How to Deal with Multiple Approvable Applicants

Let's say you have a tenant whose application to a property you're selling gets approved. Tenant wants to move in 10 days. You get the lease ready, call them to confirm, and they tell you, "Oh, I actually found something else!" What do you do? Unfortunately, situations like this happen all the time, and landlords have to deal with it. But many don’t realize that, just as tenants are allowed to change their minds, so are landlords!

However, your options will depend on your state's regulations. Take Seattle, for example. Their ‘first-come, first-served’ rental laws prevent landlords from having much of a say in the matter. Once you receive a tenant's application who meets your criteria, the state requires you to accept them.

If you can choose (like in Michigan, where we operate), it’s totally okay for you to change your mind, up until the moment the contract is signed. But on occasions where you're able to find qualified applicants that meet your standards, what is the best way of choosing between them? And what if you've told someone they're approved, and then a better prospect applies - what are you allowed to do, and how can you best go about handling this?

This kind of scenario is a reality in competitive rental markets where properties regularly get multiple applicants - and it's a property manager or landlord's job to minimize turnover times and get the best tenant possible. You can’t be expected to reserve a property for someone, so make it clear that nothing is a done deal until the tenant moves in. You can say something like: “applying for this property does not hold the property for you.” That way, if an applicant complains that you gave the property to someone else, you can point to the wording in your application process as an explanation.

Some tenants think that submitting a rental application is like entering into a purchase agreement, where it locks out all other comers. But just because they paid an application fee, this doesn’t mean it’s theirs!

The fact of the matter is, you can still back out as long as there's no contract yet. It's kind of hard to prove verbal contracts, but stay on the safe side by not promising anyone the property until it’s a done deal.

Now, regarding applicants who back out at the last minute, there are also things you can do to avoid this kind of kind of thing and minimize tenant turnover times. We usually try to get a holding fee agreement - just like the kind used in property purchases - and a lease agreement as early on in the process as possible. This can be dated for the day of signing, but stipulates that the rental term doesn't start until a future date. This contractually locks your applicant in, so you can move forward with confidence.

Again, until it's locked in, it's your prerogative to choose the best candidate (if your state allows you to do so). As long as you’re transparent about the process, and don’t fall foul of any discrimination issues when selecting the ideal tenant, there’s no reason why you can’t change your mind if the perfect applicant comes along. However, just like you wouldn't want a tenant to back out on you last-minute, an applicant would be upset if that happened to them, too! So aim to operate in a way that's fair to all parties involved (like by implementing a holding fee).

If you’ve experienced a situation like this and have another way of handling it, let us know!