Problems you may Encounter with Real Estate Sales


Most people have a false notion that investing in real estate is one of the best decisions ever, and unlike dealing in stocks and shares, nothing can go wrong while selling a solid piece of property. Well, most of them are wrong, because real estate is no different from other investment options, and great care needs to be exercised while trying to sell real estate.

The first problem you can face is the lack of any takers even after several months of advertising and letting estate agents know that your property is on the block. The longer your property remains unsold, the poorer the chances of selling it at a good price. Remember that your mortgage payments have to be made on time lest you end up paying stiff penalties. Desperation will lead you to slash prices, and a seasoned buyer will bide his time and wait for the best opportunity, dangling cash in front of you to entice you into selling a prime piece of property at a throwaway price.

Another risk you can encounter while trying to sell your property is the likelihood of the sale never going through, although you received an advance. This leaves you in a dicey situation where you cannot try to sell it to another buyer, nor is the current party going to pay the balance and close the deal. Sometimes, quite unfortunately, the person wanting to buy your house may run into sudden financial difficulties and put you in the soup! Even after signing a firm contract, some buyers try to wiggle their way out and want the entire advance to be refunded.

In some cases, eager buyers pay a token advance, hoping to sell their property to come up with the rest of the money. If their property remains unsold for whatever reason, so will yours. Sometimes, a buyer may have liked your property while viewing it the first time. Later, he or she may bring in some expert or friend who will find several faults with the property and play spoilsport and stop the deal abruptly.

Of course, the picture is not as gloomy as it appears. The silver lining is that if you take enough precautions, you won’t end up with an unsold piece of property. Make sure you do your homework well, and try dealing with seasoned experts who know the business well. Get your property inspected by a professional and make sure you get a written report. Moreover, such people have their own contacts and can put you on to some genuine buyers, leading to a smooth sale.

The Pros and Cons of Buying and Owning a Timeshare

The idea of owning a timeshare may conjure images of a gala time you can have on a vacation in some remote location with very attractive terms. However, it is important to read the fine print before signing on the dotted line. Most people rush into the decision of buying a timeshare and regret it later. With timeshares coming in various types like fixed week, floating, right-to-use and points club you’ll be quite confused which one to go for. Whichever you decide upon, just make sure you know the advantages and disadvantages in buying a timeshare.

Pros

Unlike any vacation home where it could lie vacant for most part and you still get to pay for it, with a timeshare you pay only for the time you spend at the timeshare. That is probably what makes a frightfully expensive property within the easy reach of many middle-class people looking for spending quality time at a great place during a vacation. You don’t have to break your head about maintenance and repairs, nor about paying for a caretaker.

Another major advantage is that you can have a definite vacation at the destined place, and can be sure of accommodation. Unlike resorts where you have to make sure your reservations are in order, and the flights reach the destination on time.

What’s more is you have the liberty of trading destinations with other timeshare owners in various locations, and it’s like owning multiple timeshares. In case you can’t make it on a particular vacation, you can let out your timeshare and expect decent returns that you can put away for your next vacation.

You can surprise your friends and family, especially that favourite niece or nephew of yours who got married recently. You can gift your timeshare to anyone you please, or you can even put it on the block at a charity auction and feel really good about it for long.

Cons

No maintenance is fine, but the annual fees can burn a hole in your pocket. If you were not careful enough to read the agreement fully, you can be in for nasty surprises like arbitrary hike in annual fees. You’ve got to pay up the annual fees whether you use the timeshare or not.

Timeshares are not that easy to sell, and many realize that they are stuck with their timeshares for life. No wonder then that used timeshares are sold at throwaway prices, and if you’ve fallen for one of them, bad luck. Of course, you just might hit a good bargain now and then.

Going for a timeshare in some exotic island or a foreign country comes with its own hassles. You may not be familiar with the local property laws and might end up realizing that you have invested in some worthless property because some countries do not allow foreigners to hold title to any property by law. It is, after all, a lifestyle indulgence and not a healthy investment.

Residential, Commercial or Student Properties for Best ROI?

 When it comes to investing in property one can get pretty confused, what with options to invest in residential, commercial and the ever growing student property, which probably yields the highest returns. However, each segment has its own advantages and disadvantages, so let’s take a closer look and try to find out which type of property gets the best return on investment (ROI).

Residential Property

There is no doubt that investing in residential property is highly secure, and it is possible to earn handsome returns over a long term. U.K. is still one of the leading property markets in the world. Reports released by the Office of National Statistics (ONS) indicate that residential property prices rose by a good 7.2% by the end of 2016. The buy to let market is buoyant and one will certainly enjoy many advantages investing in residential property in the U.K. There is a perpetual lack of housing in the country, and buy-to-let investors are lapping up property like never before. There is a shortfall of close to a million homes, and developers are busy developing new neighbourhoods at a furious pace.

Commercial Property

Gone are the days when commercial property was in the hands of a few big players in the property market. Today, individual investors can aspire to become commercial property owners. To be precise, they can own a segment of a large property worth millions of pounds. High-spec office suites located in busy commercial areas are ripe for the plucking. You have options of letting your share of the property on either a short lease or a long lease. It is more like buy it, let it out, and forget it for a while. The property keeps earning decent returns, and you can add the increment clause while drawing up the rental agreement and seal the deal to your advantage. There are hardly any hassles in letting out commercial spaces as business houses spell the least trouble as tenants.

Student Property

The best in the pick is probably student property, what with thousands of students converging from all over the country to earn their degrees; student accommodation is always at a premium. It’s not just the domestic students; there is a huge chunk of foreign students coming in hordes to get the coveted degree from any of the several colleges in the U.K. Surveys indicate that there could be a 10% increase in international students making a beeline to Britain in the next decade or so. Student accommodation enjoys a high occupancy rate, with rental returns on the higher side when compared to other residential and commercial property. Your best bet yet is to invest in some good student property and earn handsome rental returns.

Property investment in 2017 – Good or Bad idea?

The housing market in the United Kingdom has been influenced by two major factors during 2016 – The EU referendum and the changes in stamp duty. It is almost three years since the changes in stamp duty came into force. However, the after effects are still working, and the cost of buying property has shot up. To compound the issue, the higher rate of duty imposed on second homes that followed close on the heels of the stamp duty changes has had a profound effect.

The Brexit poll created a lot of confusion and ambiguity in the property market and the ultimate result was certainly a rude shock, the effects of which are still being felt well into 2017. The Office for National Statistics re-launched the official house price index in June 2016, which replaces the existing indices published by the Land Registry and Office for National Statistics. The figures published last indicate that there is a 6.9% increase in property prices, which is the lowest recorded figure since 2015.

The start of the year has not been very encouraging for property owners as the indices indicate sluggish growth. The artificial growth witnessed is due to a shortage of houses put up for sale, according to the reports published by The Royal Institution of Chartered Surveyors (RIcs). While the number of buyers has increased substantially since Brexit, the number of properties being put up for sale has dwindled.

In June 2016, the rate of growth of property prices in the U.K. was very encouraging at 9.3%, though the same is disappointing at 6.9% in October, a sharp decline in just 3 odd months. Although RIcs predicted a 6% growth, which was substantiated by the figures quoted by ONS, the changes in the stamp duty seemed to have played the spoilsport. The effect that stamp duty changes have had on property prices has eclipsed the effect of Brexit. RIcs predicts even more dismal figures at 3% by the end of 2017.

To compound matters, inflation seems to be fuelling the fall in property prices, what with consumers struggling to make ends meet just for essentials like food and fuel. People are now thinking twice before investing in property. Even the luxury property market does not seem to be immune to the effects and has recorded a very sluggish growth. The sale of million pound homes has taken a bad hit due to changes in stamp duty, and Brexit too has had its own effect on people with money to spend.

 

Is there a way for me to recollect rent I overpaid?

Such scenarios are quite common. So what happens when a tenant pays an excess amount by way of rent? It is logical to conclude that the tenant is entitled to be reimbursed the excess amount paid. However, it is not as easy as it seems, and here’s why.

All lease agreements for commercial and residential premises will include a clause that indicates that it is the obligation of the tenant to make payments towards the costs for maintenance of the building and towards other costs like insurance etc. But, as it is the landlord dealing with the company or individuals carrying out the maintenance tasks and the insurance companies, the tenant never really gets to know the actual figures.

Hence, disputes can easily arise, and whenever a tenant feels that he or she has overpaid rent. The landlord on his part will make demands for payments and there is no other go than to negotiate and arrive at a settlement or go in for litigation. On many occasions the tenant would have already made an excess payment without realizing it at that time.

In such cases, the tenant can opt to have the excess amount paid to be set off against the dues to be paid towards service charges for the coming year. However, if there is a specific clause with a provision for anti-set off, or if the tenant is in dire financial straits, the tenant may want the excess payment to be reimbursed immediately.

The following will be taken into account to decide the circumstances under which an overpayment was made:

  • Overpayment made due to oversight or due to an administrative error on the tenant’s part, by either reading the figure incorrectly (decimal point etc) or any error occurring during an electronic funds transfer.
  • Where an approximate sum is paid towards the estimated costs for the year, which, when worked out is found to be in excess of the actual amount.
  • Sometimes the landlords demand payments that have not been agreed upon, nor are such sums mentioned in the lease agreement. Or if it comes under the Limitation Act of 1980 or the Landlord and Tenant Act of 1985 (for residential leases).

In all above cases, the tenant is liable to get a reimbursement although in the case where an approximate sum was paid, it is difficult for the tenant to get a reimbursement as the landlord will try to justify the payment in one way or the other.

 

How can I calculate property taxes myself?


Owning a piece of property has its own hassles and a sizable amount has to be paid as property taxes. You’ll have to first have the property assessed properly. You need to arrive at the value of the land in the particular location, and the higher the land value, the higher the property taxes. Moreover, the value of the land keeps appreciating and every year the figures are bound to change.

You will have to approach the local property assessor whose specific job is to assess properties, and he or she is the best person who can calculate the value of your home. Alternatively, you may contact the local tax authority. These days there are several online tools that will help you look up your property’s value. All you need to do is fill in your address and the tool will calculate using the current rate of taxes and help you arrive at a figure.

One other alternative is to approach any of the financial institutions who can give you estimates for the value of your home, based on which you can calculate your tax liability. In order to get the exact value of your home you need to calculate the current land value and take into account the improvements carried out on your house, this will add to the value of the house and the tax amount will be based on the new value. Here again, the local assessor should be able to help you out to arrive at a value for the land and your home.

The next thing you need to do is to find out the current tax rates being charged by the government. The property tax is arrived at on a fixed percentage of the value of the property. Hence, the tax rates can vary from year to year and there could a steep increase if the county is facing financial difficulties as it will try to make it up by increasing the tax rates. Based on the current valuation of the property and the rate of taxes being charged, it should be easy to arrive at the approximate tax amount that needs to be paid by you towards property taxes.

However, if you are not too sure that you have got the figures right, you need to either contact a property management agency or a tax consultant who will be able to guide you better. Bear in mind though, if the idea is to save on consultation fees, you should maybe take the risk and submit the taxes based on your own calculations.

How can letting agents benefit out of the government’s recent ban on fees?


With the Chancellor of the Exchequer, Philip Hammond hinting at a proposed ban on letting agents’ fees, most agents are a worried lot. However, with the Chancellor insisting that it is merely a proposal that will ‘consult’ the possibilities of effecting a ban, there’s bound to be some delay in the implementation.

What with the government consulting with industry experts, consumer forums and others with a stake, it could be a while before the ban comes into force, and the same applies for up-front fees for tenants as well.  Most letting agents are notorious for charging helpless tenants costs of references; while others use different tactics like ramping up prices for services rendered on drawing up contracts and inventories.

It is such indiscriminate and unfair charges that the Chancellor is targeting and hoping to ban, giving the tenants and landlords a much needed reprieve. However, the ban is not right around the corner, though the possibility has caused mild tremors in the industry. According to informed sources from the Department of Communities and Local Government that handles such issues, talks will not take place for some more time.

Before the ban can come into force, the Department will certainly talk to the affected parties. They include landlords, tenants and letting agents, as well as leading consumer groups such as Citizens Advice who are the tenants’ representatives. While it is certain that there cannot be an outright ban, up-front fees may be banned altogether, which is a certain dampener for letting agents.  Or, utmost, there could be a cap on the fees that can be charged, so that letting agents are allowed to collect some sum to cover the costs suffered.

However, letting agents are going to have a field and continue collecting their fees until the consultations get over and the final picture is revealed. The consultations could drag on for another three to four months. Even after the consultations are concluded, the parliament has to pass a law, which could take some more time.

A letting agent charges anywhere between £300 to £400 for renting a home, and that’s what most of the tenants in London are paying currently. There is dissent amongst tenants and complaints galore that letting agents are ramping up prices, and what is passed on as fees is far more than actuals. For instance a credit check that costs a mere £3 is charged at £50, with letting agents pocketing the difference. Hence, it is still raining money for letting agents.

How does the "ban on fees" affect letting agents?


Letting agents are in a quandary with the ban on fees looming large, and it is going to be the tenants in the UK who will be hit the hardest, losing hundreds of pounds should they continue to occupy the properties. This is what the Association of Residential Letting Agents (ARLA) strongly believes, and it also contends that there are thousands of jobs at stake, should the ban come into force.

With deliberations still on the cards about how to enforce the ban, the outcome is going to affect the tenants and letting agents alike. Landlords also are not very happy with the grim prospects and there is industry-wide discontent in the private rented sector, though the move is going to affect the economy as well.

Letting agent fees account for close to 20% of their revenues and go towards the cost of setting up important checks while drawing up a tenancy agreement. The ban though, is going to hit the landlords as the agents are simply going to pass on these costs to them by hiking agent fees. Most of the landlords in turn, would be passing the buck to the tenants who get to suffer the most.

The consequences would be inflation of rents by at least £100 per year on an average, and if the landlords manage to pass on the proposed increase in agents’ fees to the tenants, they would end up shelling out £250 to 275 per year.

With the lettings sector accounting for close to 58,000 jobs across the UK, there are going to be thousands of jobs at risk, though not all agents are expected to pass on the increased costs, with some passing on three-quarters of the cost and bearing the rest. Research reports indicate that there could be a fall in demand for properties as landlords plan to cope up with the situation and refrain from investing further in properties.

A fifth of the current landlords are expected to sell off some of their rental properties, and some plan to dispense with the services of letting agents instead of paying them more. The funds allocated for property maintenance are also expected to become scarce, with landlords being reluctant to bear any of the additional expenses.

The ban will ultimately affect the government treasury as well, as the Chancellor of the Exchequer is currently collecting close to £400 million in employee taxes from the letting agents, which will reduce drastically if the ban comes into force. Letting agents feel they have been given a raw deal, given the fact that they were being paid the lowest fees all along, as their counterparts in France and the U.S. earn much more by way of letting agent fees.

10 reasons you should choose home improvements over moving

Your family may be growing faster than you planned or expected, and your current residence may have space constraints. Moving to a new home is not the only solution you have. Selling you house and buying a new one involves a lot of effort and time.  Home improvements done to your existing home can be a great option.  Here are some reasons why you should choose to improve your home rather than move:

1.      Conveyancing Costs

A conveyancer is the person who is responsible for all the legal paperwork that is required while buying or selling a property. The conveyancer charges fees for checking for new developments in the new locality you are planning to move into. He or she will also help getting the title deed for the new home after checking the encumbrances, if any.

2.      Agents’ Fees

If you plan to sell your house there is a real estate agent who will help value your home and fix a fair selling price. He or she will arrange for the advertisements in the newspapers and internet, and will also help you find a new home. All this costs money and the going rate is anywhere between 1.5% and 2.5% of the value of the property.

3.      Stamp duty costs

Did you know that since March 2012 there’s no longer any stamp duty relief if you are a first time buyer? You will need to shell out the money for the paperwork involved in changing the ownership of the property. This is going to cost you a tidy sum, so you might as well make improvements to your current residence.

4.      Moving expenses

Having your belongings and household goods moved to the new location is going to cost a lot of money. Anywhere within a 12 to 15-mile radius, the removal costs can go up to £1,500, which is a good 10% or more of the total costs involved in moving to a new home.

5.      More beneficial to stay put

Making the necessary improvements and staying in your current home may make better sense than going for an exchange for a bigger home. It is cheaper to build an extra room than to buy a roomier house.

6.      Strange location

Moving to a new location can certainly make you feel like a stranger for quite some time. Moreover, you’ll have to find everything new – school for the kids, a good grocer, new gym for working out, a new maid etc. Hence, think twice before deciding to sell and move.

7.      Creating a new mortgage

Buying a new property involves going through all the paperwork and hassles all over again. There are umpteen documents you need to produce while drawing up a new mortgage, and the appraisal charges and processing charges are going to cost a lot of money for a second time.

8.      Paying property managing agency fees

It is quite alright if you are able to sell your current home on your own, which rarely happens. If you engage the services of a property managing agency for selling your house and for buying a new one, you’ll have to spend a lot of money on fees.

9.      Create a new garden

If you are a garden lover like most people, you will have to start from scratch. You know how difficult it is to grow a beautiful lawn, and the time involved. When moving into a new home you’ll have to spend a lot of time and money for creating a new garden.

10.   Repairs and refurbishing

While the new house may look fine on first looks, you’ll learn that there are lots of small repairs and some refurbishing work involved only after moving in. This can take up a lot of your time and money, and it will be quite a while before you settle down.

5 Common Mistakes made while Investing in a Home

Hard earned money needs to be invested wisely, especially when you are investing in a property; you need to take certain precautions. Investing in property is a major decision, so what’s the point in complicating it further by buying the wrong property? Here are 5 common mistakes that people make while investing in buying a home, and how they should avoid them:

1.      Not consulting experts

Most people try to save small money they need to pay as consultation fees and avoid taking professional advice while buying a property. It is better to go through a property management agency and pay a small price so that everything is in order. They will organize all the complicated paperwork and help with the registration and other formalities. Additionally, most property management agencies help find good tenants and will keep advising you on the current market trends in the property sector.

2.      Failing to look after the tenant

It is not enough if you enter into an agreement with a tenant and allow him or her to move in. You need to treat your tenant well and provide the basic needs for the home. Ensure that the water supply and power supply are uninterrupted (pay your taxes promptly) only then will the tenant be happy. Remember that the tenant is going to talk about you, and it’s your reputation as a landlord that is at stake. If a good word is spread about you, there won’t be any problems getting new tenants.

3.      Fixing exorbitant rent

Just because you need to pay taxes and mortgage payments it doesn’t mean that you can fix rents on the higher side. As it is the lettings market is almost saturated and one needs to be realistic while fixing rents. Fixing the price too high may not attract tenants, and keeping your property vacant for a couple of months will put you in a financial mess.  Fix a fair rent, keeping in mind the long term benefits and ensure that your property never remains vacant, or at least not for more than a week.

4.      Maintenance and upkeep

Do not neglect regular maintenance and upkeep of your property. Trying to save money on property maintenance is going to affect you badly. Not only is the life of the property reduced, an unkempt looking property will certainly not attract good tenants. The longer you put off maintenance tasks, the worse the property gets to look. Hence, get small repairs and maintenance tasks done on time.

5.      Proper advertisement and marketing

It is not enough to own a good piece of property. You need to let people know that there is an excellent property to let, and there are many ways to do this. Apart from spreading the word through agents, you should also advertise online, in the local newspapers and on public bulletin boards. This will ensure that you get a good tenant quickly, and prevent voids that

Do you make these mistakes when investing in property?

Now that you have decided to invest in property, whether to move into or if you are going to buy-to-let to make an extra quid, you need to watch for some common mistakes people make. It is true that property prices are rising and there are more tenants than ever before. However, it is not a bed of roses, as you may have imagined.  Here are some pointers that should help:

Lying vacant for too long?

You can’t afford to invest tens of thousands of pounds in a property and keep it vacant for too long. The property can fetch you decent returns only if you have some tenants occupying your property. Keep in mind that you need to pay your mortgage EMIs regularly irrespective of whether the property is fetching rent or not. Hence make sure you avoid voids while letting out, and make sure you have all the dotted lines in place while drawing up the tenant agreement. Don’t let it out to tenants who want it for a short period, look for tenants who will hang on for longer.

Be informed about tax liabilities

As a new landlord you may not be aware that you need to pay tax on the income you receive as rent from tenants occupying your property. If you are making more than £10,600, which is the threshold for personal allowance, be informed that you need to pay taxes, failing which you could be fined heavily, and worse, you can be sentenced to prison. Moreover, landlords need to remain updated as the tax structures keep changing.  Since April 2017, interest relief on mortgage interest tax is to be reduced to 20 percent (maximum), resulting in additional burden on landlords.

Look out for the hidden costs

Although buying property to let makes sense as it is a sound investment, you’ll have to shell out money initially if you want to make money in the long run. There are the mortgage repayments and letting agents’ fees and some other expenses that you hadn’t planned for. There’s building insurance premium, and payments to be made for annual checks for gas safety certification. Also, as a landlord you are expected to maintain the property in a fairly good condition.

Choose the best location

Just because it is a cheap and attractive deal, some people choose the wrong location. It could be a location that has a dubious reputation, or far away from civilization. In such cases, you can’t find a tenant that easily, even if you do, you won’t be able to charge a decent rent. It is quite difficult to predict how a locality will turn out in the future; hence it is better to go for one that is good in all aspects, in spite of the steep prices.

Increase in Property Prices in the UK after Brexit

It is not just the immigrants who were affected by Brexit, though most of them feared total displacement. A more serious concern is the possibility of drop in property prices after the mandate of the people that decided that the UK will exit from the European Union. However, in reality there have been no changes as Brexit has had little or no effect on property prices.

With homebuyers moving as they take up new jobs, or because some of the families are getting bigger, demand for property is set to remain firm and so are the property prices. The actual situation is that demand exceeds supply, and with not enough new houses being built, property values are set to peak in most areas, though at a slower pace, when compared to earlier trends.

Some other reasons throwing a spanner in the works include sluggish wage rates and the reluctance banks are showing in granting loans due to stiff mortgage regulations. Although this is a dampener as far as property prices are concerned, they won’t fall any further as well.

With Brexit negotiations still going on, and in case they turn positive, there should be some buoyancy in the economy, which could boost property prices at a faster rate than imagined by experts. Reports from the Royal Institution of Chartered Surveyors indicate that the property market is indeed a bit languid, thanks to the record low number of homes on the block. With hardly any takers, and uncertainty over the final outcome of Brexit, people are putting off property purchases for now.

According to Savills’ forecast, there could be a 15% drop in property prices come 2018, as compared to prices in 2017. However, this alone cannot cause the property prices to fall. Savills is also of the view that property prices are set to be sluggish until the end of this year, however the silver cloud for landlords is that prices could gradually rise by 12 to 13% over a 5-year period, which is some consolation.

On the whole, the timing of Article 50 seems to have been a coincidence with an all-round slowing down in the property market in several parts of London and some areas south of the U.K. While the north of England is witnessing soaring house prices (after a dull phase) the southern part of the country is yet to catch up. Yet another spoilsport seems to be the stamp duty system that has been subject to several adverse changes, and has probably pushed Brexit to the background.

What does a Tenant Screening Report mean to you?

Tenant screening reports can serve as a guide for you to find the right tenant for your property. Comprising a detailed analysis of applicants' credit reports, criminal records, references, and other important criteria, tenant screening reports help you in gaining a good idea about your applicants. Let us see what each criterion in the tenant screening report would mean to you.

Credit Report:

A detailed credit report, generated by database search through secure Websites, are a good indicator of the applicant's finances. A good credit score ensures that the applicant's finances are stable and that they would be able to make rent on time.

Rental References:

To get a better perspective of the applicant's attitude during tenancy, it is wise to enquire their previous landlords. Has the applicant been a good neighbour? Have they maintained their previous property properly? These are some of the questions that need affirmative answers for the applicant to be considered optimal. Any previous evictions are a strict no!

Eviction Records Search:

As stated in the previous section, any evidence of the applicant being evicted previously needs to be taken seriously. The reasons for eviction may vary, right from irregular rental payments to improper maintenance of property, but the very record of eviction must get your alarm ringing. You don't want to be stuck with a tenant with a track record of being unpleasant.

Criminal Records Search:

This is an essential part of the tenant screening process, as it ensures that neither you nor the neighbours of your property need to deal with a tenant with a criminal record. Of course, people change, but a search of criminal records can help you know if the applicant is hiding a dark past from you.

Sex Offender Registry Search:

The importance of this search cannot be ignored, as a tenant who is on the sex offender registry would be objectionable for neighbours, especially families with children.

Employment Verification:

Sometimes, applicants don't state their employment details on the application form truthfully, to stand a better chance of qualifying for renting/leasing your property. A thorough verification with the applicant's employer is vital in knowing if the applicant is in a solid employment bracket. Also, some applicants may overstate their income in the application, so it is prudent to verify it with the employer, along with the applicant's attitude at the workplace and the term of their job; if the applicant is in a trial/notice period or is working on a contract basis, issues may arise in the future with rental payments.

Based on the above criteria, as you can see, a tenant screening report can give you a good idea of the applicants' trustworthiness and character, thereby ensuring that you select the applicant who suitable for your property.

What are the types of Reference Checks performed on Tenants?

Reference checks are a vital part of the tenant screening process. An applicant's history can help gauge future tenancy; so, a clear picture of the applicant's past can provide you with insight that can be helpful in your decision-making process. For a comprehensive reference check, it is recommended that you enquire the current/past landlords and employers of the applicants. The below questions can help you with the reference checks.

Questions for Current/Past Landlords:

1.  What is/was the duration of the tenancy?

The length of time the applicant has stayed in their previous tenancies might give you a good idea of how steady a person is when it comes to residing at a property. If your idea of an ideal tenant is one with whom you can have a long period of tenancy with, then those with a track record of shifting base in short periods of time might not be optimal for you.

2.  Who were listed as occupants on the lease?

It is always prudent to know the number of people accompanying the applicant during their tenancy. The applicant might include just a couple of names as co-occupants in the agreement, but if they have a history of friends who keep squatting at their property for prolonged periods of time, it should trigger some alarm bells for you.

3.  How consistent was the rent payment?

Running behind the tenant for collecting monthly rent is the worst nightmare for any landlord. It is always nice to enquire previous landlords to know how the applicant is when it comes to paying the rent on time. Any prior instances of late or no payments mean that you should be wary of the applicant.

4.  Did the tenant maintain the property well?

If you want to ensure proper maintenance of your property post-tenancy, a check of the applicant's maintenance of the property they have resided before will give you a good idea of their attitude towards maintenance and general cleanliness. Although you have the tenant's security deposit to take care of any damage done to your property during their stay, it is always wise to rent/lease to people who have a track record of good maintenance.

5.  Did the neighbours have any complaints?

'Love thy neighbour' is an oft quoted phrase, although most people don't implement it in their daily lives. It doesn't matter if the applicant has not been 'loved' by their former neighbours, but any instances of quarrel or arguments would mean that the applicant is not the ideal neighbour.

6.  Why did they leave your property?

No one likes to shift residences without a good reason, although what constitutes a good reason is anyone's guess. If the reason for shifting from previous property is eviction by the landlord, or any other reason that can be deemed unsavoury, it would be imprudent to rent/lease your property to such an applicant.

Questions for Employer(s):

1.  Can you confirm that the applicant is/has working/worked at your company? This should be your first question to the employer, as some people tend to fill false employment detail in their application. Making sure that people work where they say they are would be a good start to employer referral questions.

2.  How much do they earn?

People sometimes make the mistake of believing that their quality of living need not be based on their level of income. A general rule of thumb when it comes to renting property is to see if the applicant's monthly earning is at least three times their rent. If not, they might find it difficult to pay the rent on time, leading to uncomfortable situations in the future for both you and them.

3.  What are the terms of employment?

Is the applicant a permanent employee or are they on a trial period or a contract? This question might help you gauge effectively if the tenancy would be viable in the long run. Those who are employed on a trial period or contract would be able to afford rent in the near future, but the affordability might become unsure after the trial period or contract expires.

4.  How is the applicant's attitude at the workplace?

During your meeting with the applicant, they might have seemed well-mannered and pleasant, but to know a person better it is advisable to enquire about them at their workplace, as people spend a good percent of their time at their place of work. 

The above questions, along with thorough credit and background checks would help you in finding the right tenant for your property.

How do you Screen a Tenant who is not a Resident of the UK?

In recent times, there has been a surge in the number of people immigrating to the UK, be it for educational purposes or in search of job opportunities. This surge has been instrumental in the government passing the Right to Rent rules to ensure that the landlords rent or lease their property to only those who are in the UK legally. To ensure that the landlord does not get into trouble for renting or leasing their property to an illegal immigrant, specific procedures have been prescribed for screening tenants who are not UK residents. Let us look at some of the frequently asked questions about Right to Rent rules in detail.

1.  What does Right to Rent mean?

The Right to Rent rules were enforced across the UK on the first of February, 2016, in accordance with the Immigration Act of 2014. According to these rules, the landlords have to ensure that their tenants are legally entitled to reside in the UK. This screening has to be done before signing tenancy agreements, failing which the landlord would face a fine of up to £3,000 for each of their tenants residing illegally in the UK. 

2.  Why should landlords be careful about Right to Rent rules?

The rules make it mandatory for landlords to screen their tenants meticulously and hold them responsible for improper screening of their tenants. Also, landlords found to be exploiting their tenants by flouting Right to Rent rules or refusing to evict tenants who are illegal immigrants could face fines, up to 5 years of prison time, or both. These rules, as opposed to the civil fines that were levied previously, serve criminal convictions to rogue landlords who play fast and loose with the regulations. 

3.  Does this mean landlords should not rent/lease their property to immigrants?

No! These rules have been passed just to ensure that people are not residing in the UK illegally, and not to discriminate against immigrants. It is important to note that any discrimination by the landlord on the basis of the applicant's nationality, race, or religion is illegal. This makes the screening process very tricky, as landlords must be meticulous in their screening, yet, be careful enough not to ask the applicant any question that may be deemed offensive. 

4.  How can a landlord screen a tenant before they arrive in the UK?

Take, for instance, the scenario in which a landlord has received an application from an overseas student who has gained admission in a college in the UK. In this case, the landlord would be unable to verify the documents in the presence of the applicant. In scenarios like these, the law allows the landlord to issue a tenancy agreement prior to checks, as long as the veracity of documents are verified before the tenant moves into the property.

5.  Even after following all these procedures, what happens if a landlord rents/leases their property to an illegal immigrant unwittingly?

Although the Act does penalise landlords who flout it, it does offer deference to those landlords who can demonstrate with enough proof the measures they have taken to ensure that illegal immigrants have been evicted within a reasonable amount of time.

For more information about Right to Rent, please visit https://www.gov.uk/checktenant-right-to-rent-documents/who-to-check

Can Landlords use a Tenant Screening Service Directly?

Tenant screening is highly recommended for landlords when it comes to renting or leasing property. A tenant screening report provides comprehensive information on each of the applicants and helps the landlords decide on which applicant would be the ideal tenant for their property.

Initially, if landlords had to screen applicants to find the best possible tenant, they had to approach a letting agent or a broker to get the screening done. This process resulted in the landlords paying the letting agent or broker a premium for screening, as the agent or broker usually takes a commission for referring the landlord to the screening agency. If they decide to do the screening by themselves, the agent or broker had to invest a lot of time to do a comprehensive check of each applicant, in addition to their primary job.  

Thankfully, the screening process has become much easier for landlords now, as they can hire a tenant screening service themselves through the Internet. All it takes is to search for "Tenant Screening Services" online and select the company with the pricing and services that they find best suited to their needs. This way, the once-complicated process of tenant screening has been made simple enough for landlords, so that they no longer have to rely on others to approach tenant screening services.

Online tenant screening services offer various packages based on the level of scrutiny involved, and it is up to the landlord to decide on which package is suitable for their needs. The checks involved in the screening process range from credit checks to checks of criminal records to ensure that the applicant would be able to make rent on time and don't have a murky past.

Tenant screening process has become more important than before, especially in the UK, with the Right to Rent policy, according to which landlords are held responsible for improper screening of their tenants.

Therefore, tenant screening is not just optional anymore, but a mandatory measure to ensure that the landlord doesn't end up in trouble for renting or leasing their property to a tenant who is present in the UK illegally. Better to be safe than sorry when it comes to tenant screening, and for landlords it is highly advisable to screen their applicants to ensure that they don't get into any trouble with the authorities. 

Pros and Cons of Online Tenant Screening Services

When renting out your property, it is highly recommended that you screen potential tenants beforehand. Tenant screening services help you with the processes that need to be completed before an applicant is selected to be the right tenant for your property. However, like any other service, tenant screening has its pros and cons.

PROS:

Simplicity - Screening tenants on your own can be a hassle-filled and time-consuming process. You need to get in touch with the tenant's previous landlords, do an exhaustive search of public records, and do a thorough credit check to make sure that the applicant's past indicates that they pose no problems in the future. With online tenant screening services at your disposal, all that you as the landlord have to do is just fill in the applicant's details into the tenant screening service's Website and let them do the heavy lifting for you, right from background checks to previous references.

Quicker Response - If you do the tenant screening process on your own, it is going to take more time than an organisation that does the same professionally. Tenant screening services have the infrastructure and know-how to get the job done quickly and efficiently, thereby ensuring that your property is rented or leased quicker and starts being profitable to you a lot earlier than if you had screened the applicants by yourself. This also ensures that you don't lose a perfect tenant to someone else just because you were late to respond.

Attention to Detail - It is not about doubting your meticulousness, but when it comes to finer details of a field as tricky as tenant screening, even the most thorough nonprofessional is bound to make some errors in judgement when compared to a professional. Also, since tenant screening services use state-of-the-art software to compile tenant screening reports, so the margin of error is minimal to nil.

CONS:

Cost - Due to the workforce and infrastructure needed to accomplish the tenant screening process without any lapses, tenant screening services might be costly, especially if you have a number of applicants to be verified. Most services offer two options; the landlord can pay a fee to check for each client or pay a monthly fee for a contract with the company. This would cost the owner initially, but as the saying goes, "Better to be safe than sorry." It is worth shelling out a few bucks to ensure your peace of mind. 

Impersonal Decisions - There is no metric to gauge the 'niceness' of people effectively, and when it comes to tenant screening reports, they are mostly just facts about the applicants. Due to the impersonal tone of the report, it is possible that the landlord might reject some good prospective tenants. So, although the report is exhaustive when it comes to facts, there are subtleties that may get lost when it comes down to numbers.

5 Common Mistakes made by Estate Agents and Landlords during Tenant Screening

No one wants to rent or lease their property to a 'bad' tenant, but during the tenant screening process, landlords might overlook some of the most obvious things that might lead to a bitter situation during the tenancy.  Below are the 5 common mistakes made by estate agents and landlords during tenant screening:

1.  Improper Screening:

Sure, each one of us would like to think our level of deduction as Sherlockian, based on that one time we found the missing penny that rolled away on the floor in the dark. But when it comes to tenant screening, deducing an applicant's trustworthiness by just meeting them is impossible. Even the most charming and well-mannered person might be the prodigal tenant from hell, and it is always wise to screen the applicants thoroughly—right from credit checks to their absence (or presence!) in the sex offender registry—before signing an agreement.

2.  Deciding to “go solo”:

Some of us like to get the job done by ourselves; it gives us a sense of fulfilment and closure to have a hands-on approach to get things done. But when it comes to tenant screening, it is always better to have a dedicated team of professionals to make sure that the job is done meticulously, without any room for error. Tenant screening services offer you customised solutions for gathering information on applicants, thereby saving the precious time you have to otherwise spend for background checks, references, and more. Also, the software used for tenant screening ensure that no data slips under the scanner and that each and every factor that might affect the tenancy is taken into account.

3.  Poor Documentation:

Preparing the right documentation is always a major hassle for landlords, who, most of the time, do not have prior experience or knowledge of legal procedures. Tenant screening services offer advice on documentation to ensure that the paperwork is perfect and no legal issues arise in the future. 

4.  Falling into the Discrimination Trap:

Even the most innocent of questions asked during tenant screening can be termed offensive by law. Any questions regarding ethnicity or race are a strict no, obviously! Also, the screening process needs to be uniform for all applicants and not just for those who you think might be illegal immigrants living in the UK. Tenant screening services help you navigate your way through this trap by professionally treating each applicant equally and running through and exhaustive background checks on every one of them in an impersonal manner, giving no room for discriminatory practices.

5.  Neglecting Immigration rules:

The Right to Rent rules, enforced across the UK on the first of February, 2016, make it mandatory for landlords to conduct a thorough background screening of applicants before renting or leasing their property. As opposed to the civil fines previously levied, landlords found flouting this act could face fines, up to 5 years of prison time, or a combination of both. This looming threat of legal action makes the already tricky process of renting or leasing property even more complicated, as no one wants to go to prison for not properly screening their tenants.

Investing in Tenant Screening – A Profit or Loss?

One of the most famous Arthurian legends is the tale of the sword in the stone, which would not budge even when the strongest of men tried their best to pull it out. The trick to pulling out the sword was not brute force, as it had magical spells cast in it so that only the one who is worthy of ruling England would be able to pull it out from the stone—and the one was King Arthur. Tenant screening has more similarities to that story than one might realise at first glance. Sounds like hyperbole? Why don’t we look at the similarities between the two...

If brute force alone is the requirement to pulling out the sword, then by applying that logic to tenant screening, anyone with money enough to rent or lease your property should be the ideal tenant. But that is just wishful thinking, as tenant screening encompasses a multitude of parameters to find out that one tenant who is worthy of leasing your property. Tenant screening services help you find the right one, by checking if the applicants meet all the criteria that make an ideal tenant. Let us go through these parameters one by one:

•        Identity: Who is your tenant? Seems like a simple enough question, but look again—Who is your tenant? If the second iteration of the question sounds ominous, it is not just because of the bolded and italicised letters but because you realise the enormity of the issue. What does your tenant do for a living and where does he/she work? People are not always who they say they are, and the above questions need an answer before we can proceed to the next parameters.

•        Creditworthiness: Does the applicant have a clean financial track record? Has he/she failed to honour any previous agreements? The answers to these questions could be the difference between you receiving your rent from the tenant on time and running behind them to collect what they owe you. Checking the tenant’s creditworthiness beforehand by making sure that they have a steady income or are not on the verge of going bankrupt would go a long way in ensuring your peace of mind.

•        County Court Judgements: It is obvious that any landlord would feel uncomfortable renting or leasing out their property to someone with a history of frauds and misdemeanours. Vetting applicants by checking for criminal records is highly recommended, as it also benefits neighbours who would otherwise feel unsafe living nearby someone with a murky past. 

•        Previous Landlord Reference: Almost all of us go through product reviews on Amazon before ordering the item or look up Yelp reviews before trying out a new restaurant. If only there were a Yelp for Prospective Tenants, right! References from previous landlords can give you a good idea of your applicant’s temperament. Messy tenants leave behind messy homes, and who better than the previous landlord to provide insight. Obviously, previous eviction notices are a big no!

•        Employer Tenant Reference: A positive feedback from the applicant’s employer about their employment and earnings ensures that the applicant is in a healthy employment bracket and would be able to pay the rent on time.

An exhaustive analysis of data from all the above parameters is done during the tenant screening process, and the applicant is recommended to the landlord only if all of these parameters are met. Coming to the question raised in the title, as you can see, tenant screening might cost you initially, but the benefits outweigh the cost, thereby ensuring a smooth transition of your property to a reliable tenant who is not only hassle-free but is deemed worthy of renting/leasing your property, much like King Arthur was deemed worthy of ruling England by passing the litmus test of dislodging the sword from the stone!

What do Right to Rent rules mean in the UK?

In accordance with the Immigration Act of 2014, the Right to Rent rules were
enforced across the UK on the first of February, 2016. These rules make it mandatory
for landlords to ensure that their tenants are legally entitled to reside in the UK,
before signing tenancy agreements, and failure to do so would result in a fine of up to
£3,000 for the landlord for each of their tenants residing illegally in the UK. The
Illegal Immigrants Act of 2016, which came into effect on the first of December,
2016, has further built on the provisions provided by the Immigration Act of 2014.
The Act has listed a set of guidelines for employers and landlords, along with hefty
penalties for non-compliance.

Landlords found to be exploiting tenants, flouting Right to Rent rules, and refusing
to evict illegal immigrants from their property could face fines, up to 5 years of prison
time, or a combination of both, along with further sanctions under the Proceeds of
Crime Act. As opposed to the civil fines previously levied, the rules now serve
criminal convictions to rogue landlords who do not adhere to the new regulations.
This looming threat of legal action makes renting or leasing their property a sticky
wicket for landlords, especially ones securing overseas tenants. If a student submits an
application for renting/leasing a property in the UK before they arrive here, the
landlord would not be able to verify their documents in their presence, thereby losing
a prospective tenant.

The Act, while making landlords responsible for illegal tenancy, also offers deference
to those who can demonstrate with enough proof that they have taken steps to ensure
eviction of an illegal migrant within an amount of time that is deemed reasonable.
Also, in the circumstances stated in the last paragraph where the landlord receives an
application from an overseas tenant, the law allows the issuing of a tenancy agreement
prior to checks, as long as they are able to verify the veracity of documents before the
tenant moves into the property. Taking a copy of the tenant's documentation in an
unalterable format along with the date of checking is now a mandatory thing to do for
landlords, and so is keeping the copies for a year post-tenancy, after which they must
be destroyed. Steps must also be taken to ensure that the tenant's document copies are
stored safely. A password-protected computer or a filing cabinet with a lock should
suffice. In the case of sub-letting by tenants, they are responsible for carrying out the
Right to Rent checks unless the landlord, in writing, agrees to take on the role.

Right to Rent checks may seem like a lot of trouble to go through for landlords, but it
ensures that rogue landlords who rent/lease overcrowded and poor quality housing
without proper checks are forced out of the market, and also that illegal immigrants
are evicted prudently. With all this responsibility for landlords in handling their illegal
migrants also arises the need for very precise handling of the eviction process, and it is
highly advisable to consult qualified professionals.

For more information about Right to Rent check, please visit https://www.gov.uk/check-tenant-right-to-rent-documents/who-to-check