Rental companies charging application fee before reviewing application?

[Archipelago]

Been looking for apartments in a tight market. Found one that looked good for us, filled out the application, and was prompted for payment before submitting the application. $35 fee per adult plus a $500 holding deposit. I called the leasing office and was told the $500 is refundable if we're not selected, but the $35 fee per adult is not.

I'm also a landlord with rental properties - I give every person an application, they fill out the application, and if everything looks good on my end, I say "Hey, your application looks good. I'd like to move forward; the apartment is yours. Let's run a credit and background check as the final process". THEN I charge $35 per adult to run credit and background. I actually don't charge it - the tenants pay for it through a 3rd party service. I've never asked for application money up front.

If lots of people (sometimes over a hundred) are applying for an apartment but only 1 is selected, it doesn't seem fair to keep the $ from everyone else. Seems shady at best...is this just how the market is at the moment? Should we bite the bullet here, or just keep looking?

Another idea: could I go through with payment, and if not selected file a chargeback with my credit card provider? And maybe file a complaint with the DCP/FHA for some recourse? My wife and I can't be throwing around money like this if there are hundreds of other people applying. I also feel for people in need of housing and are scraping by as is.

[Zamboni]

The way you do it seems more ethical.

But, if you think about it, colleges do the same thing with application fees: they charge everyone up front, even if their acceptance rate is really low. Not saying it is ethical, but it seems to be done this way in business more and more.

[clarkfan1979]

The way you do it seems more ethical.

But, if you think about it, colleges do the same thing with application fees: they charge everyone up front, even if their acceptance rate is really low. Not saying it is ethical, but it seems to be done this way in business more and more.

I like your point regarding the application fee for college. You could make the argument that they need to charge $35 per application because they need someone to review the application and input the data. When I applied to grad school it was $200 per application. Usually around $100 went to the University and another $100 to the specific grad school program. Acceptance rates were around 5%.

[Sailor Sam]

Seems shady at best...is this just how the market is at the moment? Should we bite the bullet here, or just keep looking?

I like your system of checking the application first! But yes, in my experience renting a new apartment every 2 years for the past 15 years, the prepayment of the background check fee is very common.

[ixtap]

I have always had this with corporate landlords. With private landlords it has been less common, but it can also be market dependent. They are all reading the same local advice for landlords, after all.

I am currently in a privately owned property with a professional manager. They had us print out our kredit karma report and didn't do any other background check, so it was free.

[cool7hand]

Thanks for sharing. We were wondering about this practice ourselves.

[Captain FIRE]

I’ve had this happen frequently back when I rented. I was also never denied an application. Maybe just ask them if they have many applications in before you apply?

[Shane]

A friend recently applied for and was approved to rent a small commercial space. Weeks after my friend had been promised the unit, when the property manager was asked why an ad for the space was still active, and they, apparently, were still accepting new $35 application fees for the same unit, he was told not to worry. The property manager told my friend, 'confidentially', that continuing to accept $35 application fees, sometimes dozens more, even after a unit had been promised to other tenants and the property manager had no intention of running further background checks, was an intentional part of his company's business model.

[Archipelago]

The way you do it seems more ethical.

But, if you think about it, colleges do the same thing with application fees: they charge everyone up front, even if their acceptance rate is really low. Not saying it is ethical, but it seems to be done this way in business more and more.

At least with college applications there's a fair amount of information to review where it takes time. But if reviewing someone's rental application for an apartment, how long does it actually take? It takes me 5 minutes to know whether the people qualify, and another 5 minutes to make phone calls to verify employment? Charging $35 per person on this is $210/hr.

To be fair, most colleges are also built on growth/profit driven models, so charging money for applications and making a profit of it is pretty much par for the course.

[Archipelago]

Seems shady at best...is this just how the market is at the moment? Should we bite the bullet here, or just keep looking?

I like your system of checking the application first! But yes, in my experience renting a new apartment every 2 years for the past 15 years, the prepayment of the background check fee is very common.

I have always had this with corporate landlords. With private landlords it has been less common, but it can also be market dependent. They are all reading the same local advice for landlords, after all.

A friend recently applied for and was approved to rent a small commercial space. Weeks after my friend had been promised the unit, when the property manager was asked why an ad for the space was still active, and they, apparently, were still accepting new $35 application fees for the same unit, he was told not to worry. The property manager told my friend, 'confidentially', that continuing to accept $35 application fees, sometimes dozens more, even after a unit had been promised to other tenants and the property manager had no intention of running further background checks, was an intentional part of his company's business model.

This makes me very, very sad. Even more so for residential housing for people in need.

[Archipelago]

I’ve had this happen frequently back when I rented. I was also never denied an application. Maybe just ask them if they have many applications in before you apply?

Every rental company is the same story in my experience. You can apply or go on the waitlist. There are over 100 people applying for the same apartment, and the waitlist can be as long as 1 year.

[patchyfacialhair]

Having worked in property management myself, I understand why an "application fee" is necessary.

You can show someone the requirements for income and criminal history, example: no felonies plus 3x income, they nod their head they want the place, so you go through the application, submit it, and surprise, they have a felony on their record. "Oh I thought that was off my record." So you give them the steps to reconcile it, and then you never hear back from them, likely because they knew, but wanted to see if they'd somehow qualify.

If that application fee wasn't collected up front, I would have been out the cost of running that application.

This example wasn't super common, but it was common enough that I wasn't ever surprised when it did happen.

[bacchi]

I've always charged an application fee and 100% goes to the credit/background check. I assumed that was common and no one has ever complained about it (though they probably wouldn't).

With services like zillow, the applicant can pay once for the credit check and use that for multiple applications over a 30 day period.

[Shane]

There's someone in our area who is constantly running dozens of ads on CL for suburban residential rental houses, all at very reasonable, hard to believe could be true, prices, and they *all* accept tenants with animals, which is really unusual. If you call the number, you're asked to fill out an application, which requests all kinds of personal information, including SS#, and to pay a $35 fee. The fact that none of this person's CL ads feature *any* photos of the properties, neither inside nor out, makes me pretty suspicious that he may not actually own/manage them. I wonder if this is just some guy's 'side hustle', where he gets paid to (not) do background checks on people, for properties he has no right or ability to rent to them. I'm guessing 100% of prospective tenants get rejected.

[Paul der Krake]

I pay the background check fee with the expectation that it's the very last step between me and a signed lease. Whether it gets applied to the first month rent or not, frankly, I don't care, even though I think it speaks well of the landlord.

[Sibley]

Thinking back, I had to pay a rental application fee for my very first ever apartment as a grownup, in 2007. I don't think application fees were universal, but they certainly weren't uncommon. That was the case every time I was apartment hunting.
 
My parents when they were landlords would charge a credit check fee which paid for the credit check.

Shane - yeah, that's probably a scammer.