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

The Importance of Tenant Screening for Letting Agents and Landlords

Looking to fill your vacant house or property? Simple, you just need to find a tenant. But wait! Simple isn’t exactly simple. Why? Because any prospective tenant you might come across needs to be ‘filtered’ – and there is a process to screen a tenant’s background - before you can sign a rental agreement with him/her.

One of the most important processes carried out by landlords whilst identifying the right tenant for his or her house, is the Tenant Screening process.

We shall look at WHY this process is so critical for landlords and Letting Agents.

It’s aimed at mitigating the risks from loss and damage to your property. In addition, your tenant should be acceptable not just to you but also to the neighbourhood / society in which your tenant would be moving into.

Drilling down further, let us list out the possible risks or losses we are talking about here. We need to have answers on the below parameters, with respect to the tenant applicant:

• Identity - Who is your tenant? What is he/she doing for a living and where does he/she work? These are important questions to answer, in knowing who your tenant is. The last thing you would want it is to look to the heavens when confronted with the question, “Whom have you leased your house to?”
• Creditworthiness - Does the applicant have a clean financial track record? Has he, in the past, failed to honour any previous agreements? Answers to this will give you good feeler on whether your tenant will be in a position to uphold the rental agreement you signed with him and pay the rent on time. You wouldn’t want to rent your premises to someone who does not have a steady income OR someone who is on the verge of going bankrupt. Nor would you want to proceed letting your house to a known defaulter
• County Court Judgements - Landlords would obviously want to stay clear of individuals who in the past, have been booked for any frauds or other misdemeanors. This factor is critical not just for the Landlord, but also for those living in the neighbourhood of the property to be leased. Nobody would feel safe having a neighbour with a murky past.
• Previous Landlord Reference - Landlords wouldn’t entertain applicants carrying black marks with respect to tenancy issues. They would want to check if the applicant ever had any issues with previous landlords, if/she has ever been served any eviction notices in the past etc.
• Employer Tenant Reference- Landlords would like to entertain applications from folks who remain in the healthy employment bracket viz. with respect to their employment and earnings. So a positive feedback from the applicant’s employer is important.

Now, answers to all the above can be achieved using Tenant Screening software. At Lets Safe we have an online tool that provides answers on the above mentioned points.

So basically, it all comes down to what your Tenant Screening software has to say about the applicant you are interested in. If the final report produced by the tool gives an ALL GREEN, on all the above parameters, then the Landlord or Letting Agent may safely firm-up on the tenant and proceed with rest of the formalities.

Can Tenant Referencing Services be Fully Automated?

We know how critical the tenant referencing process is in identifying a potential tenant. We saw that in the earlier Blog “Importance of Tenant Referencing for Letting Agents and Landlords.”

Now, the question that comes to mind is whether this process can be automated. The simple Answer is YES! Let us see how.

Thanks to rapid advancements made in the field of technology, tenant referencing these days can easily be achieved with the help of software tools. Many of them are available online, and the basic concept followed by each of the tools is to provide a common space for entities involved in this process. Using a collective tool, letting agents, landlords, and tenants can complete the referencing process quickly and efficiently. With better software tools; the easier it is to accomplish a reference in a smooth fashion.

So let us see how these tools work!

ACHIEVING TENANT REFERENCING USING ONLINE TOOLS:

• Landlord / Agent registers online with the software, by filling out their details and supplying essential details of the prospective client (i.e. the “Applicant”).
• The Applicant receives an email to start the referencing process.
• The Applicant completes additional details regarding his/her employment and past tenancy details, if any. Then on clicking “Submit,” an email is automatically generated by the system and sent to the Applicant’s employer and previous landlord.
• Simultaneously, a County Judgment Check is automatically initiated by the software to check the applicant’s credit history.
• On receiving the email, the applicant’s employer and previous landlord fill out a web form made up of a “Yes/No” questionnaire.
• After they finish submitting the details, the software establishes the “risk” of the applicant, by analyzing his Identity, creditworthiness and referencing results.                                                                                             

ADVANTAGES OF AUTOMATION:

•  Each and every step listed above is recorded by the online software.
• The complete process – from registration to tenancy application to background checks and the “Final Report” – is available in ONE SINGLE PLACE i.e. in the online platform.
• Another point of interest is that these online tools are not platform dependent - they can be accessed on any computing device with an internet connection, e.g., desktops, laptops, mobile phones or tablets.
• Tracking the process can be done anywhere at any time.
• Though every tenant referencing software is built to achieve the same objective, it is to be noted that the software can be fully customized to suit the specific needs of Tenancy Screening companies.

So, one can clearly see the benefits that automation has brought to the tenant referencing process. This is precisely why automation has become a must have for letting agents and landlords.

What is Tenant Screening?

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.

Conclusion

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.