Tenant search, first come - first served? - Posted by Jill

Real Estate Investing
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Posted by Irwin(Ca) on July 07, 2001 at 17:03:04:

Jim,

Good list. But you have to be very careful to apply the same criteria to EVERYONE. Rejecting an applicant for one of the stated criteria but accepting another applicant who also falls short in the same criteria can lead to BIG problems. Even though it may be difficult, screening and selection criteria must be applied consistently to all applicants. Relying on objective criteria makes this easier. For example, I wouldn’t use “insufficient income” but rather “income less than 3 times rent”; or “excessive obligations” but rather “other obligations exceed 50% of income”.

In any event fairness and compliance with the law should keep us out of trouble.

Just some thoughts from a CA landlord.

Irwin

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Tenant search, first come - first served? - Posted by Jill

Posted by Jill on July 06, 2001 at 12:23:49:

I have a pretty basic question on finding tenants. I am getting ready to rent my first property and I had an open house for two hours to show people through (it is a very nice high-end property in a very desirable area). I received four applications from prospective tenants. I had planned to go through the applications and be selective based on the information in the application and also my personal meeting with the applicants. There is one couple I favor over the others, but have yet to check their credit, references, etc. They happended to be the last couple to view the property. The first couple that viewed the property and filled out an application made a reference to the fact that they were the first ones to view the property and fill out an application, so that if their credit etc, checked out they expected me to rent to them. Do I have any obligation to do this? Can I be selective based on my own criteria? (BTW, in case you are wondering, all of the applicants are the same race and there were no same sex couples.)

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Re: Tenant search, first come - first served? - Posted by Jim Locker

Posted by Jim Locker on July 08, 2001 at 17:23:16:

You have the right to establish a uniform set of criteria that your tenant must satisfy, and you are entitled to reject any who do not meet those criteria, so long as those criteria do not discriminate on the basis of race, religion, family status, gender, or handicap.

Within that framework, you are required by law to handle applicants on a first-come, first-served basis. Which is to say that the applicant who came first and applied first gets screened first and, if they meet your MINIMUM standard, you must offer them the property or risk getting sued.

Keep in mind that these applicants already pointed out that they were first. So if you reject them in favor of someone else, they - or their attorney - might ask you why. You then would be forced to respond, and your answer better be good, consistent, clearly documented, and fully supported.

If you respond that “I liked these other people better”, you will get sued and you will lose.

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Reasons to reject - Posted by Paul_MA

Posted by Paul_MA on July 07, 2001 at 02:38:28:

There are also many legal reasons to reject tenants.

They live in an unsanitary manner, they smoke cigarettes, they have pets, insufficient income, criminal history, etc…

It is advised to make a list of LEGAL reasons to reject perspective tenants. If your gut feeling does not like the tenant…

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Re: Fair Housing - Posted by Jim Rayner

Posted by Jim Rayner on July 06, 2001 at 15:22:10:

From A Special Report #R6 from Mr. Landlord Inc. www.mrlandlord.com - More Than Fair Special Housing Report. I quote the following for your protection. If you do not have any of Mr Landlord?s Reports get them. Think it can?t happen to you guess again. I have a close friend a rental agent who currently is facing an investigation for asking pre-qualification questions on a phone inquiry:

Q. CAN YOU SELECT THE MOST QUALIFIED APPLICANT?

A. Dear Colleague, If several applicants approached you to rent a home and chose to go through your application process, whom would you select? That question seems easy enough. The overwhelming response is always, ?The most qualified.? If you too agree with that response, as 95% of most landlords would, STOP what you are doing! Let me give you a 1990?s wake up call, because you need to make a major mental adjustment to your current way of thinking. Selecting the most qualified applicant is NOT the right or ?fair? housing response. If you select on that basis alone, you open the door for a possible discrimination claim that is becoming the landlord nightmare of the 90?s. ?Trick or Treat? is becoming an expression of reality for rental owners. You either treat all applicants who approach your door with special care or you will receive a trick. Last year the average fair housing claim cost landlords about $35,000.

You are not entitled to select the most qualified applicant. The ?fair? response is that you must select the FIRST person who meets your qualifications and there is a difference. Let?s say one prospective tenant showed up at 10 o?clock Saturday morning to fill out an application for your rental. He met your minimal requirements, but you wanted to take applications from others that day to see if there might be somebody better before you make your decision. You are happy you waited, because at 3 o?clock that day a second applicant shows up who makes more money than the first applicant, and he dresses a lot better. The average landlord would go with the second applicant. But in this scenario, prospective tenant #1 could file a discrimination claim and win.

To avoid or reduce the chances of a discrimination accusation against you, there are several steps you can follow. You need to start by having a written list of minimal ?objective? criteria for selecting and determining whether an applicant is qualified.

I suggest your list includes criteria that can be proven or documented. For example: Monthly income is at least three times the monthly rent. Avoid subjective criteria that has no direct relationship to the applicant?s ability to pay and/or is hard to prove, like dresses pooly or there?s something not quite right about that person. - Besides both of these reasons don?t provide you with a legal or ?fair? reason for turning someone down. And please don?t use the old fashion typical qualification of ?Must be working or employed.? If that is one of your qualifications, let me give you another 1990?s wake up call. You can not turn somebody down simply because they are not working! You can turn someone down based on insufficient income, but you can?t be the judge on whether their source of income is proper (as long as it is legal).

By having a written list of criteria, you are now able to know when the first person meets your criteria, and therefore avoid turning someone down who would be able to file a discrimination claim against you because you went with someone later who you thought would be better. Please note. It is not necessary to stop taking applications until the first person who qualifies, pays all the money due for move-in and signs the lease. Until then, continue to take applications. However, judge all applications in the order received (number the applications) to see who next meets your qualifications, in case the first one accepted is unable to complete the final steps to moving in.

Most landlords don?t have a list of criteria outlined and make their decisions on general but not consistent guidelines. Others judge by vibrations given off by the prospective tenant and still some go by a gut feeling they have to select the best tenant. With this report you will not have to fall in any of these potentially very costly business practices.

You are running a business that is now being watched by numerous governmental agencies and you can not make your rental decisions without taking into consideration the ever changing ?rules? of play and suggestions outlined in this report. Don?t think tenants will continue to go along with whatever you ask, dictate or reject. If you don?t follow the right rules in selecting new residents, you are putting yourself at high risk of having a discrimination accusation charged to you by a tenant population that is growing more and more sophisticated and educated. Tenants, in an increasing number of areas, are now daily encouraged to exercise their right to sue by attorneys and legal aide services ready to help prove their case

It is a good business practice to put in your records the legal or fair criteria for which you based any decision to turn down an applicant who was not accepted. Keep this information in your records for a minimum of two years. Countless landlords are getting into trouble for turning people down for invalid or unfair reasons. Some questions on the average application can now even be misconstrued as a way of illegally discriminating. It is now recommended that these questions be deleted from your application, such as: Sex?, Age?, Marital Status? Church?

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NO - I Pick the Best One - Posted by Frank Chin

Posted by Frank Chin on July 06, 2001 at 13:28:38:

Hi Jill:

I rent most of my units via weekend open houses. I explain to people that we will not be making a selection till Monday morning, after everyone has a chance to see it.

Consequently, the person seeing it Sunday night has as much of a chance as another seeing it on Saturday morning.

If you reduce your selection to first come first served, then you will not be getting the best tenants. The KEY to the rental business is getting the BEST possible tenant.

When I did my very first rental, I was too anxious, and took a deposit from the first interested tenant. She was a law student. When we called her about signing the lease, she came back with a list of things she wanted done, which would’ve cost us thousands of dollars. She wasn’t very nice about it either.

My wife and I looked at one another, and asked whether we should even be in the rental business. We thought about the very LAST applicant, an intern doctor, and we liked her the best.

So we called up the law student, and said “you’re right, there’s quite a number of things we’ll have to take care of, and it’ll take a few weeks. We don’t want to hold you up, so we’re returning the deposit.” We then offered the apartment to the intern.

We’re glad we did. The intern doctor turned out to be one of our best tenants.

Frank Chin

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First Come, First Considered – only - Posted by InfoNet

Posted by InfoNet on July 06, 2001 at 13:15:33:

From what I have heard, you are not legally obligated to rent to the first people who viewed your property simply because they talked to you first. You can rent to whoever you want to. They are applicants, which means they are requesting that you to consider them as tenants. There is no such law that I have ever heard of that requires you to rent to them based on order of application.

Remember when you applied for a job? Did you get to tell the company that they have to hire you first if your references checked out since you applied first?

Get the idea?

You choose your tenants based on their credit, but also their personalities, their demeanor, and whether or not you feel they would be “good tenants”. It is a judgement call you make yourself based on the best out of the group you can find. Since race and sexual orientation is not an issue here anyway, you do not have to worry about violations of law in that regard.

Don’t let anyone tell you that you HAVE to choose them. I would be weary of such tenants anyway. If they are that manipulative now, what will they be like once they are in your home? Now THAT’s scary!

See you later!

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You’re the Landlord - Posted by Sandy

Posted by Sandy on July 06, 2001 at 13:07:19:

You rent to whomever you want. Who cares what someone else thinks you should do. If you buckle to the whims of every prospective tenant, how long would you be a landlord? Just don’t discriminate when you make you choice and you will be fine. Learn to trust your gut and the numbers.

Sandy

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Avoiding the - I was first - problem - Posted by Frank Chin

Posted by Frank Chin on July 09, 2001 at 08:18:05:

Hi Jim:

Good post.

Over the years, I had applicants trying to establish that they were first.

1- I can tell when people calls at 8:00AM wanting to see an open house at 11:00 that they want to establish that they were first. I don’t answer the phone till after 10:00. Then I tell them the phone’s been ringing off the hook since 8:00AM and and I have several appointments at 11:00 already and its better to come by after 1:00 or 2:00 or so.

Many times, I hear them say “I was hoping to be first.”

2- I NEVER tell the first applicant he’s first. I tell him he’s the third one (or whatever) even on the first hour of the open house. If he presses me, I tell him a close cousin is seriously consdiering the place and I would have to give him first dibs to keep the family happy.

3- Then after I receive the first two applications, I tell the others that there are others in front of them (waving the ones I got) and tell each that since I like them very much, I’ll try to give them special consideration. The first two are simply told there’s people ahead.

4- Finally, one criteria is a complete application, and applications are never 100% complete. Often the applicant that I like the best is asked to completely fill out the application. Others are simply told to call back next week for a status.

I know, that’s cheating a little.

5- Fortunately, through the years, the less desirable tenants are already screened out due to credit, income. length on the job reasons that I always can count on those grounds.

Frank Chin

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Re: Reasons to reject - Posted by Jim Rayner

Posted by Jim Rayner on July 07, 2001 at 12:51:10:

The following is a list of the legal reasons to not accept a rental applicant.
Just note that the Pets reason is not acceptable in the case of handicapped or disabled persons.

Application incomplete
Unable to verify income from employment
Insufficient credit references
Temporary or irregular employment only as it applies to the extension of credit
Unable to verify credit references
Length of employment only as it applies to the extension of credit
No credit file
Insufficient income
Insufficient credit file
Delinquent credit obligations
Bankruptcy
Profit & Loss account(s)
Previous eviction(s)
Excessive obligations
Suit, garnishment, attachment,
Too short period of residence
Foreclosure, or repossession
Temporary residence
We do not grant credit to anyone on terms you request
Unable to verify residence
Pets
Poor References from past landlord
Family exceeds ?reasonable? occupancy limits
Unable to provide processing fee, required deposit, or initial rent

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This is what I Do - Posted by Frank Chin

Posted by Frank Chin on July 07, 2001 at 08:50:31:

A small percentage of applicants ask about my criteria, and this is what I do:

1- First, I try to be very freindly on the phone, describing the apartment and directions. I tell them anyone can come since it’s a open house, even if I know I won’t be renting to them. I believe people usually sue if they feel disrespected.

2- As most of my rentals are 2 bedrooms, I have many people with 3 or 4 children wanting to rent. Instead of saying I won’t rent to them, I tell them that applicants for 2 people are processed first, then for three, four etc.

3- Because the most unstable situation are roommates and boyfriend-girlfreind trying things out, we advise them that preference is given to couples, whether its gay, lesbian, or heterosexual who known and lived together the longest. When we do this, we advise them that they don’t have to answer if they don’t want to, but would like to give them some preference over other roommates in this respect. The objective is to have long term tenancy.

Indeed, by applying this rule consistently, I find that I DO wind up with married couples who dated, married, and looking for an apartment instead of a boyfreind-girlfriend who met at a bar the week before.

4- Many people with bad credit avoid large apartment buildings. They are surprised we do credit, employment, bad check, eviction screening. While they are surprised, most people have NO problem with this. Most people are actually screened out here.

5- Income. We prefer the rent not to exceed 25% of gross income, but allow it to go as high as 40% if there’s little or no other debt.

6- Then, with all things being equal, we give preference to those filling out the two page application MOST complately, as those doing a better job completing the application appears to make better tenants. While be never tell applicants this fact, we beleive that if we were ever asked about this, we can say that we have more information to process on the more complete applications.

7 Finally, we ask people to help us by calling for the status as of Tuesday afternoon following the weekend open house showing since we have hundreds of people coming and cannot call everyone back. I find that people get very upset that weren’t notified of a rejection.

Frank Chin

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Re: Fair Housing - Posted by Mark (WV)

Posted by Mark (WV) on July 06, 2001 at 18:44:44:

Thanks Jim for a very to the point post ,I’ve been guilty in the past of some of the very things you mentioned.Guess it’s time to get the ducks back in the row.
thanks for the wakeup call
Mark

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Re: First Come, First Considered – only - Posted by Jim Locker

Posted by Jim Locker on July 08, 2001 at 17:26:22:

::You choose your tenants based on their credit, but also their personalities, their demeanor, and whether or not you feel they would be “good tenants”. It is a judgement call you make yourself based on the best out of the group you can find. Since race and sexual orientation is not an issue here anyway, you do not have to worry about violations of law in that regard

If you choose a tenant based on personality, you are a fool. Period.

Remember, the best con artists have very pleasing personalities. Demeanor certainly counts, but those with unpleasant aspects - gang bangers and the like, will generally show up in other objective ways that permit you to reject.

There should be nothing subjective about this process. Don’t trust your gut. Screen everyone. Carefully.