05. SCREENING & SELECTING YOUR RENTER
5.1. SELECTING YOUR RENTER
One of the advantages of selecting a specific time that you intend to have the house open is that it groups prospects in the house at the same time.
If you say on your outgoing message that the house will be open Sunday at 3:00 pm, then the interested parties will show up at that time. If you see prospects one at a time, they are likely to say that they “will get back to you” about whether or not they are interested.
If they see several parties are interested in your house at the same time, be sure you “let” them fill out an application RIGHT NOW. Once they see someone else filling out an application, it will fuel them to do the same thing. If anyone asks, you DO NOT rent first come, first serve, but on the basis of information on the applications, including job stability, income to debt ratios, and past credit history.
If a prospect is desperate but can’t make the showing, they will call you about seeing it another time, but you’ll be surprised how many will show up at the appointed time.
At this point, you should be standing in your property on Sunday afternoon at 3:00 pm, and several couples should be looking at the house. As they walk in the door, you hand each an information sheet. Printed on the back is a copy of your application:
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5.2. RENTAL APPLICATION FORM
This application is accompanied by a check or money order for earnest money in an amount equal to the first month’s rent. When your application is accepted, the check will be deposited. If your application is not accepted, your check will be returned.
Last Name: First: Middle:
Social Security: Date of Birth: Maiden Name:
Contact Phone numbers:
Current Address:
How long there? Reason for leaving:
Name & Phone of Owner or Agent: ____
Previous Address:
How long there? Reason for leaving:
Name & Phone of Owner or Agent: _________________
Prior Address:
How long there? Reason for leaving:
Name & Phone of Owner or Agent:
Employer: How long:
Employed as: Salary: Phone:
Supervisor:
Checking Account #: Bank & branch:
Savings Account #: Bank & branch:
In case of emergency, name and address of two nearest relatives not living with you:
Name: Relationship:
Address: Phone:
Name: Relationship:
Address: Phone:
I authorize the agent for owner of this property to verify the above information and obtain a credit report. I understand that when my application is accepted, the accompanying earnest money check will be deposited, but that if my application is not accepted, my check will be returned uncashed. I certify that there are sufficient funds in my account to cover the earnest money check which is being tendered with this application. This is an equal housing opportunity.
Date: SIGN HERE: _(X)___________________________
Here are some typical questions you will encounter:
Q: When will the house be ready?
A: It is ready today.
Q: Can you hold the house until I am ready to move next year? A: No.
Q: Who owns the house?
A: A group of investors. I am just the Property Manager.
Q: Are they willing to lower the rent if I fix it up?
A: No, they have their own contractors.
Q: Will you accept less rent?
A: Probably not, we’ve had tons of calls, but I’ll be happy to take your application to the owner if you’d like.
Q: Are they going to paint?
A: No, the property is being rented AS IS.
Q: Who cuts the grass?
A: The resident will be responsible for the yard.
Q: Are utilities included?
A: No.
Q: What about washer and dryer?
A: Connections are over here. The owner is not in the appliance business.
Q: Will they supply stove and refrigerator?
A: We don’t rent appliances. You can rent them from E-Z Appliance Rental for just a few dollars a month.
Q: Can we rent this and use it as an undergraduate dorm if my dad guarantees the rent?
A: No.
Q: What about a lease purchase? Can I apply all the rent toward the purchase price?
A: The owners have indicated a willingness to discuss a lease-purchase arrangement, but that would be in addition to the rent shown on the information sheet. If you’d like to know more about it, I’ll have to talk with the owners and get back to you. I do know that the existing loan is not assumable, so you’d need to get a new mortgage.
Q: What would the price be for the house?
A: I really don’t know what the house is worth. We’d probably have to hire an appraiser to determine the fair market value.
Q: If we rented it, could we paint all the walls?
A: Generally, the owners use their own contractors. Assuming that you wanted light neutral colors, we might be able to work something out.
Q: Is it OK to fence in the front yard?
A: No, I don’t think the owners would allow it.
Q: Is it OK to build a garage in the backyard?
A: No, I don’t think the owners would allow that.
Q: Who are the owners?
A: A group of investors.
Q: Can I call and talk to them? Can I meet them?
A: They have hired me to be the property manager. They don’t deal directly with the property.
Q: Where is your office?
A: I spend a lot of time driving to and from rental houses, so it’s easier to meet you here. You can always call me at 678-455-5555.
Q: But I don’t want to listen to that long message before I can leave you a message.
A: When the message starts, you can bypass the outgoing message by pressing POUND on your phone.
Q: Is this a safe neighborhood?
A: We’ve never had any problems here. Even so, we always recommend that you take normal safety precautions. Unfortunately, crime is everywhere these days. If crime is a concern to you, you are welcome to visit the local police department because they are best able to provide accurate crime statistics.
Q: Are there any Eskimos or Greeks living in this area?
A: I really don’t know exactly who lives here, but this is a free country and people can live wherever they choose. This is an equal housing opportunity.
Q: What is the racial make-up of the schools?
A: I really don’t know, but you can drop by the school and talk with the principal. That’s the best way to get accurate information about the schools.
Q: If I have the floors ripped up and ceramic tile installed in the kitchen, is that OK?
A: You’d have to get permission from the owners for that.
Q: My brother is a plumber, and he could help me tear out all the plumbing and put a shower on the front porch. If we did that, would they cut the rent in half?
A: No, they use their own contractors.
Q: Are they gonna spray for roaches every month?
A: No, the resident is responsible for all pest control.
Q: How much are the utilities?
A: It really depends on how much you use, and people are really different. You can call the power company and gas company, and they will tell you what the average usage was for the past year. However, that was only the experience of that particular resident.
Q: What happens if the furnace breaks? Who pays for it?
A: You are responsible for the first fifty bucks of repairs. After that, the owner pays everything.
Q: Can I put a plastic swimming pool in the back yard?
A: No, I don’t think the owners would allow that.
Q: Would they, like, exchange my fixing up the place for something off the rent every month?
A: No, they have their own contractors.
Q: Yeah, but I could like fix the place up, and then it would be worth a lot more, huh? Would they do that?
A: No, I don’t think so.
Q: Can we have six golden retrievers and fourteen cats?
A: No. The owner doesn’t allow dogs, but one cat is OK with a $200 non-refundable pet fee used to de-flea the premises after you leave.
Q: But my cat doesn’t have fleas! Do I still have to pay?
A: Yes. That is the rule.
Q: What about water beds.
A: Not allowed.
Q: I am an attorney, and I will want to draft my own lease, so I need to talk to the owners directly. Where can I call them?
A: I am the property manager. Give me the proposed lease to me and I will get it to them.
Q: If I fill out this application, can I just give it to you and get you a check later because I forgot my checkbook?
A: I can’t accept the application without an earnest money check equal to the first month’s rent.
Q: Can I fill it out and bring it to your house tonight?
A: No, I’ll be happy to meet you back here.
Q: Do I make the check out to you?
A: Heavens, no! Make it payable to Delta Rental Services LLC. And please mark it “earnest money”. Also, I’ll need to snap a cell phone picture your driver’s license for identification & jot the number on the check.
Q: Do you take cash?
A: No, but we can run over to the QuikTrip and get a money order for 99 cents. Normally, we prefer a check or money order. (Label the check or money order “earnest money.”) Sorry, we are not allowed to accept cash for safety reasons.
Q: If I change my mind, do I get this money back?
A: Once you give me the earnest money check, you have agreed to take the property, so don’t give me an application unless you really want it. After I get the check, I’ll turn in your application. When your application is accepted, your check will be cashed. If your application is not accepted, your check will be returned to you uncashed.
Q: How do they decide?
A: Based on the information in the application – Read the bottom of the information sheet.
Q: What happens if you get two applications at once?
A: The owners will make a decision based on the information in the application.
Q: Do they prefer couples?
A: Marital status is not a factor in consideration.
Q: I don’t want my kids around Leprechauns or pygmies. Are there any Leprechauns or pygmies in this neighborhood?
A: I honestly don’t know who lives around here, but this is a free country, and people can live wherever they wish. This is an equal housing opportunity.
Q: How do I know if there are sexual predators or axe-murderers living in this neighborhood?
A: I am not aware of any information regarding that, but it’s best to call the local county sheriff or the local police department for accurate information.
Q: Do you provide cable tv or high speed internet?
A: No, you are responsible for all utilities.
Q: It looks to me like there are Australians living down the street. Are there lots of Australians living here, because I just can’t stand Australians.
A: I honestly do not know anything about that.
Q: Has anyone ever died in this house?
A: I honestly do not know.
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IMPORTANT
QUESTION
ON
LEAD-BASED PAINT
Q: You said this house was built before 1978, and may contain lead-based paint. Does it or not? Should I be afraid for my children? What is lead-based paint?
A: I am just now learning about lead myself, and I know that homes built before 1978 may contain lead-based paint. Here is a brochure called “Protect Your Family From Lead In Your Home” that explains the whole topic, and it has a phone number for you to call with any questions. As I said, I am just now learning about lead myself, and I really am not qualified to answer your questions. (Do not go into more detail – it is a serious mistake and may be used against you in a later court case. Don’t say whether or not there might be lead based paint at the property. You are not a CERTIFIED LEAD INSPECTOR, and are NOT expected to know the answer to that question. Hardware store test kits are unreliable in untrained hands.)
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That should give you some ammunition for answering questions, but I know more will come up. Always blame everything on the owners as a reason why they can’t do weird things to the property. You are just the property manager, remember?
5.3. SCREENING APPLICANTS
At this point, you should now have an application in hand along with a check payable to DELTA RENTAL SERVICES for $1500 (or whatever) and it should be labeled “EARNEST MONEY” in the memo field. I always ask: “Is this check good today, because I can’t accept an application with a bad check.”
If they say, “No, it will be good tomorrow,” I won’t accept the application. They can either bring me a money order tomorrow, or we can wait until they actually have the money. An application with no money does you no good.
If they say yes, I tell them I will get the application turned in as soon as possible, and I will try to have an answer back for them within 24 hours.
5.4. VERIFY THE CHECK
Call the bank where the check was issued and say: “My name is Robert Johnson of Sunshine Rentals LLC and I’d like to verify a check, please” in a businesslike tone. You will be directed to someone who will ask “May I help you?” and you’ll have to tell them again you’d like to verify a check.
Most often they will say: “Account number?” followed by “Name on the check?” and “Amount?”. After you give them the information, they will say: “That is good at this time” or “Those funds are not available at this time.” If the check is no good, I call the applicant back and tell them I will have to have a money order to proceed. If the check IS good, I go to the next step.
5.5. VERIFY EMPLOYMENT
Look up the employer on GOOGLE, and make sure the number matches the number on the application. Call the employer and ask to verify employment on the applicant. Just be aware that your applicant may have given you the phone number of his best friend who has agreed to pretend to be their supervisor.
If they refuse to give you information, call the applicant and ask for the name of their supervisor. When you get someone on the phone that sounds like they know what they are talking about, confirm salary and length of employment, and ask: “What are Mr. Smith’s prospects of continued employment?” Usually, you’ll get an answer.
5.6. VERIFY LAST TWO RESIDENCES
Don’t just call their current landlord. He might be willing to say anything just to get rid of them. Call the prior landlord as well, if possible. Ask if he would be willing to rent to them in the future. Ask if the rent was paid on time. Most landlords won’t tell you anything, and others may be unreliable, so take this with a grain of salt. Many previous landlords won’t even return your call because they don’t have the time.
5.7. OBTAIN A CREDIT REPORT (See Chapter 4)
This is one of the most important things you can do to protect yourself against deadbeats. Make sure you get a completed application from every adult who will be living at the property, not just the husband.
The most important elements of the application are FULL NAME INCLUDING MAIDEN NAME and CURRENT ADDRESS, SOCIAL SECURITY NUMBER, and DATE OF BIRTH. It helps to have a previous address, but name, date of birth and social security number are critical. Make sure the picture on the driver’s license matches your prospect and that the name and address are right too.
Some landlords are now requiring all applicants to provide a clear photocopy of their Driver’s License and Social Security Card for the landlord’s permanent retention. With the level of identity fraud going on today, that’s not a bad idea.
Unfortunately, obtaining a credit report for rental application purposes has, in recent years, become extremely difficult. According to the FTC, there has been a lot of abuse by landlords, so they now require “site verification visits” which you have to pay for.
You do have TWO GOOD alternatives:
ALTERNATIVE ONE:
LET THE APPLICANT PULL HIS OWN CREDIT FILE IN FRONT OF YOU:
After you have pretty much decided to rent to this applicant (if they have decent credit), tell them the only thing remaining is their credit report, and that you need them to meet you at McDonalds or a nearby coffee shop to pull the report.
Meet them at a Starbucks or a McDonalds or anyplace with a free wi-fi connection, and bring your laptop computer. Get online, and go to AnnualCreditReport.com , which is the site where you can get one free report annually from each of the 3 reporting agencies.
Ask them to confirm the info they gave you for name, birthdate, recent address, then tell them they are about to pull their own free credit report as part of their application. Then ask them to reach across the table and push the OK button. In a moment, their full credit report pops up. I prefer the EQUIFAX report since they are based in Atlanta and have the most complete info on locals, but all 3 are helpful.
That procedure will not work if the applicant has ALREADY pulled their free report in the past year. If that happens, I make them pay for another report from Equifax, usually about $12, using the Equifax.com website.
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2020 CoVid Virus UPDATE: As of August of 2020, www.AnnualCreditReport.com was providing free credit reports from all 3 repositories as often as ONCE PER WEEK.
Here is what the website said:
During these times of COVID-19, accessing your credit is important. That’s why Equifax, Experian, and TransUnion are now offering free weekly online reports through April 2021.
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Remember that THEY are the ones actually pulling the report, and that THEY chose to push the OK button. YOU did not pay for it and YOU did not make the request. They simply used your device to make their request.
Once you have the report on your screen, you will find it fairly easy to see how they have handled their financial obligations on a monthly basis. Each TRADE LINE will be rated 1 thru 9, with 1 meaning ON TIME, 2 meaning OVER 30 DAYS LATE, 3 meaning OVER 60 days late, and so on, until you get to 9, which means CHARGED OFF or SENT TO COLLECTION AGENCY.
You are trying to get a feel for whether or not this person generally meets their monthly obligations.
Remember that this type of digital information could EASILY be doctored by the applicant on his computer, so only rely on this report if it is pulled from AnnualCreditReport.com on YOUR computer in front of YOU.
Because YOU did not request the report and the applicant provided it to you voluntarily, you have no FAIR CREDIT REPORTING ACT obligations as far as I have been able to ascertain.
DO NOT let the applicant pull his report and then bring you a printed copy. It is too easy to make changes to the digital information which would be undetectable.
ALTERNATIVE TWO: See Chapter 4
Use the TransUnion MySmartMove TENANT SCREENING WEBSITE. It is located at
www.MySmartMove.com and offers landlords a smart way to screen potential tenants.
5.8. THE EARNEST MONEY (not a Security Deposit)
IT IS IMPORTANT THAT YOU UNDERSTAND THAT EARNEST MONEY is NOT the same thing as a SECURITY DEPOSIT.
Under Georgia Law, a Security Deposit is REFUNDABLE.
(3) “Security deposit” means money or any other form of security given after July 1, 1976, by a tenant to a landlord which shall be held by the landlord on behalf of a tenant by virtue of a residential rental agreement and shall include, but not be limited to, damage deposits, advance rent deposits, and pet deposits. Such term shall not include nonrefundable fees, or money or other consideration which are not to be returned to the tenant under the terms of the residential rental agreement or which were to be applied toward the payment of rent or reimbursement of services or utilities provided to the tenant.
In contrast, EARNEST MONEY is given by the applicant to the landlord to show that he or she is EARNEST in their desire to rent the property. In the event that the application is accepted and the applicant changes their mind about renting from you, then it is logical that they will forfeit the EARNEST MONEY.
ALWAYS REQUIRE THE APPLICANT TO WRITE THE WORDS “EARNEST MONEY” on the check submitted with the application.
Failure to properly identify the EARNEST MONEY check as EARNEST MONEY can lead to very bad conclusion. If the check is unmarked, a court might decide it was actually a SECURITY DEPOSIT. And if it turns out that you accepted a security deposit prior to the tendering of the LIST OF EXISTING DAMAGES, then you automatically lose all right to retain any portion of that security deposit for damage to the premises, no matter how bad.
Then it gets worse.
If you DO retain a portion of the security deposit unlawfully, you are liable for the complete return of that security deposit PLUS three times the amount improperly withheld as DAMAGES plus reasonable attorneys fees. READ CAREFULLY:
O.C.G.A. 44-7-35 (2010)
44-7-35. Remedies for landlord’s noncompliance with article
(a) A landlord shall not be entitled to retain any portion of a security deposit if the security deposit was not deposited in an escrow account in accordance with Code Section 44-7-31 or a surety bond was not posted in accordance with Code Section 44-7-32 and if the initial and final damage lists required by Code Section 44-7-33 are not made and provided to the tenant.
(b) The failure of a landlord to provide each of the written statements within the time periods specified in Code Sections 44-7-33 and 44-7-34 shall work a forfeiture of all his rights to withhold any portion of the security deposit or to bring an action against the tenant for damages to the premises.
(c) Any landlord who fails to return any part of a security deposit which is required to be returned to a tenant pursuant to this article shall be liable to the tenant in the amount of three times the sum improperly withheld plus reasonable attorney’s fees; provided, however, that the landlord shall be liable only for the sum erroneously withheld if the landlord shows by the preponderance of the evidence that the withholding was not intentional and resulted from a bona fide error which occurred in spite of the existence of procedures reasonably designed to avoid such errors.
ALWAYS require the applicant to write EARNEST MONEY on the application check.
If the application checks out, and the earnest money check is good, and the credit report looks OK, then you have to decide if you are ready to rent to them. Assuming the answer is yes, go directly to their bank and have their check converted to a “Bank Money Order” payable to Delta Rental Services LLC. Some banks refuse to do this, but most will. This will cost you about $20, but it’s worth it. If you got a money order in the first place, this step is unnecessary.
The reason you do this is simple. If you don’t, the tenant may tell you that they have changed their mind, and that they are going to stop payment on the check. If it’s already cashed, they will likely go ahead and rent from you.
I can’t tell you how many times I have called applicants to tell them the joyous news that their application has been accepted, only to have them tell me that they found another house.
Don’t let this happen to you. Remember that you have essentially taken the house off the market while you have been fooling around with their application.
Furthermore, you have spent time and money checking them out. If they refuse to rent the property, you get to keep the earnest money.
It’s not a security deposit, it’s not a rental deposit, it’s not a refundable deposit, it’s EARNEST MONEY to show that they were earnest in their application, which they apparently were not.
You are not required to refund the earnest money simply because they changed their mind after they made an application.
At this point, it is not unusual for an applicant to threaten to sue you for return of the earnest money. Remember that anyone can sue anyone for any reason, and you can’t stop them. But you do NOT have to refund earnest money if they just changed their mind.
If anyone ever threatens to sue you, say this:
“You do what you have to do, and I will do what I have to do.”
you will probably never hear from them again. If you do, call your attorney.