Application Fees in MKE

[Pete Woelfel]

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?

@Marcus Auerbach and @Matt Maurice would very much appreciate hearing your thoughts if you're willing to share.

[Matt Maurice]

Hey Pete,

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.