Tenant screening is a process of getting relevant information that helps you make a sound decision on a prospective applicant's suitability. With an increase in the number of people who are looking to rent, people are now applying for properties that are usually at the top of their budget; therefore, referencing applicants is the only way to have the peace of mind that those people can afford your property.
The Cost of Getting Rid of a Problem applicant
Considering the current buy-to-let boom, many landlords are now interested in taking advantage of this investment opportunity. However, it's found in a research study that thousands of landlords are facing a loss of at least £1,500 as unexpected costs.
In this new research, which was conducted by an estate agency, it's revealed that landlords have to pay somewhere around £2.1 billion in property vacancies, arrears, and maintenance charges, each year. There is also an increase in the number of applicants who don't pay rent on time, which proves financially crippling for novice landlords. In fact, research found that 9.1% of all applicants paid their rent after the due date, or didn't pay at all. Moreover, 25,422 applicants were served with an eviction notice in the 2nd quarter of 2012, which shows an 8% increase on the year before.
These figures make it clear that though the buy-to-let market is quite lucrative, it may leave you in a tight spot if you don't take special care when signing a contract with a applicant. The cost of getting rid of a problem applicant can be in thousands - in County Durham, for example, you're required to pay £150 just to take a applicant to court (cost of using a bailiff is £90 and the cost of hiring a solicitor starts at £1,250).
That's exactly when tenant screening can save you from running into this trouble. By delving deeper into the details, you will realise that tenant screening is one of the most important and useful tools in your property-letting bag. It tells you that your applicant is trustworthy, doesn't have a dubious rental history, and earns enough to pay the rent on time.
Using a Tenant Screening Service Provider
When you make use of a tenant screening service, you don't have to worry about wasting your time to gather facts about your prospective applicant. These service providers will conduct comprehensive referencing and provide you with details about a number of aspects.
Credit Checks – They will tell you more about your applicant's credit history. It will also include adverse credit info, including CCJs, etc. You may also be informed if your prospective applicant is registered on the voters roll or not.
Affordability Check -- They find out more about your applicant's salary and compare it with the rent, to see if they are financially sound to pay the rent. A good applicant will have his salary at least 2.5 times greater than their share of rent.
Previous Landlord Reference -- They get this information to ensure that your prospective applicant enjoys a good rental history. The report will tell you if the applicant was able to pay their rent in full, and if they managed to keep the property in good condition.
Employer Written Reference -- They also get in touch with your prospective applicant's employer and check if the applicant is a member of staff and their salary is exactly what they have stated. The report will also show if the applicant's job is permanent and if there are any chances of redundancy.
It's important to understand that tenant screening will help only if the service provider is ready to go the distance to conduct detailed checks. Most of these service providers charge you for providing you with basic referencing checks, which only involves verifying the basic info about the applicant – this doesn't include credit referencing. It was found from research conducted by an insurance company that in the first half of 2012, 23% of self-employed applicants failed to provide acceptable proof of income or tax returns, and 51 of these applicants had offered false employment details.
It means that only detailed referencing checks can put you in a position to make an informed decision. If you choose an experienced company, you will get a full applicant as well as guarantor reference report in 48 hours or so. This report will address all the major checks, share the referee response, and assist you in making a correct decision on all prospective applicants.
The crux of the matter is that even though it's a good idea to ask for tenant screening, only you will make the final decision. The thing is that sometimes referencing may find certain small problems regarding your applicants, but you may feel you can overlook those issues. For example, it's not a good idea to accept someone as a applicant if they have a less-than-perfect credit score. However, before you make a decision, you should consider why their score is low – this could be because they haven't been on electoral rolls for their previous addresses. In this situation, you may overlook the issue, but make sure you don't show any leniency if your applicant has CCJs or they haven't shared the whole truth about their financial or employment situation.
What's more, if you receive a referencing report that shares some 'bad' facts about your prospective applicant, you may ask them to provide a guarantor. A guarantor is the person who agrees on paying the rent if the applicant can't. Do keep in mind that a guarantor should also be referenced to prove they are financially stable to afford the rent, if/when required.