When and how to reject an applicant?

Question

Hi guys,

I'm new to Real Estate investing and looking for my first Sandwich Lease Option deal. I know that for any applicant that applies, if rejected, I must send/give them a written statement letting them know why, so my first question is, what qualifies them as an actual "applicant"? For example, if someone just calls me up and I ask them a few questions about their income, what they're looking for, etc? Does that qualify them? or is it only if they fill out my "applicant form"?

And secondly, in a case for example, where I have 2 applicants, that both are equally qualified financially, both met all of my written rental standards, etc; how do I choose out of the 2 and what would I tell the one I "rejected"? I don't think it'd be professional to say "I had a better gut feeling for the other applicant", so how would I go about this?

Thanks for your answers and help in advance!

Oscar Macal

Michael Rossi · Answer

I believe in being a little more direct.  For example, if I find out that the tenant has a recent eviction (within 7 years), I simply tell the tenant that they are being rejected because they have an eviction.  If they have a felony, I'll tell them we don't take felons.  If they are dressed like a gang banger and look like a freak show, I just tell them that we don't take people that look like a freak show!  (freak show is not a protected class)
          
          I do agree with Rich that I won't betray the confidence of another landlord, employer, etc.  If I'm rejecting them because of a bad reference, I'll just give them a vague reason.
          
          As for the written denial, that is only required if you deny the tenant because of their credit.   For anything else, you can just tell them that they're being denied.

Steve Babiak · Answer

But when you access data from a consumer reporting agency other than simply credit, you are also obligated to give a written rejection.  For things that were simply observation or interview / phone discussion, there is no need to give anything in writing - but I would venture to say that you wouldn't even get to the point of pulling credit reports with candidates like that.

Try this link:
http://www.pueblo.gsa.gov/cic_text/money/fair-credit/fair-crd.htm

Ralph S. · Answer

Oscar

Never heard of this before and would be suprised if it were true, but if true, any such law would clarify what an applicant is, and is not.  Best to read and understand the law itself.

Anytime you deliver bad news, remember the old phrase, "anything you say can and will be used against you in court."  Anything you find during your tenant screening should be kept confidential.  Could you expect anyone to provide an honest and possibly negative response if they felt you would then turn around and tell the applicant?  The less said the better, and if you say anything at all, keep it simple and not specific.

Can't imagine this will ever happen.

BP has a lot of resources available on tenant screening.  Search the forums for "Tenant Screening."  Be aware of and comply with fair housing laws, and watch your words.

Good Luck.

Mitch Kronowit · Answer

Mike is correct. The Fair Credit Reporting Act (FCRA) requires you to inform the applicant if their application was denied on account of consumer credit information. More info at http://www.rentlaw.com/credit/adverseaction.htm

If you simply talked to them over the phone and didn't evaluate their credit, then you don't need to send them anything.

Bienes Raices · Answer

Another point that has been mentioned on this forum before is that you can reject if they fill out the application incompletely, or untruthfully. Just put something about the rules for filling it out at the top or bottom of your app.

Oscar Macal · Answer

Thanks everyone for your advice and help! Much appreciated!

Oscar Macal

Steve Babiak · Answer

If you use a screening service to give you information that you used in forming your decision, then that screening service will usually require that you provide a written rejection to the applicant - and they will usually have a form letter for this that you can copy and send.

If you only get credit reports from that screening service, then your letter will basically identify which of the credit bureaus was the source of the information, and it will have to identify a means for the applicant to contact that credit bureau (to dispute or get copy of the report).

If that screening service provides other info, such as eviction history or criminal background info or lawsuit history, and you reject for one of these non-credit issues, your screening service will probably require you to send a written rejection as well and identify where the info originated.

If I'm not mistaken, this stuff all comes from federal Fair Credit Reporting Act.  I think the rejection letter might even mention that too.

When and how to reject an applicant?

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