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TRR's Blog

By TR Realty | Broker in Las Vegas, NV

A real estate agent asks how to choose a good tenant.

Smart property owners, when deciding if a prospective tenant is a good fit for their property, should request their listing broker to conduct a background check. 
TRR has contracted with a company that provides us with a criminal history, eviction history and credit scores. The service costs $49 for one person, or $69 for two persons on the same application. Each application is property specific, meaning that it cannot be reused. Every applicant who intends to be named on the lease needs to undergo a background check.
Since TRR does not do property management, once we receive the signed authorization from the tenant along with the fee for the background check, we process the request and submit the results directly to the landlord. The landlord can then make his own decision as to whether someone meets his criteria. TRR associates may NEVER make this determination on their own. The liability for the associate and also for the company is astronomical, so it needs to be the landlord's own decision.
There is a lot more to an applicant than just his FICO score. In today's economic environment, many otherwise good people have encountered financial difficulties, including short sales, foreclosure, repossessions, charge offs and even bankruptcy on their records. In my opinion, none of these things would necessarily disqualify someone from being a valuable tenant. Some people who had excellent credit before have recently suffered due to their employment situation, the housing market and other of today's woes.
I think we should normally allow more flexibility when considering an application for tenancy than we would for a mortgage, as an example. Some people rent only because their finances are not strong. So even under normal circumstances, their credit might not be perfect. But in today's climate, we need even more flexibility. I have seen countless tenants turn out to be fantastic for the landlord, but if they had been rejected just because of how they look on paper, they never would have been approved in the first place. After all: good credit does not automatically make a good person; conversely, bad credit does not mean the person is not worthy of approval.
Something that might, and should, give landlords caution would be an eviction history. That is somewhat of a red flag, depending on how long ago it occurred and under what circumstances. So I would recommend probing that matter if it showed up on an applicant's record.
In my opinion, the one thing that is a definite obstacle is a criminal history. If I were a landlord pondering an applicant with a criminal history, I would most assuredly decline that person, especially if the criminal history includes a felony. I would not be willing to take that chance for many reasons.
When we review background check reports, we often see collections, and many of those are for medical bills. Keep in mind that there are nearly 50 million Americans without health insurance (what a sin in the richest country in the history of the world, but that's another blog). Personally, I would not discriminate against someone for unpaid medical bills, because I have great empathy for that situation.
Another option that a landlord has is to investigate the applicant's current housing, either by asking to visit or speaking directly with his current landlord. That might provide a wealth of information.
Regarding credit, though, we really need to have some flexibility and understanding of someone's circumstances, and try to work with them the best we can. It might behoove a landlord, rather than rejecting someone with low scores outright, to request additional security deposit, perhaps two months instead of one. That offers the landlord more protection, while giving the applicant an opportunity to prove himself. And if he pays on time for a year, than upon renewal, perhaps the landlord might be willing to reduce the security deposit for the second year.
Bottom line: if an applicant's criminal history and eviction history are both clear, I would probably accept most types of credit, with a possible increase in security deposit, especially in today's tough economic times.

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