Can I let tenants apply for free then do credit / BG check later?

Question

Rookie question. I'm about to fill my second vacancy and wondering how to get more applicants this time around. I had a bright idea: make it super easy for them to start the application process.

Tenants would apply for free online (thru Cozy) to pass/fail an initial screen for employment, income and references. If they pass that screen, then I would follow up to have them complete a credit and background check (also thru Cozy), which would complete the application process.

Is this a dumb idea? What are your best practices?

Thanks.

Alan Grobmeier · Answer

@Tim Johnson My process is a little 'unique'. I have open houses and take ALL applications for free. Once I go thru them I stack rank them. I go back to the #1 candidate and point them to experianonline.com for credit and background checks. The tenant THEN pays for the screening process. This allows the tenant to be secure in knowing what they are paying for and it's not a 'revenue generating' event for me like it is PM's and other landlords.My properties are pretty nice, in good school systems, so people have a tendency to be honest. Especially if I demand it. My philosophy is I don't care what happened, just tell ME the truth. I have either seen it or done it myself. You will NOT surprise me.I do have 'hard stops', 3X rent = income and no evictions. Other than that I am looking at who can afford my properties and who I think will stay the longest. I am in AZ where a LOT of ppl lost their houses, declared BK, etc. Credit scores are SOMETIMES meaningless. Hope that helps some.

Ray Harrell · Answer

I would push back on the crispy $100. People who always have cash are usually the people who can't get bank accounts due to poor credit or misuse of previous accounts. For me, having cash is a hassle. To meet your demands I would have to find an ATM that dispenses $100 bills, or find an institution that will change my $20 bills into a crispy $100 bill. I would actually pass up your apartment because there are others out there that won't make me jump through those hoops.

Penny Clark · Answer

@Tim Johnson, I would still charge the credit check/app fee because it does two things:- weeds out those who are not serious about renting your property- provides a means to verify information put on the application by looking at their credit reportRenters know most landlords will charge a credit app fee. I like the idea Alan has about having the applicants go online and pay their own fee and have the report sent to you. To assuage those applicants who don't get the unit, offer to give them a copy of the report.Another suggestion to help weed out applicants who wouldn't qualify is post some of your rental criteria in your ad and also hand out a copy when you are doing showings. That way, people will know what you expect up front and will take themselves out of the process and saving them the fee if they know they won't make the cut. It will also serve to deter deadbeats and scam artists who will recognize you are a landlord who treats rentals like a business rather than a hobby.

Michele Fischer · Answer

We have it be free to apply and never cycle back to collect application fees. It adds up to $600/year or less to pay for it ourselves (on only the top applicants who pass our first scoring) for our eight units, a great investment to get more applicants and have more flexibility in selection criteria.

Stanley Parsley · Answer

great ideaI like the 100 dollar bill application processthey give up a crispy 100 dollar bill with there applicationyou process the applications and the one that gets the property the 100 dollar crispy is part of there security depositthe rest you give back to the applicants that don't qualifyif they cant come up with the crispy then your job just got easier because that lets you know they probably cant afford to pay the rent on timethe ones that can come up with the cash proves that they may be a good candidate for the rental keep there info in your file then when you have another opening you have a starting point from your previous applicantsenjoy

Linda S. · Answer

Personally, I have found the $25 background application fee weeds out 99% of the non-serious people.. if it's free, you'll be weeding through a lot of people who aren't serious, or don't meet your qualification, and you're just wasting your time. Having said that, I only allow people to apply if we've discussed the requirements and they meet everything. People won't waste their time if it costs money and they know they won't get it, they will waste their time if it's a free because it might be worth a shot.. I wouldn't do it. Free applications = waste of time IMO

Mike Wood · Answer

@Tim Johnson I do the exact thing you are talking about doing. I want to weed out the applicants that do not meet basic requirements. Only after we have down selected to a couple of applicants, do we request they run the full background and credit check, which they pay for. I have paper applications, but have been trying to get everyone to use electronic applications via Cozy. I have never taking an application fee for myself, but do require the down selected tenants to pay for the background & credit checks (I have used Smartmove and Cozy).

Jeff B. · Answer

Me too. I eat the CR fee and write it off. However, I review the app and verify employment and two landlords BEFORE I consider "is this worth pulling the CR?" I've only made ONE poor choice over the years and nothing on paper will tell you the applicant has no social skills and can't get along with other tenants.

Bryan O. · Answer

@Tim Johnson I do the same as @Alan Grobmeier. My properties are not in that great of areas, but the only applicants I would get carrying a "crisp $100 bill" would be drug dealers. Anyone can apply once they have seen the place and when I select them they pay the screening site. Also, once you have your applicants money you have to coordinate getting it back to them when not selected... You limited your tenant pool, then have to do more work to disqualify them! Not my idea of progress.

JD Martin · Answer

We always do a soft application before the hard application. The soft application clears the deck of people that wouldn't qualify anyway, so they don't end up wasting their money on credit & background checks. It also lets us collect information that the credit/background check doesn't care about, such as pets, number of vehicles, etc. Once we have pre-qualified someone, we send them the online link to the credit/background check. They pay and complete everything there. The credit/background check step is a great way to clear the decks of non-serious people. Anyone who's not serious about renting a place isn't willing to spend $26 for the checks. Processing cash is a serious waste of time. There's no reason to go through that much time or effort these days. We have processed a lot of tenants with our system with a minimal amount of time expended on the administration end of things.