone a lot of heartache and do NOT shortcut this important task.

7. Being gullible.  So many landlords believe waaay too many stories.  I used to, too.  Now when I hear a prospect tell us how their brother’s uncle’s cousin’s barber’s sister stole their identity, I empathize over the situation…and then make them back it up with independent, verifiable documentation (in this case, a police report).  No documentation?  Sorry.  Simple as that.

There are a ton more we could list here — from not keeping good records to not inspecting the interior often enough.  We’ll leave it to you to complete the list.  But if you find the same pattern or patterns repeating themselves over and over then you need to take a good look in the mirror and make a decision — either change, sell the property, or turn it over to a property manager.  Best of luck!

Peter Nelson is the Prsesident of Full Service Property Management.  Full Service PM provides a full suite of property management and services to the greater Seattle, WA area.  He has been maanging property for over 28 years.  He may be contacted through the website at www.fullservicepm.com.

Pet Policy

Tenants with pets come in two flavors – those that are responsible and those that aren’t.  A strong pet policy can attract the responsible ones and deter the irresponsible ones.  For our tenants with pets we have following pet policy:

·         $35/pet bump in rent (and +$10/mo. for each additional pet)

·         $250/pet bump in security deposit
Cat And Dog Stock Photo - 5275870

·         Spay or neuter

·         Over 18 months old

·         Under 50#

·         Restricted breeds

We usually max out with 2 pets, but will sometimes allow 3 if the rest of the application is in good order.  The bump in security deposit is preferred over a ‘pet deposit’.  Pet deposits can only be used for pet-related items whereas a security deposit can be used for anything.  Imagine the scenario where a tenant owes a bunch of rent and leaves with the place spotless.  The  tenant would receive a refund check for the pet deposit even though he/she might owe thousands of dollars in rent!

The spay/neuter requirement is a no-brainer and reduces the chance of pet odors.  We won’t accept puppies or kitties for the same odor reason.  The weight limit is mostly because big critters generally create a lot of wear-and-tear (if not on the home then on the landscaping).  And finally, pit bulls, Dobermans, and other dangerous breeds are simply a huge liability.  Some insurance companies will not insure a property with certain animal breeds present. 

“Pet rent” is becoming increasingly popular in rental properties.  We have not gotten into it much – we don’t like to penalize long-term, responsible pet owners.  But it is something we are giving a try with and so far we are not meeting any resistance from pet owners..

In summary, having a strong pet policy – and sticking to it – can be an asset for attracting good, responsible tenants while also protecting your rental asset.  Remember to follow it fairly across all applicants.

 

Peter Nelson is President of Full Service Property Management.  Full Service PM offer management and maintenance services for single-family homes, condos, townhouses, HOAs, and small apartment communities in the Seattle metropolitan area including South King County, the Eastside, and Snohomish County.

The care and feeding of a garbage disposal

As a property manager, one of our biggest maintenance calls is dealing with garbage disposals.  They are a maintenance manager’s pain in the you-know-what.  Here are a few tips to help you keep your disposal running smoothly.

  1. The garbage disposal is not a composter!  So don’t use it as one.  Put most food waste in the garbage (or in Seattle, the recycling).
  2. Always run LOTS of water while your disposal is running to keep it from overheating and to flush chopped parts down the pipes.  Keep the water flushing for at least 10 sec. after turning off the disposal.  My plumber friend says this is THE most important tip!
  3. Don’t put grease down your disposal.  OK, this is more of a plumbing thing than a disposal thing, but in any case grease and oil clog up the pipes big time.
  4. Don’t put stringy stuff down the disposal.  You know, stuff like celery, banana peels and things like that.  They will just bind up the disposal.
  5. Keep the cover over the disposal.  Marbles, screws, spoons, anything hard and inorganic will dull the blades big time.  Little items can get under the disposal blades and bind them up.
  6. Do not turn the disposal on for long periods of time when it isn’t working.   If it hums then this is a good way to burn out the motor.
  7. Do not stick your hands down a disposal.  It is a good way to lose a hand.  Use needle nose pliers, a coat hanger, or something else to dislodge or pick up whatever it is you see down there.

Troubleshooting

If your disposal has stopped working you can do a few things to troubleshoot the problem.  First of all, does it hum when you turn it on?  If not then try pressing the (usually red) reset button on the side or underneath the unit and see if that gets it working.  If not then the motor is probably shot and you need to replace the disposal.

If it is humming then you are in luck.  The motor is working and the blades are probably just jammed.  You will need to get an allen wrench and stick it up in the hole in the bottom of the disposal.  Move the wrench back and forth and free up the blades.  Be sure to take the wrench out before trying the disposal again!

Cleaning

You can clean your garbage disposal.  That’s right!  To clean it, run some ice cubes down it (with a little water).  The ice will scrape the disposal and pipes clean.  And once every month or two you can fill your sink up with hot water and then pull the plug while running the disposal.  This will give the drain a good flushing.

The garbage disposal is a good friend, and easy to take care of….if you do a few simple things on a regular basis and follow a few simple rules.  Be sure to share this with your roommates and children!

Peter Nelson is the author of this article.  He can be reached at www.fullservicepm.com