Reasons (Excuses) for Not doing a thorough Tenant Screening
Reasons (Excuses) for Not Doing a Thorough Tenant Screening
Without a doubt, the biggest headaches that a landlord can experience come from problem tenants. One bad tenant in a rental unit can cost much more than all costs associated with a typical vacancy. Inadequate tenant screening will likely result in having tenants who pay late, don’t pay at all, damage the property, and cause other problems for the landlord and/or neighboring tenants.
Of particular interest is the applicant’s history of credit use, evictions, and criminal activity. Past behavior tends to be indicative of future behavior, which is why the landlord must do adequate tenant screening. A prospective tenant that pays the majority of his or her bills late will likely pay the rent late.
With tenant screening, the landlord is helping himself to protect his investment. By doing everything he can in the first place to adequately screen applicants and select a good tenant, a landlord will save himself headaches, time, and money.
Knowing all this, why do landlords fail to follow through on tenant screenings? There are many reasons why landlords fail to perform adequate tenant screenings. As with many tasks in life, we too often find excuses for not doing what we know should be done.
The reason/excuse “I don’t have the time” is more likely “I don’t want to take the time.” Certainly there are multiple demands upon a landlord’s time, however, consider the adage “pay me now or pay me later.” Time spent upfront on screening and selection is more effective use of your time than later spending time battling bad tenant behaviors; processing evictions; and/or collecting judgments.
With today’s technologies, screenings can be conducted in less time than was possible even just a few years ago. If time is money, then the key is to use your minutes well. Determine your level of risk management, pick the screening options that make sense for your properties, pick the screening vendor that offers products to meet your needs and make the screening process a standard business practice. It is truly a mistake to short-cut your standard practices and thereby short-changes your business.
“It’s too complicated” is often used with “It takes too much time.” It may seem more difficult than it really is if you don’t understand the issues, processes, and products associated with tenant screening. Before finalizing on a vendor, ask customer service what to expect. What exactly do you need to do in order to become a tenant screening customer? Keep asking questions until you understand the requirements and timeframe to both sign up for the desired services and to conduct typical screenings.
“It costs too much” is another often used reason/excuse. If cash flow is in crisis, it is prudent to minimize cash expenditures. However, some screening items can be done by landlords themselves at the expense of only their time those items that require third-party vendors are available at relatively low cost. If money is the issue, poor decision making on tenant selection will only add to the cost.
It is important to differentiate between price and cost. What you pay now does have an immediate impact on your checkbook, but the cost of adequate screening is usually returned many fold by the benefits of a good tenancy.
“I don’t know how” or “I don’t know where to start” is a valid concern, but one that can easily be remedied. Landlord associations, landlord help Web sites, print publications, and seminars devoted to helping landlords succeed are numerous and varied. Landlord Web forums are great opportunities to learn from others. Fellow landlords freely share the wealth of their experiences and offer encouragement and advice.
There is no need to feel alone or that adequate screening cannot be accomplished. It will, however, take effort on your part to assess what you know, determine what you should know, and apply yourself to education. Of particular importance is becoming knowledgeable of all applicable federal, state, and local laws associated with tenant screening.
Take time to analyze what your true screening needs are. If you have made your process to be complicated in of itself you may want to step back and determine if you really need all of that. If you do get all of that, what are you going to do with it? Remember too that fair housing compliance will mean that each and every applicant is screened exactly the same. So any report you order for applicant A will need to be ordered for applicant B as well.
“I trust my gut instinct” is of course your prerogative, but are you really comfortable in turning over possession of your significant investment to just anyone who walks in off the street? If your gut is wrong, that’s exactly what you will be doing. Not to say your character assessment isn’t better than most others but why trust to luck. Most landlords would be reluctant to give the keys to their car to a passing stranger, even a nice stranger at that. Giving away the keys to a investment property even to a nice stranger is downright foolish.
“I tried it once, but still got burned.” Although past experience does provide opportunity to teach us lessons, if we didn’t take the time to analyze what happened and adapt and adjust we haven’t learned. We probably learned the hard way more than once, but it took getting back in the saddle again to realize the benefits. No one size fits all in spite of what the label says. If you gave it your best shot, would do nothing different, and can handle inherent risks, then your decision is the decision that best fits your business.
“I just don’t want to be involved.” Landlords who might have this reason/excuse need to realize that they are involved by the fact that they own rental properties. Landlords who don’t want to be personally involved must pay others to perform the task. However, landlords must still first understand the issues, decide which screening items will be utilized, and make sure that screening and selection is performed in accordance with all applicable laws. Screening and selection should be undertaken as a critical task not just going through the motions.
“I leave screening up to my property manager” is another reason/excuse for those who utilize professional property managers. Many landlords are surprised to learn that they are responsible for the actions taken by the property manager, including those related to inadequate screening. A rental property owner can be held partially, even totally liable for tenant screening/selection actions by a property manager that violated fair housing laws. Accordingly, owners should understand fair housing and be familiar with policies and procedures utilized by their property managers.
Landlording is management of the real property and of real people who become tenants there. In the course of every day management, there are situational decisions to be made. Sometimes landlords, even those who understand the issues and have adequate screening and selection policies and procedures in place, must consider reducing their standards in order to fill a vacancy. This is usually due to market conditions that result in fewer applicants, with none meeting the landlord’s standard criteria. Perhaps the applicant is desperately in need of immediate housing and the information supplied on the application meets the stated criteria. The applicant may be willing to provide a large security deposit to compensate for bad screening information. Will it hurt to bypass standard procedures or ignore certain screening results and accept the applicant for tenancy? The real answer is “it depends.” However, as a rule, if you ignore good business practices you will regret it. Even if this applicant is the only applicant and you feel that your cash flow demands immediately filling the vacancy, stop and reconsider. The costs of installing a bad tenant are potentially significantly greater than allowing the vacancy to remain unfilled for a while longer.