Paper rental applications? Do you know what century we’re in?

It never ceases to amaze me the number of agents, landlords and property managers that still use paper applications.

In my last 2 posts I covered how paper applications can complicate Fair Housing compliance and the create personal data security problems.

Today we will look at how time consuming paper applications are, how they make  your business look antiquated and can affect compliance with Fair Housing laws.

Paper applications, whether they are handed out or a downloadable pdf, require the agent/owner/ property manager to enter all that information into the background screening program. (If you are not screening your prospective tenants, then you are just asking for big trouble.)

Typically this can take up to 10 minutes or more per application, which  adds up when you have multiple vacancies.

Paper applications are usually accompanied by paper checks or credit card information application fees that need to be written out and then entered into a payment system, again requiring even more time with data entry.

Still not convinced? Do you still feel that all this paper and redundant data entry is really not that big of a deal?

Then consider the image that you are portraying to your prospective tenants. If you are using paper applications and collecting fees with paper checks you are giving people the impression that your business is not up to date. What are going to think about your property and its maintenance?

Fair Housing compliance is also an issue with paper applications. A blog post by OneRent http://blog.onerent.co/fair-housing-rental-application/  reports that “Many landlords notice that the paper rental applications that they receive, are rarely complete. In most of the cases, the tenant provides half-finished applications that make it difficult for property owners to scourge for and scrutinize additional information. Some tenants provide basic bio data at first and additional bank statements and credit reports later, leaving the property owners with no option but to hand over the house to a new tenant in the interim period.”

Due to the lack of complete information, landlords often discourage potential tenants from looking into their properties or steer such applicants towards another property. This constitutes a violation of the anti-discriminatory housing laws.

Using a reputable online application and screening company makes sense on so many different levels. The amount of time you save and the how you present yourself and business are just two reasons to switch.

Jay Apple is co-founder of TenantMagic www.tenantmagic.net, an online rental application and background screening provider that is free to real estate agents, property managers and landlords.

 

Personal data security dangers with paper rental applications

 

Personal data security dangers with paper rental applications
Your personal data is at risk with paper rental applications

In my last post I discussed the fair housing compliance issues associated with paper applications. In this post we will look at applicant personal data security dangers with paper rental applications and how to keep applicant data secure.

Best practices in screening rental applicants require detailed personal information. You can check out this post to get a good explanation of why this data is important when assessing rental applicants.  http://www.kimberlyhowell.com/renters-landlords/why-does-a-rental-application-require-so-much-personal-info/

According to the FBI, identity theft is the fasted growing white-collar crime in America.

Believe it or not there are still many real estate agents, property managers and landlords that use paper rental application.

There are 2 variations of these

1) An actual paper application that is handed out at the location or available on line and then downloaded to be completed. The completed application is then hand-delivered, emailed or even faxed back to the office.

2) An online fillable pdf.

Both present serious security problems as they are ultimately printed out to be viewed and distributed.

A paper application contains the applicant’s name, date of birth, current address and social security number.  I have also seen credit card information on an application

This is everything an identity thief needs to wreak havoc with an individual’s ID.

Paper applications are not easy to keep secure and away from prying eyes. I have seen them laying out in the open at many offices. These offices typically have a steady stream of people regularly visiting them. There are also cleaning and maintenance people that could access them, especially when the offices are closed and no one else is around.

Fillable, on-line pdfs present an additional security problem when there are multiple applicants. Many times the co-applicants are required to complete the same application as the primary applicant on the same form. The primary applicant will complete his/hers then the co-applicant will continue with the same application. This allows the co-applicant to see all of the primary applicant’s personal information. This is a cause for concern when the applicants don’t know each other all that well.

The solution to resolving these issues associated personal data security dangers with paper rental applications is to use a secure on-line application program.

Make sure it has the following features-

–  Individual applications (that can then be combined for review) for each applicant.

–  The ability to capture an SSN for screening purposes, but not make it visible to anyone after it is entered.

–  Access by permission only. If more than one person needs to review the application, each needs to have their own log on credentials.

Paper applications are obsolete and provide a tempting target for identity thieves. Many of the personal data security dangers with paper rental applications can be greatly reduced by using a reputable on-line rental application and background screening service provider.

Are you still using paper rental applications? – You really need to stop.

There are a number of very valid reasons why paper rental applications can adversely affect your business.

  • Fair Housing compliance issues
  • Information security concerns
  • Redundant data entry
  • Negative impressions

I will address each reason in separate posts.  In this post I will look at  potential Fair Housing compliance issues with paper applications.

The Fair Housing Act was enacted to protect rental applicants and tenants from discrimination and bias by a landlord or real estate agent.  The law which is very comprehensive and among other things, prohibits property owners and landlords from:

  • Refusing to sell or rent out a house based on the race, religion, color, gender or nationality of the tenant
  • Having different terms and conditions for different applicants based on the race, religion or nationality of the tenant for the rental or sale agreement
  • Promoting or advertising the rental with a section that seeks a specified  preferred gender, race or nationals to apply

Please note that Fair Housing laws can vary by state and even municipality. This post is not intended to provide legal advice. If you have any questions about the fair housing laws in your area, please check with an attorney or the proper authorities.

According to Ron Leshnower, who is an attorney, and Founder and President of Fair Housing Helper,  addressed the question – “Do I Have to Accept Applicants in the Order they Applied?”

His answer is “no,” but adds that “…you might want to because accepting applicants out of order, though not illegal, could give the impression of discrimination and may cause legal problems for you.”

Penalties for violating the Fair Housing Act can be very severe. Violations are typically investigated weeks or even months after they are reported. It is incumbent on the landlord or real estate agent to provide documentation that the violations did not occur.

Paper rental application makes compliant rental documentation next to impossible for the following reasons.

Many landlords and real estate agents that do use paper applications can tell you that they regularly receive applications that are missing information. While they are trying track down the applicants to get the information, they are getting new applications for that property.

Landlords can appear to be discouraging potential tenants from applying to their properties or steering them to another property when they select an application from someone who has provided a completed application after a partially completed application was submitted.

This can be considered a violation of the anti-discriminatory housing laws.

Even when the landlord does follow the rules, rejected applicants can claim, rightly or wrongly, that they were turned down due to race, ethnicity or any other of the protected classes. As indicated, the burden is on the landlord to show the first qualified applicant was accepted, which can be very difficult with a paper application months after the fact.

With properly designed online applications, you get two benefits to help keep you compliant with Fair Housing regulations –

  • The application cannot be submitted unless it is complete.
  • Successfully submitted applications are date and time stamped.

Assuming you are complying with Fair Housing rules and consistent with your application process for each applicant, an online application provides you with documentation should a complaint arise.

 

Ignore at Your Own Peril

In a previous post I wrote about the 4 critical steps you need to take when considering rental applicants. They are –

  1. Pre-screen your tenants by clearly communicating your residency standards
  2. Require complete applications, have each co-applicant complete their own individual application and collect an application fee
  3. Conduct a comprehensive background screening for every applicant and co-applicant 18 years or older that includes credit, criminal and eviction results
  4. Make sure the applicant’s ID is properly verified. Is the applicant who they say they are?

However, going through all the effort to properly screen an applicant is useless if you don’t pay attention to the results.

Here is a story from Tina who didn’t pay attentions to the screening report results.

“This new applicant was a nice guy and has a sweet dog, but I am never going to forgo the Tenant Magic approval again after what happened with my last tenant. I had her complete the application and go through the screening program, the recommendation was to refuse the applicant, and boy do I wish I had listened.  What a worthless nightmare she turned out to be.  Thanks for your help.  We’ll see what he does.”

This a great example of being able to learn a valuable lesson from the (easily avoidable) mistake of someone else.

“Believe none of what you hear and half of what you see”

Why customer service is so important from your tenant screening provider.

Even with the best tenant screening providers, there are times when the applicant can try to game the system and requires additional investigation.

Recently we were asked to take a look at the screening report of an applicant for a high end multi-unit rental property that we processed. We were told that something didn’t feel right about it.

The applicant’s credit report was returned as a Thin File, which meant that the applicant had no credit history. The applicant was 32 years old and having no credit history is unusual, but it’s not unheard of.

The Eviction Report showed 3 evictions over the past 5 years for a person with the same name as the applicant. Housing/Municipal courts do not use dates of birth or social security numbers when reporting evictions, so you do get false positives especially with someone with a common name.

At TenantMagic we compare known addresses reported by the credit bureau with the reported eviction address for the applicant. If there is a match, then we know it was the applicant that was evicted. However, in this case the applicant did not have a credit history, so we didn’t have any known addresses to cross reference.

The applicant made sure not to report his actual address on the application and used one of a relative, where he could have lived at some point.

The credit bureau did indicate that there was not enough historical information to make a firm recommendation on the applicant’s risk level. So now what do you do?

How do you determine if the applicant is qualified, even after completing a background screening?

The real estate agent for the owner called us with her concerns. The TenantMagic customer service team did a review and saw that the applicant did have some minor charges that showed up in the criminal report. We retrieved the court documents and took a deeper dive.

Criminal and traffic courts do report addresses and date of birth. In this case when we looked at the court reports, they discovered that the applicant lived at the address where the eviction was reported. We then confirmed this, as the date of birth matched with what was entered in the application.

Recent prior evictions are a major red flag for any landlord. A person who was evicted in the past is likely to be evicted again. The lengths this applicant went to hide previous addresses is cause for even greater alarm.

TenantMagic reported this to the agent and owner with the actual court reports, allowing the owner to quickly make a decision and move on to the next applicant. No time was wasted by the agent or owner. The decision was made to decline based on solid Fair Housing-compliant information.

Moral of this story. Even comprehensive background screening reports don’t tell the whole story and can require additional analysis. Agents and owners can spend the time themselves to do it and hope they get it right or they can use a full service application and background screening company to provide the information for them to make a qualified decision.

Fair Housing-Compliant Tenant Screening

Fair Housing compliance when screening tenants is so important on many different levels – legal, ethical, and business.

However, it is not difficult to avoid problem tenants before the lease is signed and still be fully compliant with Fair Housing regulations.

It is vital to set and clearly communicate your rental criteria and building standards upfront when screening applicants. If you do get phone inquiries, make sure that you provide each inquirer the exact same information and keep any conversations strictly to the property itself.

Most importantly, the residency requirements must be prominently displayed at the beginning of your application.

Unqualified applicants will typically screen themselves out of the application process if they don’t qualify for your residency requirements and are required to pay an application fee.

Fair Housing compliant standards and criteria can include

  • Rent to income ratio
  • Prior evictions
  • Bill payment history
  • Criminal history

(Please note that state and local fair housing laws can add other protected classes or have regulations that vary from federal laws, so check with your state and municipal housing authorities to make sure you are compliant where your rental properties are located.)

Finally, keep good records of each applicant or inquiry in case you do need to provide documentation if a complaint arisies.

This post is for guidance purposes only and is not intended as legal advice. If you have any questions regarding fair housing laws, please consult an attorney or the proper regulatory agency.

Stop Problem Tenants Before the Lease is Signed

Taking the first person showing up with a check is one of the worst mistakes you can make when considering a rental applicant. Many times this is the last money the landlord will see. And that is only part of the problem. Problem tenants can result in much more than just lost rents.

There is also  –

  • The time and money expended to collect on back rent.
  • The time consuming eviction process and the associated legal fees
  • Many cities are now levying fines and penalties to the landlord for nuisance tenants, including charging for police time when answering a problem tenant call.
  • The repair costs for property damage as problem tenants typically don’t leave the property in good shape.

It is not difficult to avoid problem tenants before the lease is signed and still be fully compliant with Fair Housing and Fair Credit regulations.

The 4 critical steps you need to take to reduce problem tenants and the headaches they bring –

  1. Pre-screen tenants by clearly communicating residency standards
  2. Require complete applications and require each co-applicant to complete their own individual application and collect an application fee.
  3. Conduct a comprehensive background screening for every applicant and co-applicant 18 years or older that includes credit, criminal and eviction results
  4. Pay attention to the results

Next – Fair Housing and Fair Credit compliant tenant screening

 

The (not so good) trend in tenant behavior

   This              Not This

I met with a group of  property managers and landlords from a neighborhood association that consisted of more than 150 duplexes built between 60 and 80 years ago.  What makes this neighborhood particularly interesting is that these homes were designed to look like single-family homes.

There have been two troublesome trends that have had a negative impact on the neighborhood over the past five years or so.

The first is that the number of absentee landlords has increased to 55%. The other is that the quality of tenants has noticeably declined.

Many of the landlords in attendance had more than 20 years of experience.

They shared stories with me about the “good old days” when tenants were accepted with a handshake and many times they didn’t even collect a security deposit. One landlord told me that it wasn’t unusual for the property to be in better shape after the tenant moved out.

Today, the number of problem tenants has increased dramatically and these landlords are trying to figure out what they can do. A big part of the problem is that they are small landlords and not aware of the tools that are available to them or only know about property management software and credit screening providers that cater to large property managers.

Background screening has become a crucial step in helping assure the quality of potential tenants. An industry rule of thumb is that 80% of a landlord’s tenant headaches can be eliminated if applicants are properly screened.

Finding a background screening and credit check provider can be a daunting task. Many that are readily available can be difficult to understand and to figure out how to use to properly evaluate an applicant. Landlords must also be aware Fair Credit Act compliance issues involved when using a credit report.

Next… What to look for in a tenant screening provider.

 

 

Welcome to Our Blog

 

For the past five years I have met with more than a thousand real estate agents and landlords regarding residential rentals and tenant screening.

I have heard many horror stories and really good tips on keeping bad tenants out before the lease is signed while staying compliant with Fair Housing and Fair Credit regulations.

Someone a lot smarter I am once told me that it is good to learn from your mistakes but a hell of a lot better to learn from someone else’s mistakes.

The purpose of this blog is to provide a resource to landlords and real estate agents to learn from others about applicant and tenant management best practices.

Please feel free to contact me at japple@tenantmagic.net with any of your stories or ideas for topics.