Tenant screening is a crucial responsibility for all landlords. It’s an effective way to avoid bad tenants and all the headaches that come with them. A thorough tenant screening process should include credit, income, and background checks.
Background checks—namely, criminal and eviction histories—are hopefully empty searches for the majority of your applicants. However, learning to navigate background checks is an important component of tenant screening. It’s your only line of defense between risks, including the $3,500-$10,000 average cost to evict a tenant and the potential for legal liability.
Property management software can make tenant screening much faster and simpler. However, it’s still up to you to make the final decisions. Here are five reasons why running a background check on a tenant is essential.
1. Verify Claims
The first step in tenant screening is to verify that your applicant is who they say they are. You may be able to verify identity through a credit check, but background checks are an equally important measure.
Eviction information is no longer included in credit reports, so you’ll need to conduct a search through a third-party service to find out whether an applicant has had prior evictions. If a renter claims they are qualified to rent your property but have had one (or multiple) prior evictions, this is a big red flag.
Without background checks, you have no way of knowing when to dodge a candidate that may cost you later on.
2. Ensure Financial Reliability
Financial reliability is another reason to run background checks. If a renter claims they are financially capable but have had trouble paying rent in the past, this is a sign you should further investigate.
If you approve a tenant who can’t be trusted with the responsibility of rent, you’re the person answerable to that decision. This means it’s your responsibility to pay eviction fees, repair damaged property, and find a new tenant to replace them.
Instead of taking these risks, ensure ahead of time with a background check that a renter won’t put you in any unfavorable situations.
3. Protect Yourself from Legal Risk
Legal risk is another reason you should spend time carefully screening tenants. By skipping background checks, you could endanger your other tenants and even risk lawsuits.
For instance, if a tenant turns out to be destructive or violent, other tenants’ safety may be compromised. Those tenants may ask you to take responsibility for your ill-informed decision. This could mean a lengthy legal entanglement with expensive fees. You should be cautious and run background checks to protect yourself legally and financially.
You could also be sued if you allow a registered sex offender to live near a school or daycare near children. It’s important to know this information before an issue comes up.
Running criminal reports before you accept tenants is the smartest way to avoid legal risk.
4. Reduce Tenant Turnover
Background checks can also save you time and reduce tenant turnover. For instance, if you already know a renter has had three prior evictions, you don’t have to waste your time assessing their credit score or verifying their income.
If you skip a background check, you risk having to find a new tenant for a property that’s been vacated. You might have to track down the previous tenant for rent payments, re-list and market the property, fix damages, and start the process all over again with a new tenant.
You can avoid these massive inconveniences by running background checks. If you properly screen tenants, you shouldn’t have to fill vacant units as often.
5. Assess Honesty and Integrity
A final function of background checks is to help you assess honesty and integrity. Did the renter tell the truth on their application? Will they respect your property and other tenants?
Having a criminal history is not grounds to deny a renter outright. However, you are allowed to use criminal history as justification for denial when it’s clear the decision was based on safety concerns.
If you have questions or concerns, review the Federal Fair Housing Act or consult with a legal expert to ensure your assessments of honesty and integrity are fair and not discriminatory.
Background Checks: Better Safe Than Sorry
You should always run background checks on potential tenants. Just be aware of your state’s laws regarding background checks, as what is allowed can vary.
The safety of your business, property, and especially other tenants should always come first. Even if they usually turn up empty, background checks are valuable tools that give you a better chance of finding great tenants for your properties.