In the United States, it’s estimated that 18 million rental units are managed by small and independent landlords. This population of landlords is continuing to grow, especially with the current influx of single family homes turning into rental properties. As times change, there are multiple rising trends in tenant screening that continue to shape the rental industry. The key is to be aware of these trends and adapt with them in order to improve and safeguard your assets. In this article, we will take a look at the current trends for tenant screening, specifically for independent landlords.
Accessibility of Applicant Information
Living in the age of technology, our generation has experienced an explosion of data, via the internet. It has become customary to have access to everything instantly and easily through the web, but with tenant screening, while applicant information is available, the opportunity of collecting it has become an issue. Where do landlords begin to find applicant information? What service should be used? Once you determine a viable starting point, how will you access it? What guidelines have to be followed in order to access personal information? The obstacles can be many creating a tedious and time-consuming, resulting in wasted time and energy. Finding convenience and reliability in resident screening means you’ve found the right solution.
Deteriorating Pool of Qualified Applicants
Over the past decade, a growing concern for landlords is the decreasing pool of qualified applicants. Landlords surveyed across the country agree that the “quality of applicants is not what it used to be.” You can forget about the days where landlords could rely on intuition and first impressions alone, as a predictor of who’s a “good” renter. Today, landlords are looking for a broader and deeper perspective on each applicant bringing forth multiple data elements that include: eviction, criminal, national sex offender registry, address search, social security fraud checks, as well as a credit evaluation. This qualified pool of applicants is likely to continue to deteriorate as the U.S. economic environment worsens with job losses and foreclosures.
Rise in Criminal Background Checks
More than five years ago RentGrow customers screened less than 50%of every 100 tenant applicants for criminal background checks. Today 85% of people processing credit checks are also running criminal background checks, confirming that criminal background checks are a growing priority, while raising a concern of “how” to access that information.
Today, small landlords have limited sources to collect criminal data, experiencing an overall lack of detailed information. Landlords start by contacting local police stations or making visits to courthouses or state buildings. This amounts to a tedious, time-consuming process with a narrow range of information and often incomplete information. If an applicant was convicted of a crime outside of the county being searched, the results will not show up. Due to the increase of states putting forth criminal information and data online, it is becoming easier to collect accurate, up-to-date information, increasing the trend of using criminal screening as a main data point on applicants. Resident screening is taking a step towards a comprehensive solution that doesn’t focus purely on credit evaluations.
Rise in the “Shadow” Rental Marketplace
A growing industry concern is the “shadow” rental marketplace, which is when homeowners are unable, or unwilling, to sell their homes in the current residential real estate market and instead opt to rent it. Rather than taking a loss in the sale of a home, some homeowners are seeking to wait for the real estate market to stabilize and rebound before selling. A recent study by the National MultiHousing Council (NMHC) stated that, almost 1 million U.S. single family homes and condominiums are available in the U.S. This quantity of vacant residences is beyond normal standards and likely to grow to an excess of 2 million, with the current economic climate. For the foreseeable future, independent landlords will continue to compete with the homeowners of this growing “shadow” rental market.
Limited Access to Full Credit Report Information
With the increased instances of fraud and identity theft in the U.S., credit bureaus are tightening access to full credit reports and personal information. The window of accessibility is continuing to shrink, due to laws and regulations seeking to further protect personal information of U.S. citizens. For landlords to receive full credit reports and personal information they must comply with permissible purpose laws. Under these laws, credit bureaus require that you have a separate office, identified as a “business” office, which requires an on-site inspection from an authorized third compliance firm.
Meeting prospective tenants at rental property sites does not count as a business office. To be considered a “business” office, you must have a designated room containing securable cabinetry to protect sensitive information and it must be a separate meeting place for clients. On top of that, you must have a proper way of disposing sensitive information (e.g. paper shredder) in order to protect your tenant’s privacy. If you fail to meet their requirements your privileges to accessing full credit reports will be revoked. A resident screening provider will keep you aligned with new and existing laws and regulations.
Additionally, as of November 1, 2008 the “Red Flag” rule was enforced, stating that sensitive information must be kept secure to prevent identity theft and a discrepancy in an address could indicate fraud. The rule requires that “reasonable” policies be in place to prevent identity theft and to verify a person’s identity when an address discrepancy is reported. In the case of address discrepancy, if the property manager can’t work out the discrepancy, the rule says he/she is not to rent to this individual.
While the rule has caused some confusion, compliance is straightforward. The only thing that rental owners or property managers have to show is that they have a “reasonable” process in place for preventing identity theft and for checking IDs, verifying IDs, and following up/asking about any discrepancies.
Be In the Know
Changes are constant within the landlord and independent rental owner marketplace and as we move towards better “availability” of information and a tightening of “who” can access it, it is more important than ever to adapt to the latest trends and services that continue to shape the multifamily industry. It’s time to join the movement and trust the experts, with an absolute, top-notch resident screening solution.