What do you think is the fairest way to handle rental applications?
May 24, 2011 1:33 PM   Subscribe

What do you think is the fairest way to handle rental applications? First come, first serve, or best application wins?

I am a property manager renting out a single family home in Seattle, WA with an asking rent of $2000.00+. The application fee is $40.00 and is performed by a third party that receives the entire $40.00. We make no money off the application fee.

I have previously used a first come, first serve policy. If someone puts in an application I tell any other interested potential tenants that there is currently an application in and won’t accept their application or fee until the result comes back (depending on the cooperativeness of the previous landlord and employers this could take 1-4 days). If the current application comes back good it will go to the first applicant, if not, then the next party to give me a completed application and fee will get their application run. This method means potential tenants won’t lose out on the $40.00.

Since the house has be for rent there have been two times when a tenant was approved, scheduled a lease signing, and then backed out the day they were supposed to sign. I would have liked to get a deposit on the house from either tenant, but they were not willing. This has eaten up a couple of weeks of on-the-market time and I want to move on to a different policy.

I think it should move to a best approved application gets the house. So if tenant A puts in an application on Monday and tenant B puts one in on Tuesday. I would wait till both came back and choose the best one. I would inform the potential tenants of this before hand; that they might be the first to put in an application but could lose out to a more qualified tenant. This would also be an incentive for an interested tenant to put down a holding deposit.

What do you think of my proposed policy? Would you as a potential tenant prefer something else? Have you run into different policies?
posted by Crashback to Home & Garden (38 answers total) 6 users marked this as a favorite
The goal is to get a reliable tenant asap for the property. I will go with the most qualified tenant.
posted by jchaw at 1:35 PM on May 24, 2011

I think it's absolutely reasonable to pick the best tenant. As a tenant, I might like to know before I hand you the $40 that there are x number of other applications in.
posted by Zophi at 1:42 PM on May 24, 2011

You want to be careful here. There are laws which prevent discrimination in housing applications, and a stated policy of accepting the "best" application may well subject you to legal attention you don't want. In your market segment that doesn't strike me as terribly likely, but a single lawsuit would be such a huge pain in the neck that it's probably best to just avoid it.

HUD has some info you might want to read. Again, the question isn't whether you're doing any of those things, it's that by saying that you're picking and choosing from among otherwise-qualified tenants, you may create an appearance of doing it, which may lead to HUD sending you nasty letters.

Simply notifying applicants that you are constantly accepting applications and that submitting an application is no guarantee that an applicant will get the house, even if qualified, would be a different way to do it. Rather than suggesting that you've got some criteria you're looking at which you aren't telling them about, you're simply making it clear that they don't have any rights until they actually sign a lease. If you're waiting on an application to come back and another applicant wants to know what's taking so long, you don't actually have to tell them. Just say you're working on it and will get back to them when you've made a decision. Then don't give any reasons for that decision, just say "Sorry, the house is no longer available."

Still, landlord-tenant law is kind of complicated, particularly in progressive states like Seattle, so you'd be well advised to seek local legal counsel before making any policy decisions here.
posted by valkyryn at 1:43 PM on May 24, 2011 [5 favorites]

I have always put down a deposit (or significant partial deposit) during the application process. It would be returned in full if I failed the application, otherwise it counts as my regular deposit and I can either leave it or sign the lease.

I cannot imagine another way to do things. I would not put down even $40 if I still had to keep looking for apartments.
posted by shownomercy at 1:43 PM on May 24, 2011 [2 favorites]

First come, best serve.

It depends on the speed at which you need a unit rented, and general quality of overall prospective tenants, of course.

If you have flexibility on those, for me it would depend a lot on the type of people in the building/complex/neighborhood already, you'd probably want someone who fits with existing tenants. If the crowd was young, loud and hip, I'd probably be hesitant to rent to a senior. If the tables we turned, I'd be hesitant to rent to a college student.

Look for income (ability to pay as stated), stability (previous tenancies, length at job), and general "fit" for the community. Take as many applications within a reasonable time (say a week or so) and start calling people back, as long as there is full disclosure on the app. fee and the process in general...
posted by Debaser626 at 1:44 PM on May 24, 2011

I think that's somewhat unfair. I know when I apply for housing I always ask if I'm the first to apply. I've never been denied housing after an application, so I don't mind spending the $40 once if I can reasonably assume that I'll be accepted and then offered housing. I also don't bother to apply for apartments if I'm not first in line.

If you move to a model that offers housing to the best applicant, instead of the first qualified applicant, you may have issues where a qualified applicant waste $40 because a "more" qualified applicant comes in at a later date.
posted by 2bucksplus at 1:44 PM on May 24, 2011

When we got this apartment ($1,500pcm 2-bed in LA), the apartment manager told us later that there had been eight applications for the place - I believe within a week or so. I don't know how many of the eight met basic qualifications, but it wasn't just us. They picked us because of a combination of good credit, high income to rent ratio, and more intangible stuff like that we wrote a friendly intro on our application, and said we wanted to stay several years. I think it also helped that the manager liked us.

The whole process feels weird to me, and subject to hidden discrimination, but I can't imagine it possibly working out well the way you've been doing it. Getting the applications in a batch and seeing how they compare (and possibly telling someone they're second in line for the place while you offer it to the first) seems like the only efficient way to go.
posted by crabintheocean at 1:45 PM on May 24, 2011

I'm not a lawyer, but I can imagine you might run into problems (e.g., accusations of discrimination) by telling potential tenants you're going to pick the "most qualified."

(I got my current house by being the first person to put in an application. They were a little concerned about my income level being enough to pay the rent on this place, and my ex had managed to do some serious damage to my credit rating, and there were several other people -- multi-income families who would have had an easier time with the rent, even -- who were interested in the place, but I got here first and my raw numbers met their basic requirements and I've been a great tenant ever since, despite various financial difficulties in the last few years. Just my two cents as far as that goes.)
posted by Gator at 1:45 PM on May 24, 2011

I would be a little irritated if I paid a fee to apply, then was told that actually you'd rented it to someone else, sorry, I'm out the fee. You need to be very clear to all applicants that you are accepting multiple applications, that paying the fee does not guarantee that they will get the house, and that the fee is not refundable whether or not they are chosen. (Is this normal in Seattle? Because I cannot imagine paying a fee to maybe perhaps be allowed to rent a place even if my finances are ok.)
posted by jeather at 1:48 PM on May 24, 2011 [3 favorites]

Is there some legal reason you can't ask for a deposit when they submit the application, reufundable if they don't pass?
posted by muddgirl at 1:48 PM on May 24, 2011

First, you should make sure that your proposal doesn't run counter to Washington's Landlord/Tenant Law, because you don't want to get in trouble. I used to work at a property management company (though I wasn't a property manager) and we had to log the date and time each applicant was turned in, to make sure we processed them in order.

As a potential tenant, your plan would really rub me the wrong way (what makes one tenant "better?" 5 points on their credit score? An additional 6 months rental history?). Plus, it's unfair to make a qualified tenant lose their $40 and potentially waste time because you want to see if someone marginally "better" comes along.

I think a more reasonable alternative would be to have a policy that once a tenant is approved, they have to pay the security deposit (or half the deposit, or whatever) within a certain time frame (say 48 hours), and they forfeit the deposit if they back out of signing a lease. Put that policy in your rental application, and stick to it.
posted by Safiya at 1:49 PM on May 24, 2011 [4 favorites]

I would strongly suggest that you speak with your local Fair Housing Center and/or a Tenants Union before you implement a policy with potentially-subjective approval criteria. What constitutes "more qualified" can be tricky, and even if you're not engaging discriminatory practices, if it looks like you could be, you can still be in murky waters. Specifically, considering the tenant's "general "fit" for the community" is absolutely not something you want to do, at all, ever-- that's a completely textbook 'explaination' for racial steering.

Require a deposit upon approval that's not refundable if the tenant backs out (say, half the total damage deposit, or part of the first month's rent, that goes towards that cost at lease-signing). State that policy up front, and make sure anyone who submits an application is aware of it.

(on preview, agreeing with several others)
posted by Kpele at 1:51 PM on May 24, 2011

As a renter, if you told me that even if my application (which I've had to pay a fee for!) is fine you could give the place to someone else that you think is 'better' then I'd go elsewhere.
posted by missmagenta at 1:52 PM on May 24, 2011 [2 favorites]

If I paid $40, along with my multiple roommates' $40, and then you denied us because you found someone "better" despite us meeting requirements (criminal record, income, rental history) I would be quite upset with you. I would demand my money back, even though it "all went to another company." I don't know that it went to another company. I would assume you did it to 20 other people and pocketed the cash.

Hell, I might take you to small claims for the fee just to ruin your day, depending on my mood.

Full disclosure: never been denied a rental, squeaky clean rental/credit history. Go me!
posted by Mister Fabulous at 1:53 PM on May 24, 2011 [5 favorites]

If you did this I as a renter might put in a application, depends on how nice the place was, but if I would keep looking and it would make me MUCH more likely to take another place if I found one I liked between the time I applied with you and getting the results.

You're not the only one working on a deadline and renting an apartment can be time consuming and I would assume a lot of renters would think twice about waiting on an application that has a much better than average chance of not being approved.
posted by SpaceWarp13 at 1:55 PM on May 24, 2011

Response by poster: I would love to get holding deposits from potential tenants, but in this market most people are not willing to do it unless the house is a serious steal. This house is priced on the higher end of its value.

I would tell Tenant A of this policy before they paid $40.00
posted by Crashback at 1:56 PM on May 24, 2011

Response by poster: I would also tell Tenant B, C, etc that there were X applications in front of them.
posted by Crashback at 1:56 PM on May 24, 2011

As a Seattle resident who actually is looking to rent a house in that price range in the next year, I have to say I'm pretty turned off by the idea of paying a $40 fee that might not be refunded if you choose a better applicant. I've also never run into something like this in Seattle before, so it would just seem like you don't know your market well.
posted by joan_holloway at 2:03 PM on May 24, 2011

What about specifying an application deadline? So instead of keeping track of who put in their application first, you just stop taking applications on a specific date, then evaluate them all at the same time.

This doesn't address the $40 fee issue, but I think it might feel fairer if you want to avoid the first-but-not-best applicant race.
posted by Joh at 2:03 PM on May 24, 2011 [3 favorites]

This method means potential tenants won’t lose out on the $40.00.

Why not just offer to refund the $40 yourself to each applicant who doesn't end up getting it? You're doing this because you think it will make you money, and you are offloading financial risk on your potential tenants in the process. If it's going to make you significantly more than $80 to let A, B, and C submit their applications simultaneously, then you can just take the $80 loss yourself instead of passing it off to people who don't get anything out of the deal.
posted by burnmp3s at 2:05 PM on May 24, 2011 [10 favorites]

Best answer: This is an NYC renter's perspective, so I am probably used to all kinds of shit normal self-respecting people would never put up with. That said:

Making the $40 application fee nonrefundable seems like no big deal as long as you are clear and upfront about it. ("This fee pays for your background/credit check and does not guarantee you will be selected.") In my experience this is part of the cost of doing business.

Rather than making it a "best tenant gets the lease" situation, I would instead set some fairly rigorous, objective, quantifiable standards for who will qualify, and then among those who do, make it first-come first-served. This keeps it from being a beauty pageant among tenants and preserving some modicum of fairness while still protecting your interests in having reliable tenants.

I have my current apartment as the winner of a "best tenant gets the lease" competition, and I am pleased with it because I was among the last of several people to apply for it, but if I were on the short end of the stick I would certainly be pissed. I'm also unsure of the legality of it, though at least in NYCity/State I believe the rules are laxer for owner-occupied housing and for buildings with less than a certain number of units.
posted by dixiecupdrinking at 2:11 PM on May 24, 2011

Why not stick with a rough "first come first served" model, but don't discourage multiple people from putting in applications at the same time? That way if someone backs out, you've got a wait-list of sorts. If people can't afford the $40 to put in an application, they probably can't afford the apartment.

I think it's sort of gross to pick the "best" applicant, in that in your case the best applicant = "the wealthiest applicant". Unless you mean best as in has the best references or the cutest puppy or something.
posted by Sara C. at 2:31 PM on May 24, 2011

Best answer: There seems to be a disconnect between your problem (people flaking between application approval and lease-signing, costing you several weeks on the market) and your proposed solution (trying to select the best applicant among several applications). If your problem was that you kept getting tenants that technically met the guidelines you set in your background check yet consistently had missed or late payments, then yeah, I could see wanting to select the strongest applicant (in terms of income and credit score) from a pool. But what criteria, exactly, are you going to use that will let you determine whether someone will flake out? They're probably keeping their options open and going with a better rental that they discover after applying for your place; having a stellar credit score and excellent income if anything *increases* the chances that someone will keep hunting for and find a better deal.

Your best option here really and truly is a deposit, because this solution is actually geared towards your problem: weeding out those who are serious about renting the place from those who want to keep looking for a better deal. If it's not common to get an entire month's rent as a deposit in your area, then set it lower but still high enough to make someone think twice about walking away--like $100. Someone who balks at paying $100 to secure the right to rent the place is much, much more likely to flake on you and you might be better off looking for another tenant anyway.

Also, I'm confused about why you're losing several weeks when people back out before signing the lease. How long are you allowing between background check and lease signing? If it's anything more than 48-72 hours, then you're giving people way too much slack. If getting a deposit really won't fly for you, then I'd suggest putting a policy in place that you accept applications on a first-come, first-serve basis, but if someone doesn't sign a lease by 48 hours or 2 business days of being approved then you'll move on to the next applicant and give them a chance to lease the place. There's no reason you should keep holding someone's place in line while they hunt for better deals.
posted by iminurmefi at 2:39 PM on May 24, 2011 [8 favorites]

Best answer: IAALL. This is how I do it: First come first serve, but only when it comes to who is willing to lay down a deposit. Say tenant A's application checked out, but is dragging their feet on signing the lease. Tenant B comes along, gives you an application that checks out as well, and hands your a deposit check. Tenant B gets the place. However, I don't charge a fee for applications. I do it myself.

Also, I make this clear to tenants when they apply.
posted by cmoj at 2:50 PM on May 24, 2011 [3 favorites]

Best answer: First qualifying application wins, including placement of the deposit and signing of the lease. However, if someone pays for the application process and passes it and gets beaten by someone who gets their deposit in faster, I would most certainly refund it (as opposed to someone who pays but does not pass.)
posted by davejay at 2:56 PM on May 24, 2011 [1 favorite]

Well, in Illinois, I am allowed to screen potential tenants for my rental property. I am not required to take the first qualified tenant who comes along and I am not required to refund a reasonable applications fee. As a landlord, I have a right to ensure that I am not leasing to a person who will breach the lease or damage my property or be a hazard or nuisance to others in the building. That said, I must apply the same criteria to every applicant and I may not refuse to rent based on the usual list of things. I may not refuse a tenant based on race, color, religion, sex, national origin, ancestry, age, marital status, sexual preference, physical or mental handicap, military status, or unfavorable discharge from military service; based on a tenant's source of income, including receipt of Section 8 rent subsidy. I may not discriminate against people with children, although I am more or less required by law to limit in the number of residents in my one-bedroom unit. Nor against people with mental or physical handicaps. However, if a member of one these groups does not meet my otherwise neutral tenant criteria, I am free to select another tenant.

I always inform potential tenants when there is another application on the unit, but I do not refuse applications from additional potential tenants because I do not know if the potential tenant's application will be approved and I do not know whether the potential tenant will choose to move somewhere else. I consider that reasonable and as fair as possible to both parties.
posted by crush-onastick at 3:03 PM on May 24, 2011

Response by poster: Thanks for everyone’s input. I should have worded my question better. I guess “most qualified” would be the wrong term. The first qualified applicant should get the house. Normally the issue is “who is the closest to qualification standard set by the owner.” Applicants making 3X rent as income, with few credit issues and a good rental history are not the majority. I like dixiecupdrinking’s idea of being very upfront with the criteria. The first person to meet those criteria would be selected. If the tenant doesn’t meet it they can still be considered with additional deposit, but might be bumped out by someone who fully meets the standard.

I think iminurmefi gets to what my problem actually is. Even if I choose a better Tenant B they can still flake out.

cmoj and davejay thanks for your suggestions, I think I’ll end up with some hybrid of them.
posted by Crashback at 3:16 PM on May 24, 2011

Why don't you have the applicants bid up the rent between each other, then just process the application of the highest one?

If you have multiple simultaneous applications, seems the rent might be on the low side.
posted by dave99 at 3:36 PM on May 24, 2011

I do first come, first served, but I take a back-up applications and only request the $40 to run the credit if the first applicant flakes. Basically, you keep a list of viable potential tenants on deck just in case. I have the back-up applicants do a short interview and fill out the paperwork in my office, if possible. I don't take any money until/unless first app falls through.

I know of no other legal way to cover your bases and sign a lease quickly. Hopefully, the properties you represent are nice and there is always more than one interested party at any given time.

Everyone I know also continues to advertise and show available rentals until the lease is signed and money is exchanged. Basically, it's not rented until it's rented.

Both strategies together have worked GREAT for me. I don't take deposits. I pretty much always rent available properties in under a month, average is just under 2 weeks.
posted by jbenben at 3:51 PM on May 24, 2011

Where I rent (Minneapolis), it is almost always first come first served, but it also almost always expected that you have to put down a deposit. Before you put a deposit, it's still up for grabs. It's kind of annoying this way for renters, but from the landlord's perspective, anyone not willing to put down a deposit really isn't seriously considering your place. They're probably just taking advantage of your leniency to keep you as a "safety" appartment while they shop around for another place. I know that's what I'd be doing. I might be pretty interested in your place, but I might find another I like better, so I'd be looking around right up until signing day.

Also, if someone can't put down a deposit in a timely manner, that should raise questions as to whether they can comfortably afford the rent.
posted by funnyinternetmemereference at 3:53 PM on May 24, 2011

I would estimate the amount of loss you have had due to people backing out, divide that number by the number of months you have had the house as a rental, then add that amount into the monthly rent cost. In other words, anticipate the full cost to you, and build it into the total rent.
posted by Houstonian at 3:56 PM on May 24, 2011

I used to be a landlord. Don't hold the rental without the deposit. Rent to the applicant with the best references. Within that, 1st come is okay. Don't be too forthcoming; people will scam the references. The best favor you can do is to be prompt in your decision.
posted by theora55 at 4:03 PM on May 24, 2011

I think you should give it to the first qualified applicant but set the bar high.
posted by J. Wilson at 5:56 PM on May 24, 2011

Australian perspective. We inspected a property on the weekend along with, literally, about thirty or forty other people (singles, couples, families, groups of roomies - it's a really nice, brand-new townhouse, and very cheap, in a good location) and I guarantee we only got the place because I had our application in by the time the real estate had their doors open on Monday morning. So in our case at least, it was being first that got us the place (although we also had a really good application).
posted by tumid dahlia at 6:00 PM on May 24, 2011

It looks like you want to combine two different approaches here:

1) The applicants are chosen by passing the $40 application fee process
2) The "best" applicant is chosen by whatever criteria* you use to determine best

Combining the two will lead to friction (What do you mean I passed the check but I still don't get the house? I want my money back!).

Either take you first-come-first-served approach and the first applicant who pays the $40 fee and passes gets the place. Or you choose which applicant is your preferred one and at that point they pay the $40 fee merely to confirm that you made the correct choice (or find out that you didn't). If you still want to go with the combined method then refunding applicants who passed but were not selected seems fair.

*Yes, make sure to check the legality in your location for what criteria you use.
posted by 6550 at 7:10 PM on May 24, 2011

I guarantee we only got the place because I had our application in by the time the real estate had their doors open on Monday morning

When I was renting in Sydney, the only way to guarantee a place was to get the application in on Saturday afternoon, and to offer to pay rent above the advertised price. I am so glad I no longer live in that market.
posted by wingless_angel at 12:19 AM on May 25, 2011

I'm also a landlord in Seattle. I'd suggest taking a deposit when the application is submitted, being very clear that acceptance is contingent on a credit/background check (and that the deposit would be refunded if not accepted, of course), and then eating the $40 fee yourself.

That amount is very small potatoes compared to the cost of a bad tenant. Consider it a very small investment in generating goodwill with the kind of tenant that you actually do want to have. And, as others have said above, what you really want is a solid indication that the prospective tenant really wants the place. I'm sure you lose way more than $40 or $80 when someone flakes and you have to wait 2 weeks or a month for a new tenant.
posted by Sublimity at 7:55 AM on May 25, 2011

When we approve an applicant, they have 48 hours to deliver the deposit otherwise I move on to the next applicant. That way, there is a firm deadline and I know my applicants are serious. Also, if you are having trouble finding a good tenant, the first thing I would do is drop the price (if you can afford it). Generally, good applicants know who they are and want to be rewarded for it.
posted by Shark Tail at 11:32 AM on September 2, 2011

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