Tenant Screening Process Question - Discrimination?

[Brandon Mattingly]

This is my first investment property and I'm working on getting my first tenant!

I'm trying to develop a fair and efficient tenant screening process, but I'm a little worried if I'm dancing around any discrimination issues with unqualified leads.

⚙️Here is my process in the works:

1. Gather Leads from Listing Sites - FB Marketplace and Apartments.com currently
2. Reply to inquires with a Potential Tenant Questionnaire Google Form (Based on a BP Resource)
3. Follow up Call with leads that meet qualifications (Income, Credit, Eviction History etc) to schedule a showing.
4. Offer Application
5. Approve or Deny Application with documented reason

My main fear is keeping things fair and avoiding any unintentional violations of Fair Housing laws or partial practices.

❓My question is: Do I need to reach out to people who fill out the questionnaire who would not qualify? 

For example, if someone answers with a credit score of 500 (under my required 680), do I need to tell them that they would not qualify? It states clearly in lots of places (ad + questionnaire) that you must meet those requirements. It seems as if these people are self-disqualifying themselves or just not reading the requirements.

Is it wrong or illegal for me to tell them that IF they wanted to apply that they won't qualify? I know I can't stop them from applying, but can I say, "Based on what you've shared with me you won't qualify if you apply. So it'd be best to save your $40 (application fee) and not apply?" Seems like common sense, but I wasn't sure if that could be seen as me denying an application to someone.

Obviously, I'm not trying to be a jerk in all this. But I don't what to waste my time showing the property and sifting through applications that I know won't cut it.

Thanks in advance BP community!

🔥**Bonus Question: Someone asked me if I accept Section 8 today. I'm in Indiana and currently do not want to participate in the program (someday though!). Can I say "Sorry I don't accept Section 8 vouchers?" Seem like I could since Indiana does not protect "sources of income."

[Joe Splitrock]

@Brandon Mattingly sorry I missed the part where you said you show standards in the advertisement and in the questionnaire. There is one of two reasons people who don't meet the standards submit the form. Either they didn't pay attention or they are hoping you will look past their shortcomings.

You could change the Google form to have multiple choice and a comment that says "Credit below 680 not allowed", so your credit choices may be something like "680-720, 721-800 and 800+". Force them to select one of three options, so they can't enter 500 or some low score. I would probably ignore any form from someone who clearly doesn't meet the standards.

I will make a couple unsolicited recommendations. I hope that is ok! If not just ignore me. I am only here to help.

- Credit score of 680 is pretty high. You can qualify for 3.5% down FHA home financing with as low as 580. I would probably require something in the range of 600 to 650. I have found many great tenants in the low 600's. If you can find higher, that is great, but I wouldn't limit myself unless the property is A class.

- I would try to reduce your number of questions. It seems excessive at this stage and some redundant. For example, asking "Do you have steady source of income?" isn't necessary since you are asking for monthly household income. 

- The "are you comfortable with a background check question" should be reworded. Background check isn't optional (I assume) so just be direct and ask if they are a convicted felon (or whatever standard you have). Give them a blank box to "If yes, explain." I would also publish my felon policy in the listing.

- Question about being evicted - be aware that some states require eviction notice as part of the standard process for a landlord to terminate. In that situation you can be evicted without cause, meaning the tenant did nothing wrong. You could say "been evicted or refused to leave when served notice to vacate".

- The two questions on landlord references are not necessary in my opinion. There could be many reasons they don't want you to contact a previous landlord or they may not even have a previous landlord. I would just remove those questions or replace them both with "Do you have one or more previous landlord references or did you previously own a home?" 

- One additional question you should ask is "When are you looking to move (date)?" You want to ask this because I have had people looking to move in three months or even looking to move in before the property is available. No sense showing the property to people who don't match the move in timeline.

- Another good question is "Have you filed bankruptcy?" and give them an "If so what year?"

- Another question is "How many unrelated adults will be living in the property?" This question is allowed because it doesn't ask about children. It can be helpful to screen out large groups of roommates. Leave it as a free form question and people may explain more than you asked for.

- On your requirements you say "Pets are allowed on a case-by-case basis", which is very non-specific. You want to avoid things that are unclear or you are likely to get questions. We actually ask on our screening questions "Do you have animals, if so what type and breed". We say animals specifically so people disclose ESA. Not that we screen against them, but we like to know up front.

Overall what you have looks good. Far ahead of what most first time landlords start out with! One final suggestion is try advertising on Zillow. I find that the best source of qualified leads for may houses.