Friday, April 11, 2014

"Secret" Facts in Tenant Screening

5 "Secret" Facts in Tenant Screening

credit reportWhy do experienced landlords who know how to screen tenants still get bad ones? They understand the rental housing industry, have a system of tenant screening, have a good rental application, have access to get credit reports, charge screening fees, and more, but for some reason still find themselves in eviction court! Why?

In order to secure a good tenant for your rental, it is critical that we practice proper tenant screening, but it is also important to understand some of the Secret Facts of Tenant Screening.

What Are "5 Secret Facts of Tenant Screening?"

Fact # 1:You are screening ALL the time!

Most people think that tenant screening is a quick little investigation starting with a rental application and ending with an approved credit check. Not true! A full screening begins at the point of First Contact when the tenant first responds to your rental ad. It continues through the showing process, the application process, the verification process and the review process all the way through to the very end of the lease signing process. At any time during this entire period, a landlord may find a reason to disqualify a prospect.

Fact # 2: All tenants feel they deserve as much as they can get from you.

That doesn't make them a bad person. It's just business and understandable, so always keep that in mind and try to remember that in order to have a happy tenant who stays and respects you and your property, you must provide them with a quality rental they are happy to keep paying for each month. A good deal. Oh, and because you're a good person, try to keep your charitable instincts under control. (As much as possible. Remember, this is business.)

Fact # 3: You can count on predictable responses during the screening process.

I usually try to get prospective tenants to show their "true colors" as early as possible. This is an enlightening and time saving practice, whether it is positive or negative.
By mentioning that a credit check is required or that the management reports rent payments to the credit bureau, you may get an idea of how the prospect feels towards his or her credit. For example, sometimes asking for pay stubs or tax records can ruffle feathers or not.

Fact # 4: There are 3 factors in every rental negotiation

  1. Power or Leverage Who has the power? Who needs to rent fast or who needs a tenant fast? Do you have something the prospect can't find anywhere else?
  2. Information / Knowledge Know who and what you are dealing with can determine whether you have a successful rental or not. You must know what is in your lease agreement and what your prospective tenants can handle, and if they will earnestly be able to perform what is agreed.
  3. Time If you are in a rush to rent, you may not be able to stand firm on your price. This is an important negotiating factor. One month either way equals a month of rent either in your pocket or not in your pocket.

Fact # 5: There are 4 factors in every tenant approval

  1. Credit History
  2. Cooperation with the screening process
    An uncooperative applicant is a MAJOR red flag!
  3. Income Will the rent be paid? Do they have the income needed to comfortably cover all their bills, living expenses plus the rent?
  4. Timing If you find the perfect tenants who want to move in 6 months while your rental is ready now, will you wait? Probably not, but sometimes it could be worth waiting a reasonable amount of time for the right people.

About the author:
As a Real Estate broker / investor in New York, John Nuzzolese has been involved with rentals and investment property since 1979. Besides owning and operating two real estate businesses, he is president and founder of The Landlord Protection Agency, Inc. , an organization specializing in helping landlords and property managers avoid the hurdles and pitfalls and expensive blunders common when dealing with tenants.

More information on The Landlord Protection Agency is available at

Copyright © 2013 The Landlord Protection Agency, Inc. All Rights Reserved.

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Thursday, April 3, 2014

Tenant Screening Tips & Secrets

Tenant Screening Secret # 1

You are screening all the time.
Until you agree on the terms of the lease with your prospect, and have signatures of both parties on the agreement, you should be carefully evaluating the applicant . After you've completed all the steps of your tenant screening process, the final decision is made the moment the lease is finalized - when it is signed and all the required funds are paid.

I know it may seem harsh to kill a deal during or just before the lease signing, but I've been able to uncover disturbing knowledge about some prospects just before or during lease signings.

What do you do if you come to realize at the last minute that this is not the qualified tenant you thought you had for your rental property?

A: If this new knowledge is a deal breaker, you must for your own protection kill the deal.
How do you kill a deal?
There are 2 ways you can kill a rental deal at the last minute or during the lease signing.

1) The direct way. Confront the prospect with the information and explain that you can not proceed any further. or

2) Reschedule the appointment while you reconsider.

It is important to always do your best to eliminate the chance of renting to someone who is already showing you that you can expect problems from them.

Late Fee Enforceable?

Is My Late Fee Enforceable?

First RightTo be enforceable, Late fees must be considered reasonable in the eyes of the court and must not exceed the amount of the debt.

While many landlords don't charge enough in late fees, others go a bit overboard in collecting late charges. I know a few owners who spend a fair share of their daily time pursuing past due late fees. I recently had a student who had a tenant who owed accumulated late fees equivalent to approximately 3 times the total rent... and it was paid! He charged the tenant daily late fees each month continuously throughout the year with the months of daily charges overlapping. I'd hate to see him explain those calculations to a judge.

Most states have a statutory limitation on late fees, and when challenged, all state courts will limit them if the judge feels they are too high.

Some frequent questions are,

  • "But what about if the tenant agrees to a higher late fee in the lease?"
    My answer would be to keep it reasonable and keep the state limitations in mind. These things rarely become an issue, since it is one of the terms of the lease in which the tenant has given his word of honor and signature of agreement and approval. It is usually when you are in court with your tenant for other reasons that everything unenforceable in your agreement is then challenged.

  • "I charge a higher late charge than my state's limit. Will I have a problem collecting those fees?"
    Usually not in most tenancies, but it will become an issue if your late fees are challenged in court. In court I've seen late fees either reduced or completely eliminated by the judge.

Most landlords go to court with tenants for two reasons:
1. To kick the tenant out for non-payment or holdover in Eviction Court and
2. To settle disputes between the parties which may be for security deposits, damages, etc. in Small Claims Court.

One thing I learned is that a judge in eviction or small claims court is going to decide what he or she feels is reasonable according to the law. Keep in mind that there is a difference between "illegal" and "unenforceable".

The whole idea of the late fee is to encourage rent payments to be paid on time. A penalty fee should be enough to make paying late unpleasant and not so little that the tenant will be comfortable incurring late fees. Late fees should not be looked to as an additional stream of income, but as a deterrent to late payments!

Below are some links on limitations and the subject of Late Fees.


Late Fee - Related Stories

State Limitations on Late Fees and Lease Inserts

The LPA Lease Clause # 3, Late Fees

How to Enforce Late Fees when the Tenant won't pay them willingly

LPA Essential Form: The Urgent Late Notice

LPA Essential Form: Rent Paid On Time Addendum

Landlord Tenant Law - State by State

Ask the Attorney John Reno