Prospective tenant with collections & judgments on credit report

Real Estate Agent · Mead, CO · Member since 2014 · 75 posts · 12 votes

Hi all,

I am conducting my first tenant screening process and would like some advice. I have received an application from a prospective tenant who has several collections (from 2009-2012) and judgments on their credit report. One judgment was from their present landlord. These are obviously big red flags and the only reason I am considering this tenant is their co-signer family member. The family member has stated that they will be paying the rent to us directly, and they have excellent credit, income and low debt.

Any advice on whether I should consider the tenant?

Thanks

Gina

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Nathan GesnerBusiness Member

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Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

10y

running a credit/criminal background check doesn't work if you have no idea how to use the information. They have collections or judgments in their past and apparently STILL can't afford rent because their co-signers are going to pay it for them. That sounds like someone too immature to take care if a rental! Are you so desperate that you have to take this person?

Everyone should have customized criteria to determine the worthiness of an applicant. With my criteria, I wouldn't touch them with a ten-foot pole.

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Account Closed
Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes
10y
You might want to call the landlord with the Judgement. Ask if it was related to damage or non payment of rent.
If it was for damage I would not rent to them. If it was for non payment I might consider it, since the other person is knows the judgement would be against them if the rent does not get paid.
The first thing I would do is decide if I had waited long enough for a better tenant.
1 Reply
Michael Boyer
Investor · Juneau, AK · Member since 2015 · 980 posts · 741 votes
10y
Gina. Run. (My shortest post ever)....
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
10y
running a credit/criminal background check doesn't work if you have no idea how to use the information. They have collections or judgments in their past and apparently STILL can't afford rent because their co-signers are going to pay it for them. That sounds like someone too immature to take care if a rental! Are you so desperate that you have to take this person?
Everyone should have customized criteria to determine the worthiness of an applicant. With my criteria, I wouldn't touch them with a ten-foot pole.
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Jeremy Dolan
Manhattan, NY · Member since 2015 · 109 posts · 27 votes
10y
Revise your options, do not settle for a tenant that cannot take care of himself. I understand that everyone deserves a second chance, but you don't want to be the person to give it to them. Show the property to a few more people and make your life that much easier.
1 Reply
Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
10y
My criteria is the last six months 'issues', judgments, late payments. My experience (over 18yrs) is tenants needing co-signers seldomly work out - - ergo, don't rent to them.
1 Reply
Linval T.
Investor · Bay Shore, NY · Member since 2014 · 1k+ posts · 688 votes
10y
@Gina McKee
This is a clearcut case of managing from your head and not the heart. It's best to wait for another more qualified tenant, than add a known problematic tenant to your pool.
But, it's your call and if you do otherwise than advised by BPers, then, there is nobody to blame than yourself if rent collections become an issue.
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Sarnen Steinbarth
Commercial Real Estate Broker · Fort Collins, CO · Member since 2015 · 308 posts · 151 votes
10y
Just chiming in with the rest of the crowd. . . move on to the next.
"A vacancy is better than a bad tenant" - Never forget this.
Vacancies don't cause damage. Have parties, incur legal fees, etc.
Wait and get a good one and your life will be easier.
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Account Closed
Wholesaler · Santa Cruz, CA · Member since 2014 · 79 posts · 12 votes
10y
Finding a good tenant is not an easy task. Getting rid of a bad tenant is a far worse experience and is more time consuming than finding a good tenant. Unless you are absolutely desperate and can get a document in place and have a Guito in the background and you are willing to bump some heads I would RUN
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Stephen E.
St Thomas, Ontario · Member since 2013 · 575 posts · 408 votes
10y
Just to emphasize what others have said, collections and judgments are both extremely negative signs, and a judgment from a landlord makes it pretty clear what the most likely future event is here. On no account rent to these people. You have no experience and do not want to be suing cosigners in small claims and chasing tenants through the evictions process. It does not matter how they present themselves or what stories they have, on no account rent to an applicant with such a profile.
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David Tipton
Los Angeles, CA · Member since 2015 · 197 posts · 59 votes
10y
If you end up denying the application due to information in the credit report, just make sure you comply with federal law and provide the appropriate notice: https://www.ftc.gov/tips-advice/business-center/guidance/using-consumer-reports-what-landlords-need-know Better safe than sorry!
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Aly W.
Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
10y
I would ask why the co-signing family member didn't help them out before? If they owe their current landlord and no one is paying, RUN!
My application states that we do not approve if there are evictions, judgments, and criminal activity.
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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
10y
The only time I have seen landlords place questionable tenants is if there is no other action on the property and it is a low income area.
If a property sits vacant in those areas for too long they can steal everything out of the unit an strip out all electrical and plumbing. Since rents are lower in those areas sometimes you are better off having a tenant in the unit even if they are non-optimal.
So placing a questionable tenant at 500 rent a month to only get 1,000 in 3 months versus the unit getting stripped sitting vacant for 10,000 in damages.
If this is an average to better area and a good rental time of the year then it might make more sense to wait.
I would revisit your marketing efforts on why this is all you are getting for an inquiry.
If you did look at this you might want to check in your state if having additional security deposits is allowed. So from the guarantor having first and last months rent and double or triple for a security deposit. Even with the guarantor I do not like this situation. My experience is that when someone is given something and doesn't have to work for it then they do not have pride of ownership. The bad choices from multiple judgments and collections is an example of this. They generally feel entitled which is what makes it okay in their mind to keep doing it over and over again.
That is the difference if you see one mark on someone's credit where they had hospitals bills or another unforseen situation happen but since then have had good credit. Everyone has hard times but it is how they respond to it that shows you their character. Do they bounce back or have a (everyone owes me) mentality?
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Alex Hamilton
Roseville, CA · Member since 2015 · 57 posts · 26 votes
10y
Is the applicant making attempts to payoff the collection account? Have they established any positive credit since the judgment?
Before checking anyone's credit, you should establish a screening criteria. You may want to get some professional counsel to make sure your screening procedures are compliant with FCRA and Fair Housing regulations. The Consumer Reporting Agency that provided your credit report is a good starting point.
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Gina McKee
OP
Real Estate Agent · Mead, CO · Member since 2014 · 75 posts · 12 votes
10y
Thank you all for your comments. They were very insightful. I do have screening criteria, and use a scoring system to accept/reject tenants. This tenant did not make the minimum score so I did reject them. I am just getting a little anxious of the vacancy due to the time of year, and lack of applications received. I have had several people who seemed well qualified take applications and I never hear from them again. I wonder if I am doing some wrong or if I should just continue waiting.
The property is rented to the same/less price of similar rentals in the area. It is in a class B neighborhood. Tenants moved out at the end of October, but rehab work was being done on the property until just before Thanksgiving. So its been ready to rent for just under a month.
It is located in VA, and I am in CO so I hired a leasing agent to show the property. However, I am not convinced they are doing a good job since I have had negative feedback from a couple of prospective tenants. There are not many options for other leasing agents in the area just willing to show the property so in a bit of a bind with the current company.
Considering reducing the rent amount to generate more interest, getting 1-3 leads a day (or was when I had it listed, before hiring leasing agent and they took over the listing).
Any thoughts or advice?
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Stephen Haynes
Rocklin, CA · Member since 2015 · 207 posts · 66 votes
10y
contact local property managers and ask if they have a lease only service. If so they would advertise and find you a tenant and once tenant is found they hand everything back over to you to manage.
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Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
10y
1. "Considering reducing the rent amount to generate more interest, getting 1-3 leads a day (or was when I had it listed, before hiring leasing agent and they took over the listing)."
lowering the rent only brings you more 'problem tenants'. It's counter intuitive, but raising rents brings better applicants (they have better expectations too, so don't try class C rents/apts on these folks).
Yes, YE rentals are iffie as who wants to move during the holidays. Take the time to spruce up the curb appeal or interior amenities.
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