Milwaukee, WI · Member since 2017 · 138 posts · 69 votes
I'm curious where the rest of you fall in terms of charging application fees on open units. In the past, I have allowed tenants to apply for free. After selecting my top candidate I have them complete a background/credit check online. They pay the website $40/per adult on the lease for this, I make nothing (which I'm fine with).
If you've used up front application fees have you:
1) Felt like you've lost out on potential tenants who don't want to pay the money just to potentially be denied?
2) Felt like your management has been more efficient because you aren't spending time corresponding with/showing the unit to unqualified parties?
Zillow does an up front $29 application charge that includes a background/credit check - has anyone used that?
Let's start with what you can and can't charge... The state of Wisconsin allows you to charge your real cost to process a "credit check", up to $25. If you state this as an "application fee", you can get into trouble. As a landlord, this means whatever you pay for the credit check is what you can recoup from the applicant, up to $25. Some property managers extend this further to state their time they are charging to the client is a true cost to the landlord, and thus try to charge for their time above and beyond the cost of the credit check and the $25. It is my opinion that this is poking the bear and not worth litigating semantics.
Tenants who can provide you a recent credit check should not be charged the credit check fee (although I would still highly encourage you to do your own due diligence).
Now getting to your real question which more or less related to the business practice and outcome of requiring an upfront fee. I wouldn't do it any other way.
There is an implied value when something has a cost associated with it, particularly when most landlords/managers are charging the same fee. The opposite is also true, by not having the fee you can actually discourage potentially qualified applicants who perceive your unit to be a lower value. Having a very structured process exudes professionalism which will attract higher quality tenants.
The requirement of an upfront fee will also weed out some of the folks that are aware they won't be approved when background & credit are a consideration. It also provides you with a level of commitment from that applicant, which will help keep them engaged during the application process. If somebody has no skin in the game, it's easy for them to continue their search then leave you hanging at the last minute.
Our checks are handled within our PM software so unfortunately, I have no familiarity with Zillow's service.
Let's start with what you can and can't charge... The state of Wisconsin allows you to charge your real cost to process a "credit check", up to $25. If you state this as an "application fee", you can get into trouble. As a landlord, this means whatever you pay for the credit check is what you can recoup from the applicant, up to $25. Some property managers extend this further to state their time they are charging to the client is a true cost to the landlord, and thus try to charge for their time above and beyond the cost of the credit check and the $25. It is my opinion that this is poking the bear and not worth litigating semantics.
Tenants who can provide you a recent credit check should not be charged the credit check fee (although I would still highly encourage you to do your own due diligence).
Now getting to your real question which more or less related to the business practice and outcome of requiring an upfront fee. I wouldn't do it any other way.
There is an implied value when something has a cost associated with it, particularly when most landlords/managers are charging the same fee. The opposite is also true, by not having the fee you can actually discourage potentially qualified applicants who perceive your unit to be a lower value. Having a very structured process exudes professionalism which will attract higher quality tenants.
The requirement of an upfront fee will also weed out some of the folks that are aware they won't be approved when background & credit are a consideration. It also provides you with a level of commitment from that applicant, which will help keep them engaged during the application process. If somebody has no skin in the game, it's easy for them to continue their search then leave you hanging at the last minute.
Our checks are handled within our PM software so unfortunately, I have no familiarity with Zillow's service.
@Pete Woelfel - what Matt said. We don't charge for the paper application. Actually spending the time to fill it out (well) is a bit of an investment. Paper applications get ranked. We only run a background check on the top applicant to confirm what we already believe to know as being true. And that's through Mysmartmove and the applicant pays directly. By the way, some people take an application and want to send it in later - that almost never happens.
Once we started requiring application fees I noticed a drastic drop in the number of application we ran that never went anywhere. Now almost everyone that applies ends up following through if we accept them.
Yes, the renting of units has been more efficient and quicker since instituting it. We are only running applications for serious applicants which means we can handle more showings and aren't wasting precious hours on a getting a final commitment from a wish-washy applicant. It probably was the best decision I made in the past 7 years.
@Corina Eufinger - could you please explain? At what point do you charge an application fee? Does that mean you used to do an actual background check without a fee (before you changed your process)? I do my showings open house style (but with appointments every 15 min) and just have them fill out a paper. No real effort from me at this point. Do you collect the fee before the showing or before they fill out a form?
@Marcus Auerbach, 10 years ago when I first started at this company (which I now own) the previous owners weren't charging for application processing. An application will not be provided until the potential tenant has 1) seen the property and 2) the fee has been received.
We save time because previously employees were calling for landlord verification, running criminal background checks, credit reports and doing income verification for many applications that wouldn't go anywhere because the applicant never followed through with moving in. Since applicants have skin in the game up front, they are less likely to apply just because they can and not because they truly want the unit. Does that make sense?
@Corina Eufinger - wow, yes that totally makes sense!! Good thing you took over ;-)
I can only imagine - I have sometimes 50% no-shows, that's why I double book showings. And even then, you don't know. I had an applicant last week for a client's property actually, who seemed very motivated, saw the unit, filled out the application, provided additional info, corporate job - and then went dark just before signing the lease. Glad it was my showing assistant, who did all the legwork so far..