To convince those of you who are hesitant to charge an application fee for your Real Estate rentals that you should do so, I'd like to give you a reason that you may not have considered. The obvious reason is to pre-screen your applicants and the financial reason is to cover the costs of a criminal background and or credit check. The not so obvious reason is that requiring an application fee could save you from bodily harm or even save your life!
Personally, I never show property that a tenant lives in. In my business I only show vacant property after the previous tenant has vacated. It's my personal belief that while a tenant is complying with the terms of my lease they have the right to "Quiet Enjoyment" of the premises and that does not include me parading prospective replacements for them through their home. Because of this business philosophy, I always show property that is vacant and there are some inherent dangers in showing vacant property.
Here are a few tips to consider when you show a vacant rental. I'll get to the lifesaving application fee in just a minute. First, if you show property alone, let someone (we'll call him or her your backup) know where you're going and what time the prospective tenant is scheduled to arrive. Ask your backup to call you a few minutes after the appointment time. Prearrange with your backup what you will say if there's a problem. An example would be, when I answer the phone if I say to my backup, "No, there's no Barbara here, You must have the wrong number", my backup will know there's a problem and call 911. If I don't answer my phone and my backup calls again and I still don't answer then my backup has been instructed to also call 911.
Let your prospective applicant hear that you are talking on the phone with someone. Mention to your backup that you are showing the rental to two men who have an older model Ford LTD just like yours. Give the potential applicants the impression that now, someone not at the scene may be able to help identify them.
If you are still "uneasy" about the situation, trust your instincts and tell your backup to call you back later so you can finish showing the property to Mr. Bundy and Mr Ripper (by now they should have introduced themselves). Your backup has been told in advance to call every 5 minutes until you say the coast is clear. But why do you need to charge an application fee? A couple of more safety tips before the answer.
Always arrive at the property prior to the appointment time. When you arrive make a mental note of your surroundings. Are there neighbors around that will come to your aid if needed. Park your car in a manner so that you can not be easily blocked in. You may need to make a hasty exit. Leave yourself that option. Quickly walk through the property and unlock all the doors that can be used to exit the house. If possible, stay outside of the property while the prospects view the interior. If you must enter with the prospects, allow them to enter rooms first. Try to stay between them and the exit.
Here's why you require the application fee. The prospects have seen the property and want it. They want to fill out the application right away and move in as soon as possible, but as you review the application with them your hopes of doing business with this prospect begin to deteriorate. They didn't provide a driver's license number. They are currently living with a friend. They don't know the name of the friend's landlord. If you've been in this business for any length of time, you know the drill.
Now it's time to answer to a "Higher Authority". It can be your wife or husband, your business partners, the owners or whoever. You know you can't do business with this prospective tenant. Your gut is telling you that you won't be able to verify the incomplete or unacceptable information. Here is where you leverage the application fee to escape this no win situation. It can be suprising how agressive some prospects become and how rapidly this uncomfortable situation can deteriorate. This is where you play the game "Us versus Them". You leverage the application fee as if it was the "jaws of life", saving you from accusations, hostile or aggressive behavior and potential bodily harm by saying something like this...
Landlord; "I see here Mr. Ripper that you have left the police record blank. Do you have a police record?"
Ripper; "No"
Landlord; "Okay, just wanted to check because my partners never approve applicants with police records, especially Domestic Violence or Assault. I HATE IT WHEN I TAKE AN APPLICATION FEE FROM SOMEONE AND I KNOW THAT THE APPLICATION IS GOING TO BE REJECTED. It's just a waste of money and everybody's time." Then be quiet for just a minute and 9 times out of 10, you'll get to hear a story.
Sympathize with the applicant and say how glad you are that you were able to stop the process before he WASTED any money, especially in this depressed economy. Tell the applicant, "It's great that this little piece of information came out BEFORE it was too late". Thank the applicant for his time and offer the partially filled out application to him to take along to his next property. After all, not all owners are as strict as your boss. This way you're not the bad guy who rejected his application and kept him from moving into your rental. You're the guy who just saved him $50.00.
