Letting Agents and Tenant References and Checks by LettingFocus

Landlords using letting agents to find a tenant for them need to be very careful that they set out EXACTLY what references they expect the letting agent to obtain from the tenant as part of the reference checking process.
Those of you who have read my book “Successful Property Letting” will know that I tend to go a little bit further than most letting agents do in terms of the kind of the references I wish a tenant to provide.
Where the property in question is close to me I still tend to do the “finding tenant” job myself using websites like Upad -see the link at Services and Products for Landlords
I do the viewings myself and then get the tenants to provide the employers and past landlord references plus all necessary documents - which I then validate.
And I ask to see a lot of documentation too – bank statements, utility bills, proof of ID etc.
Plus I do a credit check.

Why Do It Yourself?

Sometimes I am pretty busy on my corporate consulting work and speaking engagements and I sometimes think to myself, “Hey, why am I still doing this myself?”
The answer is complex.
But I find that I can do reference checks a lot faster myself than a letting agent can do it, so I’m not sitting and waiting ages for a “Go” or “NO GO” decision on the tenant.
Plus I get to see all the references the tenants provide, I study them carefully and can make up my own mind as to whether they will be good tenants or not.
And with the stress and cost one has if one gets a tenant from hell, it is really a job that I am loathe to lose control of.

As an example of this, a consultee of mine recently used a letting agent.
The agent had the tenant fill in the application form. But though the tenant was from Korea (and clearly outside the EU) the agent did not think to ask to see the work permit from the Home Office.
Doh! Basic stuff! But all too common a problem, I'm afraid.

Agree What Checks Your Letting Agent Will Do

In this case, the landlord had not agreed in writing exactly what reference checks they wanted the letting agent to do when they had agreed for them to do the work to find the tenant.
It’s an easy mistake to make and one that I have to confess I have made in the past.
I do use letting agents from time to time (and I have to for my properties that are far away because I cannot physically do the viewings.)
However, the letting agency is fully appraised as to what refs I need and he sends me copies of the tenants application form and copies of the references obtained too.
I trust them.
In theory all good letting agents should be as thorough on reference checks as he is.
After all, they should not want to provide you with a duff tenant because that will strain your relationship (or it should!).
But some letting agency staff are blinded by the commission and frankly could not give a monkeys about the quality of the tenant.

Be Wary of Pure Commission Driven Letting Agents

This type of letting agent will have the view that as long as they have ticked the minimum number of boxes as part of the reference checks and have got their commission, they are happy with that.
A letting agency near us has staff that I know are entirely on commission. This is the sort of firm you should be wary of and keep on a tight rein.

Private Rented Sector Policy Is Often Made on the Hoof

As part of the corporate consultancy work I do for mortgage companies and in the social housing sector, I get to read a lot of position papers on the private rented sector.
But I am continually amazed that in the private rented sector, so much government policy is made without the benefit of any good quality research.
Julie Rugg in her superb report into the private rented sector found the same thing.
Policy has been and continues to be made that affects landlords and tenants but which is not rooted in valid research findings.
What research there is, is often limited in scope and uses too small sample sizes.
An example is the proposal to require houses converted to HMOs to obtain planning permission. It may be sensible policy, but where is the research to justify this proposal?
I may come back to this issue another time.

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of landlord information.
Hello, I’m David Lawrenson.
I have been a landlord and property investor myself for over 25 years and am author of “Successful Property Letting” – which has been the UK’s top selling commercially published property book for the last 3 years.
Our main business is at a corporate level for organisations - both public and private companies.
We provide consultancy for banks, local authorities, social housing providers and other organisations – helping them with their landlord facing or buy to let product strategies and services.

OTHER WORK

We also write for property websites and are regularly quoted by the media. In addition, we have written articles for numerous publications including The Independent, The Telegraph and quality landlord websites.
For private landlords, we also find some occasional spare time to help landlords and property investors make money in property by coaching them in ways that work, which are ethical and which involve minimal risk to the investor.
We pride ourselves on giving independent unbiased buy to let advice on either a one to one mentoring / coaching basis or through our occasional group seminars.
Unfortunately, in the UK today, property advice in the UK is still largely unregulated and what counts as “good advice” is too often more about making the promoter money than giving useful information to the investor.
With no links to property firms, developers or bridging loan providers we can advise on where and what type of property to buy for investment and when to buy it. We also show you how to manage tenants properly.

AT OUR WEBSITE, LETTINGFOCUS.COM:

THE HOME PAGE OF THIS BLOG click here: Blog
THE HOME PAGE OF OUR MAIN SITE click here: LettingFocus Home Page
For general info on our CONSULTING click here: Consultancy and Seminars
ONE TO ONE PRIVATE CONSULTANCY click here: Property Mentoring
NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors:
Next Property Investment Seminar and Networking Event
We have OFFERS on a range of services and products for landlords too; click here including landlords insurance, tenant referencing, tenancy agreements and more: Services and Products for Landlords
TO READ CLIENT TESTIMONIALS – both commercial and private click here: Testimonials
BUY “SUCCESSFUL PROPERTY LETTING” click here: Buy the Book at Amazon plus anything else you fancy at Amazon.co.uk

To JOIN our Free QUARTERLY NEWSLETTER simply send an email to david@LettingFocus.com - Please note we WILL NOT send spam or sell our mailing list to advertisers!

IF YOU HAVE A SITE WHY NOT LINK TO THIS BLOG OR TO OUR WEBSITE?

See our TWITTER PAGE: http://twitter.com/LettingFocus

Copyright of Blog: David Lawrenson 2009. This blog is updated roughly once a week usually on a Monday or Tuesday.

WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?

Over on the right hand side under all the previous blog entries you will find a button which says “Site Feed.” Simply copy the site feed link into your News Reader or News Aggregator.

Copyright Notice: If you have a website & are thinking of reproducing material here, that’s fine but we DO require a link to the blog to be included, including also all the links in this section. (The full article including all links must be available to ALL VIEWERS of your site and not restricted.)
TO VIEW RELATED POSTS select a “Category” at the bottom of this page.
WANT TO ADD A COMMENT OR VIEW OLD COMMENTS?
To add a comment or view other people's comments on this post, simply click on “link to this post.”

Choosing Letting Agents / How the UK’s dopey banks made a mess of buy to let mortgage lending by David Lawrenson

Following on from last weeks’ blog, where I said landlords are not suffering too much, it seems that some landlords are suffering after all – even in the face of record low interest rates.
Latest figures from the Council of Mortgage Lenders now show investors’ arrears rates are significantly higher than for standard residential.
So, what’s the truth?
Well, the truth is there are landlords and there are landlords.
Unfortunately, lots of would-be landlords did not do their research and believed all the hype spun by the many Get Rich Quick gurus and have gone on to make a complete muck up of it – bankrupting themselves in the process.
Many of these will have been to a guru’s seminar and went out and either bought existing housing with No Money Down from distressed sellers using bridging finance with a back to back next day remortgage or they bought new build ghetto flats with gifted or hidden deposits.
Both techniques have finally been stopped as the UK’s rather dozy mortgage lenders finally woke up to the fact that they had in fact just lent on 100% of the property’s value (or at least what the buyer paid.)
(Many borrowers would also use credit cards and loans for non existent kitchens to finance deals.)
With little understanding about how to be a landlord quite a few of these would-be investors got into trouble - and therefore so did the banks and building societies that lent them the mortgage cash.
On the other hand, landlords and property investors who ignored the hype, hopefully the type who read my property investing book – and listened to informed experts of the likes of Richard Bowser, Tom Entwistle and myself at property shows will have done rather well.

BUT WHY WERE BRITAINS MORTGAGE LENDERS CAUGHT OUT ON BUY TO LET?
That’s a very good question.
At a recent seminar I heard from John Corey, an American property expert about how in the USA, the types of techniques that borrowers were pulling here to raise big buy to let mortgage loans in which the borrower had no equity, had long been known to mortgage lenders and had either been stopped by law or through the use of intelligent underwriting techniques.
For example, by requesting up to a years worth of bank statements the American lenders could really assess a borrower’s true financial position. In the USA, it would have been impssible to raise say, £25K on a loan for something else one month and then use it as a deposit on a house the next month.
But in the UK, these kinds of things and many other sneaky tricks went on for years.
I suspct that many mortgage lenders in the UK did not have a clue about back to back re-mortgaging as a technique for someone to acquire a property with “No Money Down.”
OK, by sometime in 2006 and 2007 they had all finally woke from their slumber and have now stopped this kind of thing.
But if you get a buy let mortgage loan today, you will still walk out of the bank with virtually no help, no guidance or anything else to help you be a good landlord.
Unless you have read the right stuff you will have a good chance of becoming another arrears statistic on their buy to let loan book a few years hence.
A few years ago I contacted some senior figures in some of the banks (not easy – even getting their names is hard enough) and suggested that as a leading property author I could help them correct this failing. I’m still waiting for the call back.

MIND IF WE KICK YOU AGAIN SIR?
Don’t tell my partner but I have subscribed for most of the rights issues in the shares I have.
Many of these shares are well down on what I paid for them, so it’s a bit like asking a mugger if he would like to hit you and rob you again.
But the shares are all very heavily discounted and I figure that after the RBS’s famous 200 pence a pop rights issue surely, no one would be allowed to put out a rights issue prospectus which was so clearly full of nonsense.

TIPS FOR USING LETTING AGENTS
Don’t go with the letting agent that charges the lowest fees or one who claims he can get the highest rent. It is important yes, but not the only thing that counts. If the agent says they can get a premium rent. Fine. Ask them to prove what rent they have achieved for properties like yours by showing you comparables.
Ask other landlords which agents they use and trust. Then check if the agent is a member of a recognised trade association such as The Association of Residential Letting Agents which has a code of practice for members and client money protection schemes in place. Others bodies offering similar protection include The Royal Institution of Chartered Surveyors and the National Approved Lettings Scheme.
Landlords should check what protection the agent’s membership of a trade body gives them and if the agent is really still a member.
True, there are some very good and long established agents who are not members of any trade body for good reasons - like the very high cost of membership.
If you are set on using one of these, that’s fine, but make extra sure to check references and find out how long they have been in business.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord experts. Read Property Articles.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - buy Property Investment Book. The new edition is for both accidental landlords and more experienced residental property investors and is fully up to date with all the recent changes to tenancy deposit schemes, landlord registration and capital gains taxes.
I’m a property expert and property speaker - and I run the well known property blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general advice on property letting to anyone looking to buy property for themselves or to let.
What’s unique about lettingfocus.com is that we offer independent unbiased advice on renting out property because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier other than through the links we have on our affilate scheme page. Find out about some great deals we have arranged at our Property Affiliate page.
For landlords' insurance products such as rent guarantee cover and property insurance click on Ukinsurancenet. Don't forget to quote our reference code, LFOC, to get the best rates from them too.
Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
Over on the right hand side under all the previous blog entries and the bit where it says “Links” and “Subscribe” you will see a button saying “Site Feed.”
Just copy the site feed link into your News Reader or News Aggregator. Even a non techie like me managed to do this.
Please note if you have a website & are thinking of reproducing material here - that’s fine but we DO require a link to the blog to be included, including also the links in this section. The full article including all links must be available to ALL VIEWERS of your site and not restricted.
WANT TO ADD A COMMENT
To add a comment to this post, you just click on “link to this post” then simply add your comment.
To view past comments, once again you’ll need to click “link to this post” and view the comments (which appear at the bottom of the post.) All comments are moderated.

Take care referencing and checking tenants even if you use a letting agent says LettingFocus.com

So far the credit crunch has not led to any large increases in unemployment.
However, I see the press is now carrying more stories of lay offs here and there - so we can expect some rises in unemployment to start to filter through to the official figures before too long.
How does this affect landlords?
Well, I would say that today more than ever, you need to make sure that the tenants you get are good ones and are fully referenced plus that they are in the type of sector of the economy where they are less likely to lose their jobs.
Why?
Well, if they lose their jobs they may struggle to pay the rent and / or have to move to less expensive accommodation – which is bad for them and whichever way you look at it, also means more hassle and expense for you the landlord.
In the worst case, it could also mean that they could stay put and just not pay any rent at all – meaning you have to seek repossession - and that process can take months, often with little chance of you ever recovering the money owed.
In the current environment, if I had to choose between equally good tenant candidates – one of whom worked in an economically shaky sector and another who worked in a (usually) slightly safer public sector job as a teacher or a civil servant, I know which one I would sooner go for.
Yes, it’s tough on some – but hey I’m not the one who was responsible for the state the economy is supposedly in.
Also, if you use a letting agent, don’t fully trust to new agent on this issue unless you have used them for a while and know they are reputable and can be trusted on this.
Sadly, there are a few rogue agents out there who cut corners on referencing and don’t do it properly.
Remember it will be you, not the agent, who is the one who loses out financially if the tenant turns bad.
So ask the agent to let you see references they obtained.
And don’t listen to all the guff some letting agents will give you about the "Data Protection Act and that you cannot see the references, the reference report of the tenants application form" because your tenant should have authorised for you, the landlord, to see the references on the application form he filled in when applying to rent the property.
If your agent won't let you see these things, go to one who will.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of landlord advisors lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 2 years has been the UK’s top selling property title - buy the UK's top selling property investment book.
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value.
I’m an expert freelance property journalist , property speaker and a well known property blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I can provide landlords advice
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
You can read more of my blog & find details of my networking, advice, property investors networking programme at my website.What’s unique about lettingfocus.com is that we offer property investment mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, a developer, an agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated once a week.
Want to be kept updated on our blogs?
It’s easy. The link to the RSS feed is at the bottom right of every blog we publish. Simply click where it says, “Link to this post.” Once you have done this, this will take you to the latest blog which will have a 'Subscribe' button at top of the page.
Once clicked, this link is added to your Bookmarks (or Favourites) drop down menu in the top toolbar. Thereafter, every blog published automatically appears in this drop down menu.
This means you won't have to visit the site to pick up latest blog, the headline of which will appear in your toolbar menu.
You can then click the headline and copy and paste the full article or a synopsis into your Latest News section - some software may be able to automate this process.
Please note we require the full links shown in each blog to also be shown at your site. Please contact us via our main site http://www.lettingfocus.com/ if you have any queries about this.