Tenant Screening Software, What Landlords Need to Know

Tenant screening software is becoming more and more popular now that landlords are working to improve their applicant vetting processes.  

In this episode, we will cover what tenant screening software is, why it matters, and how it compares to other options like using property management software or hiring a property manager. 

We’ll also cover a couple real-life horror stories about tenant screening gone wrong and the legal liabilities landlords need to be aware of.

So, whether you're using screening software or not, by knowing the risks, the best practices, and the best tools can make or break your rental business. 

Of course, we will also compare some of the top software options out there.

LINKS

👉 Episode 49: Analyzing Credit Reports for Tenant Selection

👉 Our FREE Landlord Verification Form

👉 SmartMove Tenant Screening Software

👉 Tenant Alert, Tenant Screening Software

👉 RentPrep Tenant Screening Software

👉 My Rental Tenant Screening Software

👉 The Top 5 Prescreening Questions We Always Ask and WHY

👉 Course Waitlist: From Marketing to Move In, Place Your Ideal Tenant
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Transcript

Stacie: 0:00

On the flip side, if you don't screen your tenants at all and things go south, say they damage your property or commit a crime on the premises, you could be liable for negligent screening. In some states courts have ruled that landlords have a duty to thoroughly vet tenants, especially when it comes to safety concerns. So not screening your tenants is risky, but using inaccurate and incomplete screening reports can be just as dangerous. And that's why you need to use reliable software that complies with the Fair Credit Reporting Act and other state regulations. You're protecting yourself as much as you're protecting your property.

0:44

Welcome to your landlord resource podcast many moons ago. When I started as a landlord, I was as green as it gets. I may have had my real estate license, but I lack confidence in the hands on experience needed when it came to dealing with tenants, leases, maintenance, and bookkeeping. After many failed attempts, fast forward to today. Kevin and I have doubled our doors and created an organized, professionally operated rental property business. Want to go from overwhelmed to confident? If you're an ambitious landlord or maybe one in the making, join us as we provide strategies and teach actionable steps to help you reach your goals and the lifestyle you desire. All while building a streamlined and profitable rental property business. This is your landlord resource podcast.

Stacie: 1:33

Hey everyone, welcome back to the Your Landlord Resource Podcast. I'm Stacie Casella, and as always, I'm here with my co host Kevin Kilroy

Kevin: 1:42

Hey there, landlords. We hope you're all doing well because we've got a great episode today, all about a topic that's critical for all of us self managing landlords. Because today we are discussing tenant screening software.

Stacie: 1:58

Yep. So today we're going to cover what it is, why it matters, and how it compares to other options that are out there like using a property management software or hiring a property manager to do your tenant screening for you. We'll also cover some real life horror stories about tenant screening gone wrong and the legal liabilities landlords need to be aware of. So whether you're using screening software or not, by knowing the risks, the best practices, and the best tools can make or break your rental property business. We will also compare some of the top software options out there as well.

Kevin: 2:37

Alright, so let's start by breaking down why tenant screening is so important for landlords. And at the core, tenant screening is about minimizing risk, right? You want tenants who are going to pay rent on time, take care of your property, and not cause any problems. Screening can help you avoid tenants with a history of late payments, evictions, or even criminal backgrounds. I mean we've all heard the nightmare stories of landlords who ended up with tenants that didn't just miss a month's rent, but destroyed the property in the process. So tenant screening helps you spot these red flags before they move in. It's all about using data, you know, like credit reports, eviction history, criminal records to make an informed decision. But there are a few ways landlords can go about this.

Stacie: 3:30

Yeah, you can certainly do it yourself using tenant screening software, which is what we choose to do. You can use property management software that includes tenant screening features. Or, you can hire a property manager and they can handle everything for you. Each option has its pros and cons. So let's go ahead and break those down for you. First, let's look at using tenant screening software on its own. And the big pro here is that it's usually very cost effective. You're in control, and you can pick a service that fits your budget. The data is usually available fairly quickly, sometimes within minutes, depending on the service that you choose. The downside, though, is that you need to know what you're looking for. And some landlords may not feel confident interpreting credit scores or deciding what types of criminal records are deal breakers.

Kevin: 4:24

Let me jump in here real quick and remind all of our listeners that we've done a couple of podcast episodes on both how to read a credit report, and understanding Fair Housing and criminal background checks. We will link those in the show notes for you to reference.

Stacie: 4:39

Oh yeah. Perfect. Thank you for that. Uh, those both will be very helpful to listen to along with what we're talking about today. Now it's important to remember that even the best tenant screening software has its limitations. For example, it won't necessarily tell you if a tenant is difficult to work with or maybe they're a nuisance to their neighbors because you're still missing that human element, which for us, is where doing a full background check, including calling the current and past landlords, is crucial. And remember, if the current landlord wants them out, they may lie to you and tell you that they're great. You'll get your best information from the previous two landlords who have nothing to lose by telling you the truth. And for a quick side note, we have a free landlord verification form that you can download and use when you're making those calls. So, we'll link that in the show notes too.

Kevin: 5:33

All right. So, getting back to missing that human element. That's where property management software comes in. Now, many of these platforms like TurboTenant or Avail include tenant screening as part of a larger suite of tools. So you're not just getting background checks, you also get rent collection features, maintenance requests tracking and more. Which sounds great, but those costs can add up. And just like with tenant screening software alone, you still need to make the final call on whether to accept the applicant as a tenant. Sometimes, actually speaking with an applicant's landlord, employers, and personal references can help you make your decision to accept or deny them. Now for us, just relying on information that a computer software spits out, it's really not advisable. This is also why our acceptance process usually takes at least two days and sometimes longer. I would guess many, if not most self managing landlords, don't take the time necessary to process an application, to gather all the information needed to make an informed decision. Which brings us to the third option, hiring a property manager. They can take care of everything, tenant screening, maintenance, rent collection. But that service comes with a hefty price tag. And we're talking about anywhere from 5 to 12 percent of your rental income, depending on the market and the size of your rental property. However, you can hire a property manager to just do the tenant placement, which usually costs somewhere in the range of one month's rent. Again, the amount they charge depends on the market. Keep in mind that if you only hire them to place the tenant and not manage the property, they really do not have a stake in it. If you hire them for full management, you should feel confident that they will place a well vetted applicant in there just for their own peace of mind.

Stacie: 7:33

Yeah, you still have to trust that the property manager is doing a thorough job. You know, sometimes landlords assume that hiring a property manager means they don't have to worry about anything, but mistakes can still happen. So now that we have discussed the three options, you can see that there's a balance to be struck here, right? Tenant screening software gives you control and can be affordable, but you're doing the work yourself. Property management software helps automate some of those processes and hiring a property manager is the most hands off option, but at a much higher cost. Alright, so let's talk about what can go wrong. Unfortunately, even the most diligent landlords can run into issues, and tenant screening horror stories are more common than you think. Like, there's a story of a landlord who used a basic screening service that didn't check for an eviction history. Everything looked great on the credit report, but it turns out the tenant had been evicted multiple times. And that landlord did not find out about those eviction issues, until they had to start an eviction proceeding themselves a few months later.

Kevin: 8:42

Which goes back to the human side of tenant screening and making sure you are calling and checking with the applicant's previous landlords and their current employer. Bottom line guys, you do not want to cut corners when it comes to screening.

Stacie: 8:56

Yeah, and it's not just about bad tenants. Landlords also need to be careful because tenant screening can lead to lawsuits. There have been cases where screening software had inaccurate or outdated information. Like maybe it showed a criminal conviction that had been expunged, or flagged someone for an eviction that was actually dismissed. As we mentioned in our last episode about criminal background checks, so that would be episode 83 I believe, landlords who rely solely on that faulty information can face discrimination lawsuits. For example, under the Fair Housing Act, if a tenant claims that they were rejected based on inaccurate criminal background information, and that decision disproportionately affects a protected class, it can lead to legal trouble. So let's talk a little bit about the liability of using, or not using, tenant screening software. First off, landlords are responsible for complying with the Fair Credit Reporting Act. And the acronym of that is FCRA. That means you need the tenant's written permission to run a background check. And if you decide not to rent to them based on that report, you have to provide an adverse action notice. This gives a tenant a chance to dispute the information that you used to deny them.

Kevin: 10:16

And you guys, this isn't just about being courteous, it's a legal requirement. If you fail to provide that notice, you could be hit with fines and the tenant could possibly even sue.

Stacie: 10:28

Yeah, on the flip side, if you don't screen your tenants at all and things go south, say they damage your property or commit a crime on the premises, you could be liable for negligent screening. In some states courts have ruled that landlords have a duty to thoroughly vet tenants, especially when it comes to safety concerns. So not screening your tenants is risky, but using inaccurate and incomplete screening reports can be just as dangerous. And that's why you need to use reliable software that complies with the Fair Credit Reporting Act and other state regulations. You're protecting yourself as much as you're protecting your property.

Kevin: 11:09

All right. So now that we've covered the risks, let's look at some of the best tenant screening software options for self managing landlords. These are tools that not only help you stay compliant, but also give you accurate, reliable information when doing your background checks on applicants. And per usual, we will link each of the four softwares we are discussing today in our show notes. Alright, first up is TransUnion SmartMove. This is one of the most popular options out there and for pretty good reason. It was built specifically for landlords. It's powered by TransUnion, one of the major credit bureaus. So you're getting real time data that's incredibly accurate. You get credit reports, criminal background checks, and eviction history all in one place. it is great for landlords who want quick results because you usually get the full report in 24 hours or less and a lot of times they say within minutes. And the cost is pretty reasonable, about$40 per screening. It's FCRA compliant, so you don't have to worry about legal issues. And it's easy to use. Another solid option is MyRental by CoreLogic. And if you're unfamiliar with them, CoreLogic is a company that provides data and analytics for the real estate, mortgage, insurance, and other industries. MyRental is known for its accurate eviction history reports, which is huge for landlords who want to avoid repeat offenders. It also has a great user interface and offers criminal background checks across multiple jurisdictions. And MyRental offers flexible pricing. You can pay by report, which adds up pretty fast, or just get the Premium Tenant Screening Report, which at the time of this episode runs around$38, I believe. It's affordable and gives you detailed data.

Stacie: 13:04

So the one thing that I want to note about MyRentals Tenant Screening is that they have what is called a TU score. Just as a credit score predicts the likelihood that a loan will be paid, the TU rental score assesses risk by helping to predict the likelihood that a tenant will fulfill a lease obligation. This score is engineered for rental screening and is designed to provide a better estimation of the risk to your future rental property income than a typical credit score will. Now, let me talk a little bit about RentPrep, which is powered by Stessa Property Management Software. Now what sets RentPrep apart is that they offer manual reviews of the reports. So real human experts are looking at the data, especially the criminal background checks to make sure that everything is accurate and that nothing is overlooked. It's a little more expensive, but that extra layer of protection may be worth it for you. It's around$50 for their premium package. And for an extra$10 they will go ahead and verify the income for you. They say you get the report back a few hours after submitting it but not sure how that works with the income verification part. My guess is it's closer to 24 hours, which is still a pretty quick turnaround. But the peace of mind that you get with the manual review makes it a really great option. Especially for landlords who have had bad experiences with automated reports in the past. And lastly, we have TenantAlert, which we have mentioned earlier in other podcasts as well, and that is a software that we use. We started out using a software that was available to us as part of the Sacramento Rental Housing Association, but that software was bought out by tenant alert. So here we are now. We have been using them for years and have been very happy with the results so far. So TenantAlert is another FCRA compliant service that provides quick, reliable results. It's ideal for landlords who want to keep costs low. And where a couple of the other software have this option as well, It has an option where tenants can pay for the report themselves. Pricing starts around$24.95 and goes as high as$49.95, which is still pretty affordable. Here's the thing, TenantAlert provides the only instant tenant screening service with what's called a lease guarantee. You can select from a number of reports, including credit background checks, and here's the key, nationwide criminal and nationwide eviction. Some of them are only in the areas in the state of where you're at. You can add up to four applicants in one order to screen multiple roommates, which has been really nice for us in our two bedroom units. You can use your own application or you can send off their tenant alert application when you're vetting the tenants. You can pay for the credit screening or you can send a link to the applicant for them to pay for the service. And their reports are really easy to read. Uh, they have summaries to help you determine if the applicant meets your qualifications or not. So the other thing they do is they rate the applicant on a scale of a hundred and offer a lease guarantee for up to$10,000 of protection, and that's against damages, lost rent or legal fees. And that starts at$199 a year that you or the tenant can pay. So essentially that lease guarantee can replace having to ask your tenant to get a guarantor or a co signer should the reports come back with such issues as credit issues or late rent payments. You know often we will get recent graduates coming to work at the California capital which is a couple miles away from our Sacramento complex. And those graduates usually have little or no credit history and have a hard time finding a place to rent. So in order to give them a chance, we generally will ask to have a family member to be a guarantor on their lease just in case they default or in case of any major damages. This lease guarantee that TenantAlert offers is pretty much the same thing. It's like an insurance policy that covers a tenant for lost rent, damages, and even some reimbursement on eviction fees. And you don't have to go through and do credit and background checks on that guarantor or cosigner like you would have to do. You could just pay the$199 or whatever the amount comes to and get that lease guarantee.

Kevin: 17:44

And hey, so far so good on our end with TenantAlert. So to sum up, if you're looking for the best combination of speed, accuracy, and affordability, TransUnion Smart Move, My Rental, Rent Prep, and TenantAlert are all solid options. Each one has its strengths, so it's really about what fits your needs as a landlord. Okay, we have talked about what each software can offer, now once you get these screening reports, how can you be sure the information is accurate? This is especially important when it comes to criminal records or eviction history. And like Stacie mentioned earlier, one step you can take is to double check references. Contact previous landlords or employers to verify the information on the application. Make sure everything matches what's in the report. Another thing you can do is to ask for pay stubs or bank statements to verify income. A credit report will give you a sense of their financial responsibility, but you know, seeing actual proof of income can give you that extra confidence and allow you to evaluate their net income versus their gross income. Some employees have a lot of deduction for things like, medical benefits, uh, 401k or retirement investments that can be several hundred dollars a month. When you compare that actual net income to the credit report, it does appear the applicant will have enough money to pay your rent each month. You know, it's just some things like that to think about. And you guys, this was all discussed in episode 49 and it was called Analyzing Credit Reports for Tenant Selection and we break down how to read a credit report. So, check it out. It's really a great companion episode to today's. And if you're really concerned about accuracy, using a service like Rent Prep where human experts review the data might be a good option for your peace of mind

Stacie: 19:45

Yeah, I definitely agree with that. If you don't feel that you have the time or want to make the effort needed Rent Prep is a great option. You just need to be certain that you have all the information you need to make your decision because it's different for all of us. All right, let's wrap up with some important legal considerations because this is something every landlord needs to be aware of. Tenant screening laws can vary from state to state, and it's critical that landlords stay compliant. So as we say in nearly every single episode, know your landlord tenant laws for the state and area where your rentals are located. For example, in California, there's a cap on how much we can charge for tenant screening fees, and you have to follow strict rules when it comes to criminal background checks. New York has similar restrictions, especially in New York City where they've passed a Fair Chance Housing Act limiting when you can check criminal history.

Kevin: 20:43

Yeah, that's right. And in Washington State, landlords are required to accept what are called portable tenant screening reports if a tenant provides one. Meaning you can't make the tenant pay for another report if they already have one that's recent and meets the criteria. So that means you now are out that money paying for any reports you may want. Which means what? You should be selective about processing applications. Not accepting applications, processing them. The best way to weed out those applicants that may not qualify is pre screening them. You may also interview them before accepting their applications. Essentially, you're telling them what your criteria is and if they cannot meet them, they will remove themselves from your applicant's pool. We do offer a free download of some of the pre screening questions we ask and why we ask them. We will link them in the show notes if you'd like to grab them. Getting back to the landlord tenant laws, those are just a few examples. Each state has its own rules, so landlords need to be careful and make sure they're following both state and federal laws, especially when it comes to the FCRA compliance. So to wrap it up, tenant screening is a crucial part of running a rental business. But there's really no one size fits all solution. Whether you use tenant screening software, property management software, or hire a property manager, it's important to understand the pros and cons of each method and make sure you're staying legally compliant.

Stacie: 22:21

Absolutely. And remember, you're not just protecting yourself from bad tenants, you're also protecting your business from legal risks. And hopefully, if you decide to invest in reliable tenant screening software, like the ones we discussed today, you can save yourself a lot of headaches in the long run. So that's it for today's episode of Your Landlord Resource. If you found this information helpful, don't forget to subscribe or follow on your favorite podcast platform and leave us a review. If you have any questions or suggestions for future episodes, we have a couple ways you can contact us. The best and easiest way is to email us. We can be reached at Stacie at yourlandlordresource. com. That's Stacie with an I E. Or Kevin at your landlord resource. com. You can also text us at 6 5 0 4 8 9 4 4 4 7. Or you can click a link in the show notes to text us too. If you use that one, please leave your email for us to respond because that is a one way only texting service. And of course, you can reach out to us on social media. Instagram and Facebook are the ones that we use most often. And all the links will be in the show notes for you to access as well. If you'd like to download any of the free forms that we offer, like those prescreening questions, or if you want to sign up for our free weekly newsletter, you can access all of those links in the show notes too. I think that's it. Thank you so much for taking the time out of your busy day to listen to what we have to say about self managing your rental properties. We sincerely do appreciate each and every one of you. Until next time, you've got this landlords.