The Progression of Tenant Screening
When I first started property management, all I did was run a credit report and check references. Then after a few criminal-related issues, we started searching the local court records to screen out criminals. Well, after a known arsonist burned down one of our favorite client’s home, we came to realize that wasn’t enough. So over the years, we have incorporated a whole gamut of screening criteria all geared to prevent loss of income to the owner. When we have problems filling a vacancy, I look at all of the denied applications for that property and wonder if our screening process has gone too far. There is certainly a cost to being over selective. How much lost rent outweighs the risk of getting a bad tenant?
I don’t analyze the credit reports any more, but I wanted to list some of the things we look at when our leasing agents do. Alone, some of the discrepancies that we find don’t mean a thing. But multiple discrepancies raise a flag and sometimes additional documentation is needed or the applicant is denied.
Misspelled applicant names, multiple social security numbers under that name, multiple addresses in the same period of time, poor credit to include bankruptcies, charge offs, collections, and late pays, public records, inquiry history, criminal background to include sex offenders, employment and pay verification, eviction records, and previous Landlord verification. That’s a long list from just a credit report.
RentGrow is a national screening company and besides offering great services, they routinely send out great newsletters. In their recent newsletter they addressed how tenant screening has changed over the past 10 years. For example, RentGrow stated that in 2000, less than 15% of their clients performed criminal backgrounds. Today, they report that over 95% of their clients request criminal backgrounds. Obviously, property managers who had experienced similar issues like I had, looked at how to reduce their own risk, as well as the property owner’s risk. RentGrow also acknowledged advancement in technology making it easier to find and access this data.
Identity theft was another new trend. When I was in the military, they put our social security number on everything, like my duffle bag and every certificate and plaque that I ever received. Your social security number was your identity. Times have obviously changed. Bad people who no longer could rent from professional property managers began to use others identity to secure rental properties. So almost every professional screening company has analytics in their programs to flag or bring attention to possible applicants who have done just that. Identity theft is just another reason all landlords should use a professional company to do a full tenant screening. Additionally, they have measures to protect the Landlord from hackers getting confidential information and stealing the identity of our tenants.
Boise Area Rental Market
As the graph below indicates, our vacancy rate continues to improve. However, each week that we get closer to Christmas our inquiry rate decreases. So I am actually surprised about the number of vacancies we are filling right now. We are being very proactive on the incentives and marketing campaigns, so that is probably a big factor. Normally, a low vacancy like this indicates a time to increase rents and decrease incentives. To be honest, I think the only reason our vacancy is this low is because we have been proactive and the small pool of tenants who are looking to move are calling us before others.
Boise Investment Market
Since my daughter’s illness, I’ve really had to rely on the other agents in the Swope Investment Properties offices to help me. But I am still keeping up to date on the market. From a year ago, active four plex and duplex listings are greatly reduced. We’ve got about a 6 month supply, which normally would indicate a better than normal market. The number of pending deals is slowing down, but that is fairly typical this time of the year. 90% of the deals in November were either bank owned properties or short sales. So those deals continue to keep sales prices down. As I have indicated in months prior, newer turnkey properties seem to be in higher demand and we’re seeing those values go up.