Real estate agents who help landlords must pay attention when screening potential tenants. Doing this can help keep the landlord out of costly and uncomfortable situations. After all, if the tenant doesn’t have the financial ability to pay their lease, the realtor wastes time, and the landlord may end up with substantial costs to find another tenant.
How to Determine Financial Ability
During prequalification, you speak with the tenant. During this conversation, you ask questions that will help determine the price they can pay for an apartment or rental home. Ask them for the names of their current and past employers. Ask questions about their financial situation.
Then, do your research to see if they told you the truth or hid some critical information from you. Remember, if they lease the property, the landlord will have to deal with them daily, often for many years.
So, run their credit report. Make sure they have enough cash to close the transaction, usually about three months’ rent. Request a letter of recommendation from their landlord. Even better, talk to the landlord who leases to them now. Check their background with the police, and find out if they have any evictions. Look at their bank records.
What to Know about Credit Reports
Real estate agents need to be extremely well-versed in what credit reports are, what scores are acceptable, how to find vital information, and how to interpret it. For example, credit scores can range from 200 to 850. However, more landlords will rent to tenants if they score above 620.
For more information on credit reports and tenant screening, check out real estate online courses such as Roadmap to Success: Tenants. The more real estate agents know about credit reports, the better they can serve landlords, tenants, buyers, and sellers.
Getting Past Financial Roadblocks
Not every potential tenant that real estate agents screen will meet the qualifications for leasing a home or apartment. There could be several reasons for this:
– They have bad marks on their credit, or their debt-to-income ratio is too high.
– There are errors on their credit report.
– They don’t know the best ways to use credit.
– They have been evicted in the past, especially if it was recent.
– Their credit score is too low.
– They don’t have enough cash for closing.
– They have a felony on their record.
Getting past these financial difficulties can be tricky. However, the well-prepared realtor can often overcome them. For instance, you can coach them on several ways to improve their position. Here’s some advice you can give someone with trouble meeting the financial ability tests.
– Choose a lower-cost rental unit for now while they improve their financial situation.
– Offer to pay more in deposits or early rent than is required.
– Get a co-signer.
– Search for more flexible landlords, such as small complexes, duplexes, or those with only a few properties.
– Dress appropriately when meeting with the landlord.
– Get a referral from someone you and the landlord know.
– Pay down debt and always pay bills on time.
– Avoid taking loans from finance companies.
– Check for errors on their credit report and request removal.
– Stay as far from your credit limit as possible.
– Get a free credit report from one of the major credit bureaus at annualcreditreport.com.
Remind your clients that they need to keep improving their credit scores as much as possible. It’s very tempting for many tenants to buy furniture and interior decorations when they know they are about to move into a new place. However, if they put all that on a credit card or take out a personal loan, their credit score and financial ability to lease the apartment or home may keep them from completing the transaction.
How Can Real Estate Agents Help Landlords?
Although you will have many conversations with the potential tenant, much of this is to help the landlord. Ensuring that the tenant has the financial ability to pay the rent allows the landlord to avoid the costly and time-consuming eviction process. You help them find a great tenant quickly. What’s more, you help them avoid dealing with a dishonest person.
So, have serious conversations with the tenants. Find out what they can afford and what they can’t. Discover if they are people the landlord can live with for the long term. As you do all this, you can still help the tenant. You can nearly always help a tenant in one of three ways. You might help them lease the property they want. Or, you might help them find something lesser that they can afford. Finally, you can coach them to fulfill their dreams later on. In the end, real estate agents have all the tools they need to move most potential tenants forward on their journey.