Making common rental application mistakes can cost your landlord business dearly. The rental application contains critical information you will need to screen tenants thoroughly. For example, employment information, previous landlords, income, and permission to run a credit check are all standard on rental application forms. Rental application mistakes could mean the difference between getting a good or bad tenant.
Mistakes on rental applications range from not checking illegible handwriting to omitting crucial information. So, what are the top six application blunders to avoid at all costs? How can due process during the rental application process save you from evicting a bad tenant and protect your income?
The Importance of the Rental Application Process
The rental application process is the first step to assessing if the prospective tenant will be a good match. The application form helps determine the applicant’s ability to pay rent on time, look after the rental unit, and avoid getting into serious debt.
Of course, you can’t foresee the future. But the rental application process gives you insights into the tenant’s rental history. And this can give you an idea of how suitable they are. That is why it’s vital to analyze their employer and landlord references, pay stubs, bank statements, credit score, and identity.
Rental applications typically take up to seven days to process. However, the processing time can be shorter. After receiving the application, you should verify employment details and call previous landlords. Additionally, the rental application should ask for permission to run a credit history check.
Because there is so much riding on the application process, there is no need to rush it.
Rental Application Mistakes to Avoid
The first mistake many landlords make is rushing the rental application process. Unfortunately, the desire to fill vacancies as fast as possible can lead to costly errors.
It’s good to remember that signing the lease agreement is easy. However, starting an eviction process is challenging and costly because a delinquent tenant defaulted on rent or trashed the place.
Apart from rushing through due diligence when processing rental applications, there are several other mistakes you must avoid at all costs. Here are six.
1. The rental application is discriminatory
Most landlords and tenants are aware of the Fair Housing Act. This makes it illegal for landlords to refuse housing to anyone based on race, color, nationality, gender, religion, age, disability, or familial status. Therefore, it would be a massive mistake if the rental application had illegal questions or clauses.
For example, illegal questions on a rental application form would include:
- What is your national origin, or what country did you emigrate from?
- Do you have children, or are you planning to have children?
- Have you ever been arrested?
Although most states allow landlords to check criminal convictions, asking about being arrested is a mistake. This is because being arrested doesn’t make someone guilty of a crime.
However, it’s not against the law to discriminate against a potential tenant based on smoking or pets. Therefore, these are valid reasons for sending the tenant a rental denial letter.
2. The rental application denial letter is discriminatory
It’s not a mistake in the rental application process to disqualify a tenant based on their income, references, or credit report. Also, if a tenant lies on the application, that is a valid reason to reject their application. However, the rental application denial letter can’t mention anything discriminatory.
For example, the application rejection cannot be based on any protections offered by the Fair Housing Act. In addition, it’s a mistake to deny tenancy based on arbitrary reasons. For example, sending a rental application rejection letter because you noticed the applicant had tattoos.
3. Ignoring the law on rental application fees
Don’t make the common mistake of ignoring state and city laws on rental application fees during the rental process. It is usually possible to charge fees for the tenant screening process. However, some states don’t allow you to charge tenants fees. In addition, it may be required to refund fees if you deny the tenancy.
4. Charging too much for the security deposit
The rental application contains information on the security deposit, and it can be a costly mistake to ignore state laws on these. Many states have rent control laws that regulate security deposits. These regulations control how much you can collect, how to hold the money, and when to return it.
In some cases, landlords can request an application or holding deposit to allow the tenant to secure the property while screening takes place. If the application is rejected, it’s important to refund the holding deposit.
The security deposit is different from the application deposit because it’s used to pay for potential damages during the lease. It is usually only paid after the application has been approved and the lease signed.
5. Setting the wrong rental rate
One of the worst mistakes during the rental application process is to get the rental rate wrong. The amount you charge in rent directly impacts your revenue and vacancy rates. If the rent is set too high, you will have trouble attracting prospective tenants to apply. Even if you find a suitable tenant, they may not stay too long if they find cheaper accommodation.
Of course, if the rental rate is too low, you will find it difficult to make a profit, cover unexpected costs, or make mortgage payments. For example, it may be challenging to keep up with maintenance, and the rental unit could fall into disrepair. And this is usually a reason for tenants to get their landlord into trouble. You may even attract the wrong type of renter if you underprice the rent.
6. Accepting illegible or incomplete rental applications
It can be a costly mistake to ignore the warning signs of a sloppy application. For example, spelling mistakes or illegible writing could create confusion down the line. Also, it could make the screening process difficult if you can’t read the social security number or the previous landlord’s phone number.
It is also necessary that tenants complete every section of the application. If a section doesn’t apply, then they should mark that appropriately.
Many landlords use a property management app or request tenants complete a digital application to fill out rental applications properly. This way, you can ensure that only a properly completed application can be submitted.
Six Rental Application Mistakes to Avoid At All Costs is written by Remen Okoruwa for www.biggerpockets.com