Inform

Proper Renter Screening Protects Everyone

BY MICHELLE GAMBLE

As many property owners know, once a renter moves in and something goes wrong, it can be nearly impossible to evict him or her. Not only do evictions require lots of time and money, but also can be difficult to do. As a result, property owners need to go that extra mile to ensure they don’t get a bad deal with their renters. Thus, effective renter screening policies need to be in place to prevent long-term problems. However, property owners must also be aware and avoid any discriminatory practices or processes that could cause legal issues.

First, property owners and operators need to get their renter screening processes established. In fact, any new property owners must make renter screening a top priority. As noted, bad renters can not only cause problems with the rental property itself, but any unwelcomed noise and nuisance can drive away other renters, especially in multiunit complexes.

“Comprehensive renter screening involves running reports (credit, criminal, eviction history), collecting income documentation, speaking with the applicant’s employer, speaking with their current and former prop- erty owners, and ideally inspecting their current home,” said Brian Davis, property owner and founder at SparkRental.com. “An applicant’s income tells you if they can pay, while their credit tells you if they will pay. That’s a distinction too few property owners appreciate. Their eviction history also speaks volumes about their history as a renter.”

“The two sources of information I tend to rely on most are references and credit scores,” said Leonard Ang, CEO of iProperty Management Leasing. “I know that credit ratings agencies can be opaque with some of their formulas and have a history of discrimination in some cases, but I need some objective measure of financial health to consider, and this is the best one out there. References are where the real value lies. They can reveal details about a person’s exact situation and personal character that can be key in making these decisions.”

Many renter screening and background check services are available. However, experts like Ang suggest that “relying entirely on outsourced services, especially for things like background checks and credit scoring, is going to throw out a lot of good candidates with the bad ones. While some managers simply have too many applicants to give each one personal consideration, it’s far from an ideal situation.”

“One of the most critical mistakes that property owners can make when it comes to renter screening is relying solely on a credit score,” explained Zackary Smigel, real estate expert and founder of Real Estate Wizard. “A credit score doesn’t provide a complete picture of an applicant’s financial situation, and it may unfairly discriminate against individuals who have experienced financial hardship in the past, so I advise considering other factors, such as income and rental history, in addition to credit when screening potential renters.”

Joy Aumann, a licensed realtor and founder of LuxurySocalRealty.com, agreed and added, “As a real estate agent, I have witnessed several property owners commit serious oversights regarding renter screening. One of the most typical is determining a renter’s eligibility based on their credit ratings. Credit reports are an essential tool, but they only give a partial picture of a renter’s financial history. To determine a renter’s capacity to pay rent and maintain the property, property owners must take into account criteria other than credit ratings, such as income, job history and rental history.”

Avoiding Discrimination

Additionally, property owners and operators absolutely must prioritize and use processes that do not inadvertently discriminate against prospective renters. It’s vitally important that property owners follow all of the rules and regulations stipulated by state and local government. Education and awareness about these laws can prevent lawsuits and complaints. This is why joining organizations like East Bay Rental Housing Association (EBRHA) can be so beneficial. Trade associations like EBRHA keep property owners up to date on the latest rules, regulations and legislation that affects their industry. Discrimination isn’t always intentional but often done out of lack of awareness.

“To screen renters in a way that also protects existing renters, I suggest having a clear and transparent screening process that’s applied equally to all applicants,” said Eric Bramlett, a realtor and owner of Bramlett Residential. “This process should be documented and include specific criteria for approval or denial, and should be communicated clearly to all applicants. I’d say that the most critical mistakes are not following fair housing laws and basing screening decisions on discriminatory factors such as race, ethnicity, gender, religion, and family status. This can lead to legal issues and tarnish the reputation of the property owner or management company.”

“The best thing you can do is have a clear screening process in place that is applied consistently to all applicants, which can serve as proof that you’re treating all applicants fairly and avoiding any appearance of discrimination,” said Smigel.

Davis added, “As for avoiding discrimination, the easiest rule of thumb is to never describe the ‘ideal’ renter. Just because a tiny studio apartment is ideally suited for a young professional – and not a family of five – doesn’t mean you can say that. Have a strict screening process in writing, and follow it. Apply it equally to all applicants, and rent to the first applicant who meets your written criteria. Keep all your screening reports and interview notes on file, for both approved and rejected applicants, so that you can easily produce evidence that you applied the same screening process to all applicants.”

These suggestions are just a handful of great strategies. Transparency and proper documentation provide the most effective means to screen renters and protect your business at the same time.

Michelle Gamble is the editor of Rental Housing Magazine.