In our 2022 State of the Property Management Industry Report, property managers we surveyed underscored the importance of building personal relationships in attracting and retaining residents. Residents, too, are looking for stronger relationships and open communication with their property managers, according to our survey.
That relationship begins long before residents move in. In fact, it starts with the application and tenant screening process. Tenant screening can make or break your relationship with residents right from the start.
Because you’re looking at an applicant’s personal information to determine if they’re a good match, there is a lot of room for mistakes and misunderstanding.
In this article, we’ll explore every part of tenant screening. We’ll discuss how to set up a fair and transparent process that complies with housing laws and helps you build a reputation for honesty and reliability with residents long before the moving truck rolls in. We’ll also discuss tech solutions that make that process easier, faster, more accurate, and even generate new sources of revenue for your business.
The Importance of Communication in the Tenant Screening Process
First off, let’s talk about how important it is to keep the screening process transparent and to communicate with applicants throughout. A well-established communication process benefits both applicants and your staff.
First, establishing a regular channel of communication with your applicants builds the foundation for a good relationship if and when they become residents. Let applicants know with automated emails when their application is received and when they can expect to hear from you.
If their application is accepted, send them next steps for signing the lease and submitting the first month’s rent and deposit. Follow up with a welcome packet with helpful information about the residence and the community. If they are rejected, give them a contact to reach out to should they need more information.
Automated emails and regular communication processes also help your staff. Instead of fielding calls from applicants, they can spend time on other tasks, saving time and money.
Tenant Screening Pitfalls
According to the American Apartment Owners Association, there are a handful of common pitfalls landlords and property managers fall into when screening tenants. Before you begin the screening process, make sure you’re not falling into one of them.
Lack of Detailed Listings and Pre-Qualifying Questions
Before the application process even begins, you can save yourself (and your prospective residents) a lot of time by building out detailed listings that include updated photos or videos of the property. It should also list move-in date, amenities, rent, and any fees clearly.
Leasing tech powered by AI can help you determine which amenities to highlight to pull in the kinds of residents you’re looking for. When those prospective residents do apply, the same AI can tell which are most likely to sign a lease.
Even simple questions that address move-in date or willingness to pay a deposit can eliminate unqualified candidates and save time. After all, there’s no point going through the trouble of running a credit check on someone who can’t move in when a property becomes vacant.
Other questions to consider include:
- Do you have pets? (Particularly for properties that don’t allow pets)
- How long do you intend to stay?
- How many people will be living on the property?
- Do you smoke?
- Will you need a ramp or other accommodations?
Note that you cannot deny an applicant residency based on how they answer that last question. It can, however, help you match units (if you have multiple) to their needs, or prep a single unit to accommodate them.
Screening Only One Applicant
If multiple people are moving into the same unit, it may be tempting to screen only the primary applicant for financial reliability. But there is so much more you can find out from the tenant screening process than financials.
For example, while the primary applicant may look great on paper, a secondary applicant, such as a spouse, could have credit problems that affect rent payment. Even in the case of roommates, the primary applicant may have stellar references, while the other has a history of disputes with previous landlords.
Screening Only Question Marks
Tenant screening can be time-consuming, and so it’s tempting to screen only the applicants you’re not sure of.
Again, make sure you’re screening every applicant who gets past your pre-qualifying questions. While one applicant may have great credit scores, they may have a job that moves them around, and so has a history of breaking leases.
On the other hand, you may come across an applicant with a low credit score, but excellent references from their landlords. That’s why it’s so important not to skip references. They can tell you a lot more about an applicant than simple numbers on a page.
If you live in a college town, you know how important references are. Students with a short credit history may very well be good tenants. You wouldn’t know it, however, unless you looked at their references.
Right now, it may save you time to screen one applicant per unit or only the ones you have doubts about, or to skip references. But a tenant screening software solution can pull all the data you need on each applicant almost immediately, making the process much faster and more efficient. There are no more excuses for screening only one!
Tenant Screening Software
We surveyed property owners on the tech they wanted most for their properties. Number five on the list was tenant screening software.
There are property management software solutions that can help you run your entire tenant screening process. A good software solution will pull the correct reports and send automated messages to applicants at each step of the process.
We mentioned screening only one applicant per unit or screening only questionable applicants as major pitfalls. Landlords and property managers may get into that habit simply as a means to save time. An automated process, however, screens all applicants thoroughly, without requiring additional staff or resources.
Which Reports Should You Be Looking At?
For each applicant, you are legally allowed to ask for all of the following reports.
Credit Report: Look beyond the credit credit score at the applicant’s payment history and the number of credit cards they have in their name. Both will tell you a lot about how reliable they are with money.
Pro Tip: Use tenant screening software to set credit score limits, so you see only the applicants who meet your requirements.
Criminal Record: Whether or not you have access to an applicant’s criminal record during the screening process and whether you can deny an application because of it depends on where you live. In many places, there are no laws preventing the denial of applications based on conviction history, but other places only allow denials for certain convictions.
Many places won’t allow you to deny an application based on an arrest record. After all, just because someone was arrested doesn’t mean they were guilty of a crime.
Court History: Court reports can tell you if an applicant was taken to court by former landlords for damage or failure to pay rent. You can also find records on lawsuits that may affect their eligibility.
Rental History: Ask applicants to list their previous landlords, then call them up. Find out what kind of resident the applicant was, whether they paid their rent on time, and whether or not there were any issues such as noise, pet violations, or damage to the property.
Income: This one is pretty straightforward. If an applicant doesn’t have enough income to cover rent, then they probably won’t be a good fit for your property.
References: Ask for references aside from former landlords. References from employers or colleagues can also give you a good picture of an applicant’s reliability as a resident.
Screening services offered through property management software can help you access these. TransUnion, for example, is integrated into Buildium’s tenant screening software. Property managers can access credit reports, criminal records, eviction reports, and TransUnion’s ResidentScore, which assesses the risk of a prospective resident.
With the right technology that saves time for everyone involved, you can pass on screening costs to the applicant and even generate extra revenue by setting your own screening fee.
Tenant Screening and the FHA
No matter how you conduct your screenings, however, it’s important to remain compliant with the federal Fair Housing Act (FHA), which prohibits you from denying housing to applicants based on race, color, religion, sex, national origin, familial status (families with children, who are pregnant, or who are in the process of having children), or disability.
The FHA has a specific definition of what constitutes a disability, according to NOLO. It’s important to be well-versed in FHA standards.
It also prohibits you from applying rules or restrictions to the application process unevenly across applicants. For instance, you cannot waive application fees for applicants with disabilities without waiving them for all applicants. Nor could you require 10 years of employment history from single applicants while requiring only five years from married applicants.
It’s important to note that some states and cities have added more protected groups to their own fair housing laws, as well as accommodation requirements for applicants who require them. Make sure you and your staff are familiar with fair housing standards in the communities where you manage properties.
And, as always, it’s a good idea to consult a legal expert in FHA with specific questions or to get more information.
AI: The Future of Tenant Screening?
There’s no denying the tenant screening process can be time-consuming, particularly when you need to look past the credit scores and income levels.
One innovation in tenant screening, however, has helped landlords and property managers streamline the process. That’s predictive tenant screening using software that applies artificial intelligence (AI).
Using AI-based tenant screening software, a landlord or property manager can not only determine a prospective resident’s ability to pay rent, but also their willingness and likelihood to do so.
Through an extensive rental history database, AI-based tenant screening software can predict whether or not a prospect will be a reliable rent-payer based on past rent payments, something that a simple credit and income history wouldn’t be able to tell you.
For example, a prospective resident has recently gone through a divorce that damaged their credit score. Traditionally, a landlord may pass on their application simply because their credit score is low. By using AI-based software, however, the landlord may discover that the prospect has never missed a rent payment, and so is likely to be a reliable tenant.
AI-based tools are just one of the ways technology can improve the way you screen applicants. Property management software with built-in screening features can help you make your entire application process more efficient for you, your applicants, and your owners, helping you to find residents that are the right fit in less time.
In our next post, we’ll discuss that full applicant experience. We’ll explore simple ways technology can improve each stage of the leasing lifecycle, from before a prospect sees a listing to move-in day and beyond