How much to put in an ad - Chesapeake, VA

Question

I have a question about the appropriate amount of information that should be revealed in an ad regarding the credit scores and exposed incomes requirements we seek. I wish to reduce calls and meetings with folk that do not meet our minimum income and credit score requirements. I believe posting the info in the ad will save the perspective tenant time and effort by not viewing a property that, should they find it suitable, I will not make a deal with them. For decades I had a mentor (Ray) that I could go too for sage advice, but he is no longer with us. I would much appreciate the opinions of others.

Bill Gulley · Answer

Larry, having your opinion in your mind and keeping it there is one thing, putting it in writing as your underwriting requirement is another, it's a violation of law, an applicant or anyone reading that can turn you into HUD, they don"t have to be tenants.

It's also not a good idea, IMO, to put the credit score out there either, you don't have to disclose any of your requirements to meet. By doing that you are giving notice that if you meet XY and Z, I'm then obligated to rent to you under fair housing.

While it is good to be consistant in your process and treat everyone the same, you can certainly disqualify an applicant by giving the reason. The reason might be a number of things, past rent verification, lack of sufficient credit ( a credit score never has to cross your lips) not meeting our income standard of 4 times the rent. Doesn't mean you couldn't rent if someone great has 3 times the rent as income in a SFD as you don't have apartment dwellers to chat between themselves.

Treating all applicants the same will reduce your liability and losses more than exposing your underwriting requirements to the public in such detail.

If you are so adverse to taking any risk, landlording might not be for you. Requiring some people to pay more based on the source of thier income is illegal, that 67 year old may be collecting from you when the judge gets done.

Read the landlord forums here and you'll see how to reduce those concerns you have in your selection process. Good luck....  :)

Larry Ames · Answer

This is what I found:

Screening Applicants
If you're a housing provider, one way to reduce the probability of having a complaint filed against you is to treat everyone the same. Having written guidelines that you follow with each applicant can help ensure you treat everyone the same. Whether you're managing hundreds of units for a large company, or you're an individual who owns and rents a few units, it's a good idea to establish written guidelines for everything: from how you expect the rent to be paid, to your eviction process, to how you expect tenants to behave while living in your dwelling.

Part of your screening guidelines should include an applicant's ability to pay the rent on a timely basis. Therefore, you may ask the applicant to provide employment, income, and credit verification information. How much income and how long of an employment history you require depends on your housing market. You should set standards that allow you to compete for applicants. But setting standards too high may be viewed as trying to keep certain groups of people out of your rentals.

In addition to asking all applicants to verify their income and credit history, you may also ask all applicants to provide character references or criminal history checks. If the applicant has a criminal history, for example, you may chose not to rent to an individual with a conviction that might present a safety issue for other residents in your complex.

This is the link the above excerpt was taken: http://www.dpor.virginia.gov/Suggestions_for_Housing_Providers/

Additionally, this applicable link does not speak to my topic. But is much used in this State.

http://www.dhcd.virginia.gov/HomelessnesstoHomeownership/PDFs/Landlord_Tenant_Handbook.pdf

I am exempt of the rules shown in the link that is immediately above, but I rather closely adhere to these rules as to reduce conflicts at court.

According to these Virginia Rules and Regulations, I don't see the legal threat as Bill suggested

The business sense that Dyna speaks too is quite applicable in all situations.

Thanks again.

Bill Gulley · Answer

Larry, great, glad to hear you will revist fair housing issues.

You mentioned lumpsum rents paid and it's been discussed here before. Sounds like your experience went well.

Accepting lump sum amounts upfront and discounting rents can be fine until you get to an eviction. Even if the arrangement is not dosclosed in your lease, if the etnant shows up they will probably mention it to the judge. So, if there is a balance allocated to the lump sum remaing to be applied to the month missing payments, based at fair market rents, you may be sunk as your pre-paid rents are your liability to provide housing. A consideration in accepting pre-paid rents.

As you say, many tenants rent because they can't buy, limited or poor credit is common. Assessing the ability of people to pay as agreed is an art, while setting guidelines weeds out many applicants by association there will never be any system that will eliminate eyeballing folks, sizing them up with personal impressions. RE is a people business.  :)

Larry Ames · Answer

Thanks for all of your thoughts.

I will investigate further with HUD. I will provide details that I uncover.

Dyna, and Bill, 
     Your willingness to offer your time is quite notable, and is appreciated on my part.

I have not asked anyone to pay more. But to place more security up front. - this is done often in the NYC, ATL. The monthly rents nor the total annual cost of the lease does not increase above my written price. Try this one - about 8 or 10 years ago I had a family from NJ offer and paid $4800 on the front of a lease to have the payments reduced to where they paid $1800 less thru the term of the annual lease. They reduced my risk, I reduced my profit.

I have no reservations of people that are 67 years of age. I do address what is garnish-able in the State of Virginia. Thus it a business decision, not one of social ideas.

Actually the revaluation of the rental application decides whether we enter a lease agreement. Income is something folks can't readily change. What "I" have put out there is whether on not you meet the income requirement. Thus my wishes to streamline process.

In this area, and in the price point of my housing, most applicants have credit issues (I disregard medical bills) with consumer debt of which I do not place allot of weight. I do weight payments of rents and maintenance of the dwelling quite heavily. I see it as the greatness indicator of the persons stability. And the lessening of risk.

Hope You Both have a great week

Dyna J. · Answer

Thats the problem. If they have a history of evictions, bankruptcies, foreclosures, etc then they are high risk and not worth the trouble. If they have a low credit score from student loans, medical bills, etc or a history of job hopping (but still paying their bills) then I would be less concerned. Are you referring to people who fall in the second group?

Larry Ames · Answer

Dyna, and Bill thanks.

"Looks like you're saying you don't count income or have different standards for income from government sources, which puts you in violation of federal law." I do count different sources of income only as they are different liabilities to me. If you income is not exposed to the courts you have has less skin in the game. Some time around late 01 I receive a judgement for a few hundred dollars concerning lease that went bad. Upon hearing the Judge's decision the 67 year old told me "you will not get a dime, cause you can't touch my Social Security".  The judge confirmed it to be so. I have a great interest in what Federal Laws I may be in violation of. My standard is as stated.

Dyna, "Also part c --- the tenant paying additional months in advance offsetting the requirements sounds like a problem in the making. You have your criteria for a reason dont deviate from it. Also I agree with Bill regarding the different standards you're using."  -  I had tenants who knew Realtor's and property managers who will not allow them housing because of their rental and income history......the tenants have approached me with those terms. You reduce my risk, I will attempt some kind of deal.

Credit Scores, Rental History, Income verification are used to access risk. I choose to commit my criteria to writing so every applicant gets the same info. I have always attempted to avoid non-objective criteria when evaluating an applicant.

Many thanks

Dyna J. · Answer

Also part c --- the tenant paying additional months in advance offsetting the requirements sounds like a problem in the making. You have your criteria for a reason dont deviate from it. Also I agree with Bill regarding the different standards you're using.

Dyna J. · Answer

I wouldn't put the excerpt about the adequate income in the ad. Ads need to highlight your property, the more words you put in it the more likely people are to skim through it and miss important parts. Mentioning garnishing someone wages makes it sound like you have a problem with frequent evictions.

Bill Gulley · Answer

Looks like you're saying you don't count income or have different standards for income from government sources, which puts you in violation of federal law.

Why don't you forget trying to quaify people before you meet them and just say, House 4 Rent....?

I have never seen anything like that!  :)

Larry Ames · Answer

Thanks Bill and Ned for responding. I would like to add - all of my properties are 4 bedroom, 2 bath homes. Most of the local folks are seeking the school district. I don't recall getting young folks (here described as <27), looking at my properties. Mostly 35 to 50, with school age kids or grand kids. These folk know their scores because most have rental histories and they know what the property managers want. I am not a Realtor and the folks that come to me are surprised that they will have to deal with an application. About four years ago I started charging an application fee. This greatly reduced paper work from folks that where being evicted and seeking another landlord to duke. Most folks will not turn in an application that they have to pay for processing unless they are reasonably sure they will be approved.  Here is the specific excerpt  from my rental application I wish to post in my ad -

Adequate Income
a.	We’re looking for applicants that have a “Fully Exposed Income” that is 2.75 times the monthly rents for this property. “Fully Exposed Income” for the purpose of this application are incomes that can be garnished in the Courts of the State of Virginia. Social Security, Child Support, and most disability payments cannot be garnished.  Minimum Credit Score 585.
b.	Applicants with Incomes that are not “Fully Exposed” but have more than 67.5% of their gross income is “Fully Exposed” shall have a gross income 3.25 times the rents with a Minimum Credit Score of 625.
c.	Additional rents paid in advance may be considered to offset the requirements in paragraphs 3 and 4 of this page.

Again, Thanks for your response.

How much to put in an ad - Chesapeake, VA

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