Prospective Tenants, Application Submission & Deposit To Hold

[Wesley W.]

Hi All,

As I continue to try and sharpen my RE game, I am going to solicit feedback on how people handle prospective tenants and the application process.

Here's what I do, and I'm wondering if there is a better way:

Prospective tenant likes the rental unit at the showing, fills out an application on site, submits their most recent pay stub and photo ID for scanning via smartphone (discussed via email as part of scheduling the appointment), signs a "deposit to hold" agreement (which gives me a 5 day right of rescission), and gives me one month's rent in cash as the deposit (which becomes first month's rent at lease signing).  Tenants that are "on the fence" or more measured just take an application with them.  A very small percentage of these folks actually reestablish contact and proceed with the application.

Pros: 

(1) ABC "Always Be Closing" - ask for the "sale" at the closing on someone who seems solid; "A" tenants don't have a chance to get placed by someone else in the meantime or flake out when it comes to meet for the receipt of the deposit to hold

(2) Streamlines the process IF the applicants check out (see below)

Cons: 

(1) sketchy people have dressed nice and behaved long enough for me to accept their deposit (and then I am aghast when I start doing my screening) which finds me awkwardly returning the deposit on someone who was quite as good in reality as they claimed on paper

(2) no time to do proper due diligence before accepting money

I know some landlords take several apps (either all at one showing or in series over several showings within a day or two, then contact their "best choice" to offer the unit to them.

My concern is there is a delicate dance that needs to be executed with great applicants, as they are looking for a place for the next month and can't sit idly waiting for a landlord to call them after reviewing their application.  From a tenant's perspective, they are losing valuable time and the "good" inventory is being snatched up - so they continue looking and applying while waiting for the call.

Please feel free to comment and offer feedback on the system I use (and / or) share your process and it's own pros and cons.

Thank you in advance!