Tenant Screening Tips From A Property Manager

Tenant screening is one of the most essential aspects of property management’s risk-based approach.

Everything you Need to Know About Tenant Screening as a Philadelphia Landlord

This article will help you understand the importance of utilizing a formal screening procedure and following it consistently and how it helps you maintain the standards set by fair housing laws including its benefits to you as recommended by a property manager.

Also read: What type of tenant should you look for?

What do you understand by the term “tenant screening?”

Tenant screening can be defined as the process of checking out a person’s history and background before instituting rental transactions like signing a lease agreement. Potential “red flags”   are identified through a rigorous screening procedure, which provides a lot of opportunities for you to boost your customer service (this is very essential for a great long-term relationship with both your present and prospective tenants).

You can decide to go with an informal screening process, which includes having a checklist of different questions to ask your potential tenants or it might be a formal gathering and analysis of all the information needed to arrive at the right decision. What is important is that you have a well-planned policy that you use consistently for every applicant.  

Use a Risk-based approach to the screening of a rental applicant

Risk-based property management is one of the methods of controlling risk exposure, of being a landlord, and achieving the goals of the organization through company activities and processes. The strategy involves a lot of rigorous tenant screening, which helps a landlord and a property management company to meet or exceed all its compliance obligations while strengthening internal efficiencies.

This process makes it possible for front-line leasing employees to put all their energy into building beneficial relationships with well-qualified applicants.

Also read: How Philadelphia Property Owners Are Using Mobile Tech to Attract Tenants

With a well-designed system, targeted at utilizing data-based resources, organizations can easily approve legitimate transactions, reduce the odds of having a bad debt, mitigate fraud-induced losses, while making sure every member of the community has access to housing.

Below are five major areas that should be considered during the approval and application review process

1- Credit Profile Report

Tenant credit check is a great way to discover applicants with bad credit scores through their payment history or through the ratio of their unbalanced credit-to-debt, however, tenant credit report can also bring new patterns that need to be inspected more thoroughly to light. Such changes might be an indication of more advanced financial management or they might reveal early signs of financial problems.

Identity theft & credit reports

Credit profile report is another method of risk management that might not occur to every landlord immediately: discouragement of fraud. In 2018, a provider of identity theft protection service, LifeLock, released data stating that, “Nearly 60 million Americans have been impacted by identity theft.” Even landlord rental property owners that are yet to experience fraud or identity theft are bound to experience it eventually seeing as these cyber-threats keep evolving and expanding.

The National Apartment Association (NAA), advices rental property owners to be very careful when giving approval or denial as compliance measures when there’s suspicion of fraud.

Fair Credit Reporting Act protects victims of identity theft. Apartment managers with frozen credit files are allowed to demand for documents verifying identity, like driver’s license, state-issued means of identification and utility bills charged to their present address. They’re also allowed to ask the applicant to assent to a release from the credit bureau in charge of their data.

It is possible that an applicant that refuses to present supporting documents or allow one-time access, is a fraudster not a victim. This is why companies need to carry out proper investigation before assenting applications; no matter how “perfect” the application may look.

If you’re in doubt, then you should educate yourself on how to help applicants using NAA and all the credit reporting agencies around you. Providing assistance for identity theft victims and helping them take proactive steps to build back their credit, gives rent property managers the opportunity to grow their customer service; so both the property management team and the applicant will benefit from the situation.

OFAC Search

The OFAC (Office of Foreign Assets Control) website, mentions the enforcement and administration of economic sanctions against countries, including groups like narcotics traffickers and terrorists as their objective. If an individual or even entity finds its name on OFAC’s Specially Designated Nationals (SDN) list, such a person or entity will not be allowed to transact with them, unless they obtain approval from OFAC.

Therefore, if you noticed a possible OFAC hit on their personal background check, you should carry out due diligence to know if the person who’s name is on that list is one of your applicants or not. Your review will help you decide on how to go about your acceptance and denial procedures and policies for applicants.

2- Background checks & criminal records

There are certain states and cities with laws preventing property managers from refusing a rent application just because of negative criminal history.

Seattle is an example of such. They recently passed an ordinance preventing landlords from rejecting a lease due to criminal conviction with the exception of, “sexual offense convictions which occurred when the perpetrator was an adult, and which require that individual to be included in the national sex offender registry search for life on a local, state, or national registry.” And you can only deny this after showing that there’s a legitimate reason why your business will be negatively impacted by renting to a person who has been convicted of sexual offense.

Make sure you check the position of your state and local laws (as well as pending legislation) including federal guidelines before you establish any policy to that effect.  You must consider the protection of the members of the housing community, even as you provide them with access to housing.

There are states with strong positions on the consumer/applicant, so you need to know the ones that apply to you and make sure your procedures and policies are in line with those guidelines (you should review those guidelines with an attorney that specializes in the fair housing field before you go ahead).

A background check is a great opportunity for review teams to acquire all the necessary information on past and present relationships: work histories, living arrangements including other behavioral signs that might affect financial responsibility.

These are the systems responsible for maintaining legal records used by companies that carry out in-house background checks to view records:

  1. Justice of the Peace Court (JP)
  2. Magistrate Court
  3. County Court
  4. District Court
  5. Superior Court
  6. Circuit Court
  7. Courts of Common Plea (this is dependent on the physical location of the property in question)

Organizations dedicate a lot of time to reviewing those court records in other to build the profile of each applicant. Third-party vendors can also be used to gather these records more effectively. You can build an integrated screening device into the management software program for an automated process. You might need to check out both out-of-state and in-state registries if you want your background profile to be complete.

3- Verification of Employment

In the last couple of decades, a lot of changes have occurred in employment patterns; the business model and the workforce have completely evolved. Primary breadwinners used to maintain the same employment throughout their working years. However, the advent of the 1990s ushered in a wave of entrepreneurs who created countless number of small businesses, moving us from the manufacturing age to the new tech age.

A lot of people were thrown into unemployment by the recession. Today, we live in a service-driven economy with improved market corrections, which is why employers are now the ones scrambling for qualified employees to occupy vacant positions.

We need to revisit past work history. Changing jobs has become the norm, because we’ve become a service economy, and people will rather provide a service than create something. Indeed.com created a poll in 2016 to understand the pattern of jobs in the work environment. According to the poll, 70% of the workforce would rather change jobs or were actively trying to land a new job.

How is rent application impacted by this new attitude? Employing a risk-based approach implies that we no longer assume that those that have been in the same field or job for a while are the most qualified candidates.

  1. Verification of current employment is very important. With the right employment information, you can have access to financial data and a person to contact if the renter defaults.
  2. Get in touch with some of your prospect’s past employers to know if they were on good terms when they left. Job changing might be in vogue, but if there’s a pattern of recurrent termination for cause, it might be an indication that the prospect is irresponsible.
  3. If a prospect is self-employed or an entrepreneur or freelancer with flexible work hours, you can ask for some tax returns to confirm annual income.
  4. Implement some kind of post-screening policy that can be used to confirm employment every 3-6 months in the course of the tenancy.
  5. Eviction Reports

Factors like a great credit score, low debt ratio, stable work history, used to choose between competing applicants, have different effects in different market conditions. Property management teams can decide to adjust their rent to income ratio or lower the requirement for minimum income when there is high housing inventory, to attract more prospects to their property.

Your risk-based management policy should include assessment of eviction reports in other to verify application information (don’t forget to check if there are legal restrictions in your state or locality). It is always better to verify to make sure that the applicants are telling the truth about their eviction status. This is why eviction records are very essential.

A complete eviction summary should contain valuable information on past landlord-tenant disputes and helpful resolutions for determining application.

A comprehensive summary should contain:

  • Name and addresses
  • Filings
  • Court judgments for Defendant or Plaintiff
  • Default Judgment
  • Writs of Possession
  • Dismissals

It is important to carry out a critical analysis of the report. Eviction suits might end up damaging the reputation of both the landlord and the tenant.

Here are some tips on how to spot possible red flags while avoiding unnecessary eviction disputes:

  • Review the filing and resolution dates: There are lots of unscrupulous landlords who’re known for granting leases to practically anybody. The result of this is a questionable agreement that neither of them is ready to honor. You need to proceed with caution if you notice that a particular address has a lot of case filing numbers.
  • An applicant is not necessarily disqualified because of just one eviction case spanning a long renter history. The default could be caused by major life events like, illness, divorce, death of a family member or job loss.

Property managers in some states might be legally obligated to notify the law enforcement agencies about criminal activity of any kind on their property. In certain cases, there might be financial or even criminal culpabilities for not notifying the authorities and the surrounding residents. You can reduce legal exposure, avoid spending money on litigation eviction processes, or having to remediate damaged property, by carrying out rigorous tenant screening.

4- History of Previous Address

Though we’ve mentioned address verification before, we’ll still like to highlight the significance of past addresses to risk-based approach in tenant screening. You can get additional details on work history, financial habits, relationships with roommates or other landlords and prior living arrangements. Eviction summaries and criminal backgrounds might be incomplete without this data. You can give applicants a 7 to 10 year window.

Consistent tenant screening

Performing a screening exercise whenever you’re evaluating a prospect is probably one of the most essential aspects of tenant screening; you need to be very consistent. Create a checklist for tenant screening so you’ll always remember to gather all the necessary information and documentation from your prospective renter in other to have everything you might need for a screening check, like full name, rental preferences, phone number and social security number.

With SSN verification, it is easier to pull the applicant’s credit information, which can serve as a red flag where the details don’t match.

This is what a checklist looks like:

  • Personal information:
    • Name
    • SSN
    • Phone number
    • Previous address
  • Contact information and employment status
  • References

And more importantly, you need to have well-laid out procedures and policies and make sure every applicant abides by them, including a list of all your denial and approval criteria, as recognized by the state or locality.

5- Use effective screening tools to boost efficiency

A comprehensive application is a huge part of tenant risk assessment. You’ll need a very comprehensive risk-based screening policy if you really want to get qualified tenants. And it is better to go with a screening policy that utilizes innovative property management software that can score applicants using key metrics like those mentioned above. You can make the application more efficient by contacting past and present employers, talking to former landlords, reviewing eviction filings and examining public records, to get the best tenants possible.

Most renters just want a safe and comfortable home. They expect community leaders and the people at the helm of affairs to treat them with transparency and openness. When potential errors are uncovered during screening, find out from the applicant if the records are completely accurate, or if there were any extenuating circumstances that he/she could do nothing about. In as much as you want to keep your community safe, you should be willing to give your applicants the opportunity to explain themselves.

A tenant who recently suffered identity theft will definitely appreciate a little help on how to report the issue. The same way an applicant who has suffered through an eviction threat before as a result of circumstances beyond his or her control will appreciate a second chance to plead his case despite all the pre-established metrics. And, if you’re entering into an agreement with a person with such a record, you need to be very transparent about the company’s expectations. Provide boundaries and make sure they’re part of the lease terms.

Automate your Resident Screening Process

The screening process is quite frankly – time-consuming, which is why you should consider automating the entire tenant screening process. Property managers have found a way to simplify things using an in-built screening tool that provides a perfect solution with the help of the tenant screening criteria provided by you and the resultant tenant score. All these can simplify your decision-making process and help you comply with the Fair Housing Laws, while getting rid of potential human bias.

As you’re automating the resident screening process, it might be a good idea to take a good look at the entire leasing process. An all-encompassing property management provider like AppFolio will take care of all the manual tasks, from vacancy posting, down to getting a renter and tenant screening. They provide efficient tenant screening services that makes it possible for property managers to assemble multiple criteria models for their automated screening decisions, while running screening reports on all their prospective renters with the help of the software.

The screenings come with comprehensive decision pages, while the report comprises of a summary of the applicant’s background, it includes:

  • Credit history, public record history (obtained from Experian, which is the country’s top national credit bureau) and FICO credit score.
  • Experian® RentBureau® rental history.
  • Nationwide eviction search, with data obtained from records across the nation, state and county court, including the ones without judgment (with permission).
  • Nationwide criminal search, which includes the OFAC terrorist watch list, Megan’s Law, and a search of the registered sex offender list.


Joe White

Joe White is a Philadelphia Property Manager and Real Estate Broker. He is the owner of Grow Property Management and has been involved in the management, sales and purchases of Philadelphia area rental investment properties since 2008. He is an author and works as a real estate investment consultant and construction manager.

View all posts by Joe White

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