“Don’t lie about it. You made a mistake. Admit it and move on. Just don’t do it again. Ever”
Property managers and real estate professionals now have easy access to vital information about prospective tenants. Learn how this can help your business and what to watch out for.
JUNE 2016 | BY DAN WEIL
For years vetting potential apartment tenants was a laborious process for property managers. It could take several days to get information like credit history over the phone and via fax. But increasingly the screening task has become automated, saving a lot of time and effort.
“Everything is available online, from credit to sex offender status, in real time,” says Jeff Cronrod, president of the American Apartment Owners Association. The group has a service that provides credit reports, former addresses, eviction histories, criminal pasts, Social Security fraud information, and more. Where in the past it took multiple inquires to acquire this data, now it’s one-stop shopping. “When you have a tenant who wants to rent, you can generally get reports in 10 seconds. That makes this easier, cheaper, and faster.”
In addition to screening, there are many automated services landlords can choose from to filter their tenants. Most of them offer information on potential renters, including income and the areas cited above—often with little more than a person’s name, date of birth, address, and Social Security number. The services then use a scoring engine to determine whether the prospective renter makes the landlord’s cut.
Todd Callow—rentals program leader for Move Inc., the operator of realtor.com®, which helps to match landlords and renters—says its filtering tool for landlords can be individualized by users.
“Property managers can tune it based on their willingness to absorb risk,” he says. “They can look for certain profiles.” For example, some landlords will accept only tenants who have renters’ insurance. Similarly, CoreLogic’s Leasing Manager screening system utilizes 1,600 attributes in compiling a score for rental applicants that landlords can use to find the right tenants.
Of course, there’s a wide variety of vendors available. Some systems enable efficiencies after the rental contract is signed, such as managing rent payments electronically. HomeMe, a new app that offers an automated preapproval system for apartments, asks for renters’ income, verified with a pay stub. That information can be very handy for landlords, says HomeMe cofounder Mark Douglas. “A renter may say he or she wants a $1,900 apartment, but he or she can afford a $2,900 apartment. Now when the manager is giving a tour, he or she can say, ‘Do you want a larger unit,’ knowing they can afford it.” The automated information allows rental agents to tailor tours to individual applicants.
Real estate professionals say they have found the automated services quite useful. Scot Rife, an agent with the Scot Rife Group of Keller Williams Advantage Real Estate in Dayton, Ohio, utilizes a company called Cozy. “The report [on potential tenants] comes up almost instantly, so we’re able to make a rental decision quickly,” he says. “The background check is very thorough. We see seatbelt violations. So you know if you see that, you will see the important stuff.” Rife also likes the fact that the potential renter sees his or her credit report before releasing it to his company: “If we have to go over something, it’s no surprise to the tenant.”
With any online service that stores personal information, security is an issue. Service providers say they spend a lot of time and money ensuring their systems are safe, but obviously any form of online commerce carries some level of risk. Make sure you understand the safety promises and risks of any system you are considering for your business.
Also, keep in mind that automated screening doesn’t eliminate the need for human judgment, Cronrod says. “The reports are just a tool, not a decision maker,” he says. Credit reports can be inaccurate, criminal histories may actually belong to someone else with the same name as the prospective renter, and fraud isn’t always detected. “Someone can apply [for an apartment] under a fake name or their child’s name,” Cronrod says. “If you do it right, it will take a few hours to vet someone after receiving our report.”
As for pricing, some services charge a fee to landlords or rental agents for tenant screening and others charge a fee to the tenant. But in the end, the tenant almost always pays, as the landlord generally will charge an application fee to cover any vetting expenses. For example, the American Apartment Owners Association charges from $19.95 to $49.95 for its services, depending on how much information the landlord wants.
There’s no set formula for choosing a service. “It is up to each individual [real estate professional] to compare the features and determine which of the services offers the best fit for their needs,” Callow says. He says many of the biggest apartment owners use CoreLogic’s Leasing Manager, while many medium-sized landlords, who might rent out 100 to 300 units, use AppFolio. Independent landlords tend to go with one of the many small companies in the field.
Move Inc. works with Cozy, which is free for landlords and real estate professionals. “Our mission is to provide piece of mind to both sides of the marketplace,” says Gino Zahnd, Cozy’s CEO. Callow says Cozy is at the forefront of the movement to provide a fuller renter profile that will stick across multiple moves for a renter. That profile can include rental payment history and recommendations from property managers. “It’s a blend of renter empowerment and additional data for the landlord,” Callow says. “We think about it like Uber or Airbnb. In the real marketplace as a renter or transporter, you have a profile and are ranked. You get a deeper recommendation based on your actions.”
Other innovations coming down the pike could be fingerprint- and facial-recognition technology to check a potential tenant’s background, Cronrod says. Fingerprints are in limited use now for federal criminal records, while facial recognition is a long way off, he says. But the need is there. “We get a lot of bad data, and fingerprint and facial recognition would get rid of a lot of it.”
Dan Weil has worked as a reporter at Bloomberg, Reuters and Dow Jones, where his work appeared in The New York Times and The Wall Street Journal. He is now a freelancer, and his work has appeared in Institutional Investor, CBS Money Watch, Bankrate.com, Slate, The Fiscal Times, The Street.com, The Real Deal, Foxsports.com and Tennis magazine.
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