Nobody gets into real estate because they want to screen tenants. It’s not the fun part of being a landlord or property manager. People buy rentals for cash flow and appreciation but tenant screening is still one of the most important aspects of your business.
The better you get at screening tenants the less headaches and issues you will have down the line. This will free you up to focus your time on growing your real estate business instead of dealing with late paying tenants, evictions, and complaints.
There are many tenant screening services to choose from but not everyone is going to be the right fit for you.
Here we will break down the three things you need to know before ordering a tenant background check.
1. Does Your State Allow For Instantaneous Access?
There are currently five states that do not allow automated platforms to pull criminal data from their database.
Those states are the following:
- South Dakota
These states require you to pay an access fee to search their criminal records. This means that any tenant screening service that is automated will not be able to access these records.
This is important regardless of where your rental is located because if your applicant lived in one of those states previously, you would not see their criminal history.
2. Know If Your Service Is Automated
There is a pretty easy way to tell if a report is automated or not. Go to the FAQ section of the website and see if they answer how quickly reports are turned around.
If the service brags about reports being turned around instantly it means it’s an automated service.
Quick turnaround time is the wolf in sheep’s clothing of the tenant background checks industry. It looks like a good thing but is actually a dangerous warning sign.
The FTC completed its most recent study of credit reports in 2015. They found that 23% of consumers identified errors in their credit report.
Databases are filled with errors, false positives, and omissions that create plenty of issues on the final report. If your service is automated, it’s sharing all of those errors with you.
If your service has a person fact checking and cross-referencing the data, they can scrub out the false information and provide a more thorough and accurate report to you.
3. Understand Your Local Laws
Every state has different laws from the next when it comes to managing and owning rental properties. There are federal laws, state laws, and the laws set for by your municipality.
Sometimes these laws will overrule another. For instance, the FCRA is a federal regulation known as the Fair Credit Reporting Act. According to the FCRA a landlord cannot use a tenant eviction from more than 7 years ago as reasoning for denying a tenant applicant.
However, some states such as Oregon have a different law in place. Evictions are only reportable for five years in this state.
If you have a state that is notoriously tenant friendly, you will want to consider a tenant screening service that is either local or has screeners to manually check the data.
If you deny an applicant in Oregon due to an eviction from six years ago you’re violating local laws. A local screening service or one with FCRA Certified Screeners will understand these rules and make sure that data is not included with your report.
Understanding your local laws will give you more insight on what data is reportable in your area. If you find a local law that deviates from the FCRA you can call and ask your service for clarity.
For example, if you live in Oregon you could call the service and ask them how long evictions are reportable for in Oregon?
If the service can’t answer the phone or your question you may want to look to the next option. Once you find the right fit, you’ll be off to the races to find the perfect renter for your rental.