How to properly deny application

Question

Hi All, I'm back with another question! So this weekend we had two showings with families that really liked the place and submitted full applications. I'm using cozy.co so it is all online. The first family submitted on Saturday and the second on Sunday. I like the second family better, but what reason do I give to deny the first family? And how much work do I have to do to justify their denial. At first glance they look like they make the required minimum income I am asking for. So it has to be something else. Here are my options:

1. Credit score below 500. OMG - you gasp! But yes we are telling people we will consider applicants with low credit scores... My lawn guy has a low credit score and he is the most trustworthy person I know who has paid back two personal loans we made to him over the years! There are so many people in my area who have low credit because they don't deal with credit at all. However, we could draw the line at 500. The boyfriend's score is 474.

2. Incomplete application. For some reason they filled out the application so that their current address (As far as I can figure) is listed under previous addresses and the current address field is blank. Remember we're using Cozy so this could have been an honest mistake, but they still only filled out one address. Unfortunately, I didn't specify in my directions that they needed to fill out a previous address.

3. Lack of tenant history. The boyfriend admitted orally to me during the showing that he has never been on a lease ( he is about 40 years old. :( Do I have to confirm this?

The thing is I like the second family better. Their jobs seem more stable... they have been in them longer. They are local to the area (the first family is moving back to the area to be near family but say they are going to continue to commute to their current jobs which are at least a hours drive from here). And the second family, although they also have low credit scores, the score is based on the fact they don't use credit they do have some collections but the debit amounts are very low.

What kind of CMA work do I need to do before I deny the first family? I haven't called employer's or landlords yet on them because, if I'm going to deny on credit score or the credit report, than it is cut and dry.. right?

Thanks Everyone!

Rob D. · Answer

I wouldn’t even consider a 500 score and a incomplete application is a immediate denial. If you have th3 time to go back and forth playing Magnum PI with a application you are wasting your time. Think about it. If a guy can’t fill out a application correctly do you think he will pay attention to the lease? Pay on time?

You really need to stop being amateurish on your acceptance policy. Stop telling people you’ll consider low credit, because you can’t do that. What’s your cutoff? You’re leaving yourself wide open for a fair housing violation without set parameters. If you want to accept 500 and above scores that’s fine. You need to have a acceptance policy written down. Whatever it may be.

Now at this point you’re not going with I like so and so better than so and so even though both have crappy scores. While i understand people tend to rent to people they “like” it’s really not a good way to make a decision . You don’t need to justify anything. They simply did not pass the requirements you set forth. Usually people with low credit scores have them that way for a reason.

Russ Draper · Answer

I would just deny without a reason, the less information you give the less you have to cover your ass! Just say sorry, please keep us in mind for the future or similar in case you get other buildings later.

Rob D. · Answer

It’s just a good idea to have a bare minimum acceptance policy. You can always add or take away as you see fit. But make sure whatever you add or take away you apply it equally across the board.

Regardless where the property is located you still have fair housing laws.

I had a rental recently available. My acceptance policy was written down so there was no question of acceptance. You’re just leaving yourself open to interpretation when you say we will accept lower than x score. What happens if you declined a prior applicant with a 530 score but took one with a 500 score and similar background.

While Amateurish may not be a exact description you need to understand that there are a lot of people out there hoping for landlords to make grave mistakes.

Take care

Rob

Kristin Kiddy · Answer

@Rob D. I wouldn't call my self amateurish as much as inexperienced. When we had property in another state we used a property manager to screen tenants (and she actually did a poor job at it since our last tenants left our rental so filthy, we needed three cleaning companies to get it good enough to sell) We have a lot of set parameters that we indicate in writing to prospective tenants. But they are incomplete as of yet because we haven't thought of everything and every tenant brings new questions and different details to the review process. Plus we are trying to gauge an appropriate level of standards for our rental area. I have been reading the forums trying to get a list of qualifications to use, but a person with rentals in an upscale neighborhood in CA where rents run 2500/mo. on average is going to have a completely different qualifications than someone doing working class rentals.

I do agree with your comment that if we are going to check credit scores then we should have an absolute minimum number that we 100% won't go below. And then we can still say that we will consider bad credit (500-600) after we review the whole picture of the applicant. I really like the points system @Michele Fischer recommends. I think I am doing that now, just not formally. I'm going to make myself a checklist right now.

Thanks for all the advice everyone! I don't know what I would do if BiggerPockets wasn't here.

I do agree with your comment that if we are going to check credit scores then we should have an absolute minimum number that we 100% won't go below. And then we can still say that we will consider bad credit (500-600) after we review the whole picture of the applicant. I really like the points system @Michele Fischer recommends. I think I am doing that now, just not formally. I'm going to make myself a checklist right now.

Thanks for all the advice everyone! I don't know what I would do if BiggerPockets wasn't here.

Kristin Kiddy · Answer

Thanks @Russ Draper I intend to, but something tells me they may ask for a reason and I've read you can get in trouble if you don't give a reason when asked for one.

Michele Fischer · Answer

I would wait to find a tenant before deny anyone.

Some jurisdictions require you to process applications in order received, otherwise you can concentrate on the stronger candidate.

Sounds like you could benefit from a systematized way to rate applications. I use a scoring system that helps me get the top application identified, and I concentrate on that one until they prove themselves out or not.

My applicants gain points for holding the job for a year or more, lose points if they have held it 3 months or less, gain points for having lived in the community for five years (to me low risk is they have been commuting, but moving to commute often backfires in my area), etc. First point total lets me know who to run credit on and making phone calls on. Once I start digging deeper they gain and lose points for credit, landlord references. If neither have rental history they would need a co-signer, with one just need to verify they were authorized occupants. You have the right to not process an incomplete application, but best to reach out to ask for the missing data, which can be verified by the credit report.

How to properly deny application

How to properly deny application

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