How to Screen a Good Buyer

Screening a buyer for a lease option is extremely important and yet some of us investors still go by instinct or illegal decisions. There are two areas to discuss on screening;

1) Detailed Screening

2) Fair Housing.

‘We liked them’, some investors will say to me. There are too many really good liars in the world and those of you that feel you can ‘read’ people and relying on that are in for a rude awakening. Many of my worst situations came from my own ignorance of believing in people. We should all screen people as if we were blind and deaf. We would then screen them strictly on the facts and not our opinions or prejudices.

Screen a tenant by reviewing the application in my course. Have them fill it out. Check it for accuracy. Make sure they did not lie to you. If someone lies to me, they are denied the occupancy. Check their name – get a copy of their driver’s license. Check their employment – I confirm the pay amount, hours they work and time on the job. Check their banking information, you might need it later. Also check their landlord history , the current land lord may want to get rid of them, but the previous has nothing to hide. Call them both! Confirm it is the real landlord by one of two ways; check it on county records, or call person and say a different amount of rent than on the application.

Fair Housing:

Fair Housing is an entire seminar in itself. Realtors around the country have half to full day training sessions on this topic alone. Fair housing rights when violated can cost owners hundreds of thousands of dollars. This is not an area where you want to mess up. The bottom line is this: select a tenant on their application alone and nothing else. There are federally protected areas and there may be some state protected categories also. Each state has their own protected areas, so check your state for the details. The way to be really safe is don’t judge anyone by the way they look or talk. This is why I say that we should be blind and deaf to select a tenant. If we would just evaluate on the application process alone, then we would stay out of trouble. Then the selection would be based truly on the facts not our gut feel or our instincts. Besides, many times we think our ‘intuition’ is that someone is ‘good’ and they later are not so ‘good’. Stick with the law and you will be safe.

As you can see screening a buyer for a lease option is highly important. For more information on How to Screen a Buyer and putting your standards in writing you can check out my book Investing in Real Estate with Lease Options and Subject-to Deals. Stay tuned for the next topic How to Qualify a Good Buyer.

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