More tenant screening

[Rick Lee]

So my perfect tenants with less than perfect credit have bought a house after living in my place for two mos. They want out, but are offering to do everything they can to find more tenants. They must have really fixed up the place, as they've already brought me two couples who want the place within two days of placing the CL ad. Took me two mos. to get one serious bite. Tenants have been better than great, direct depositing rent a week early, sending me photos of the painting thet've done, etc. I'm going to miss these guys.

Anyway, another couple who wants the place filled out the rental app. and the credit report I pulled on the husband gives me pause before even bothering with his wife. His FICO is 571, which is not great, but the real concern are two 90 day lates on their mortgage in June and July 2009 and a "settled for less than full balance" note on the CR. The wife just called me to explain that they did a short sale and were never late once. I've heard of Wells Fargo dinging credit for short sales, but how else do they note it on a CR other than by giving out 90 day lates? She said they sold the house last June, so there was not even any payment due in July for them to be late on. Sounds legit to me. Virginia is a deficiency state, so I asked her why WF wasn't coming after them. She said it was a VA (Vet. Affairs) loan and, since VA paid off WF, all was good again. Sounds legit to me. What do you guys think?

[Dueller]

Plausible...on a short sale you often suspend paying monthly note prior to closing the short sale. Thus if the short sale was in july-sept 09 or so the computer would generate that hit.

[M.D. Holloway]

Could be OK - sounds like they had a bad run of it last year. Sometimes the best people on paper turn out to be nigh-mares and vice versa. Rental properties are like any other investment - a gamble. I'm too big a puss to throw money at it. You got bigger ones than me.

[Rick Lee]

I ran the wife's and her FICO is 493. But her mortgage has a perfect payment history, which I think was the house she bought before she got married. It's pretty silly that banks won't even talk to you until you stop making payments. Everyone can probably understand taking a credit hit for doing a short sale. But intentionally stopping your mortgage payments to get the bank's attention is pretty nuts. Anyway, I think I'm gonna do employment verifications on Monday and, if they check out, let these guys take it.

Lube, I don't want to be a landlord. I was kind of forced into it.

[Zeke]

I think I'd want to know more about their employment history at this point. Do landlords ever ask for a job resume? Criminal background check?

[Rick Lee]

No employment gaps for several years. I don't think the app. asks past three years. She is actually a credit analyst for a credit card company we've all heard of and he drives a train for a gov't-backed company that only ever loses money. I'll call their employers tomorrow, but don't know what kind of hoops they're gonna make me jump through to get them to talk to me.

Another couple who wants the place sounds like they're my parents' age, I'm guessing perfect credit and they want a 2-3 yr. lease because they're too old to move often. Trouble is they can't take it before Nov. 1. So that leaves me eating October, which I really don't think I should have to do, since my tenants are the ones who decided to break the lease. But then they brought me prospects who want the place Oct. 1 too. So I can't really complain.

A few min. ago my tenant emailed me that they'd take care of October if I want to give it to the second couple. My guess is they close on their new house on Sept. 30th and can't be out of the place the same day in time to have it empty and cleaned for the folks who want it Oct. 1. Anyway, it looks like I'm probably gonna have a longterm lease soon and won't have to worry about this place much for a while. Oh, and my tenant is depositing August's rent tomorrow at my bank. Gonna miss these guys a lot.

[Rick Lee]

Originally Posted by Dueller

Plausible...on a short sale you often suspend paying monthly note prior to closing the short sale. Thus if the short sale was in july-sept 09 or so the computer would generate that hit.

Hey Dueller, is it common or even plausible for divorce lawyers to advise their clients to stop paying bills until an agreement can be reached? I'm sure they don't advise against paying lawyers' bills. But is this believable?

[s_morrison57]

I'd go for the old folks if they check out, a 3 year lease is gotta have some dollar value for piece of mind

[speeder]

You are lucking-out bigtime, Rick, in the world of long distance landlording.

[Joe Ricard]

No gap in rent is much better than 6 months with no rent.
I would rent to them. Worst that can happen is you evict them around Christmas time.

[WIL84911]

Originally Posted by Joe Ricard

No gap in rent is much better than 6 months with no rent.
I would rent to them. Worst that can happen is you evict them around Christmas time.

+1. thoroughly specified in the contract of course.

[Rick Lee]

The older folks are telling my tenants they don't think their furniture will fit in my place. No idea if that's a real concern or a lame excuse. So I'm doing employment verifications on the others today. His boss's phone just rang, didn't go to vm. Her boss's went to vm and I left a message. We'll see if the plot thickens.

[jorian]

Those FICO scores are brutal. Must be more to the story regarding credit.

[Rick Lee]

Well, two 90 day lates sounds about right for FICO punishment due to a short sale. And Wells Fargo probably refused to even discuss a short sale with them until they stopped making payments. Banks are complete idiots about such stuff. You have to screw your credit up before they'll take you seriously. Though I do wonder about the other stuff she said their attys. said to not pay until they could get a separation agreement. But they do have a paidoff mortgage with perfect history and plenty of other accounts with a perfect history, I'd expect to be trashed if they were true deadbeats.

[Dueller]

Originally Posted by Rick Lee

Hey Dueller, is it common or even plausible for divorce lawyers to advise their clients to stop paying bills until an agreement can be reached? I'm sure they don't advise against paying lawyers' bills. But is this believable?

Yup...especially if one of the parties has a good credit score they're trying to preserve and the other one doesn't care. Negotiating tool to force one with good credit to pay the bills or settle the case.

[MT930]

I would recommend negotiating a lease buy out of 1/2 of the remaining lease value. Get the money in your pocket to cover you while looking for a new tenant. I'm doing it right now with tenants. Having tenants find tenants has never worked well for us, they get tired and bail. Especially residential properties. Commercial sub tenants are another story.

[911Freak]

Originally Posted by jorian

Those FICO scores are brutal. Must be more to the story regarding credit.

+1

Missing something here...

How are they leveraged on their cc (% rev avail low?) How many other derog trade lines or collections are there?
If they're close to maxed on the cc, they could be 1 small step away from another default on a contract, your rental contract. How's there savings account? Do they have 3+ months living expenses saved? If they're broke, maxed and have a shortsale/default I'd need strong compensating factors such as lots of cash and solid character references from employers to make an exception..

When looking at CR and applications for tenants or mortgages I try to get an overall picture of their character. Are they credit poor, cash poor or do they have few tradelines/little credit history and as a result low scores due to a rare incident. Are there a lot of 'stories' does bad luck seem to follow them etc.

Do these people have strong stable character or are they just characters?

We just had to give a 3 day pay or vacate notice to one of our tenants.
It's never pleasant.

Verify, verify, verify

Good luck Rick!

[Rick Lee]

No, they have plenty of trade lines with perfect payment history and no outstanding balances. No mortgage lates on two mortgages other than those two 90 days as a result of the short sale a year ago. Their stories check out. They seem pretty motivated too, though I wonder if that's because I'm the only one who hasn't told them to pound sand or because my current tenats really made the place nice. I told them I'll take it off the market as soon as I have money deposited in my account. Should be tomorrow or Wed.