Get The Good Faith Deposit
A good faith deposit may be the last thing on your mind when you have a vacant home. Why? Because having a vacant rental property can be very scary.
It can be exciting when you get someone who says “I want the house”. You may think you can breathe a sigh of relief. It can be tempting to go ahead and take the home off the rental market but don’t get ahead of the process.
Remember, that just because someone indicates he wants the house doesn’t mean that he will actually follow through or even qualify to rent the home. You should never stop advertising your home for rent until you get a good faith deposit in your hand!
a good faith deposit is something that you collect along with the application and the application fee. Click To Tweet
Why Collect A Good Faith Deposit?
Generally speaking, a good faith deposit is something that you collect along with the application and the application fee. This deposit will typically equal one month’s rent. It is the best way to separate the tire kickers from the serious applicants.
Someone who is serious about renting the house won’t balk at giving you a good faith deposit. There is no reason to remove your house from the rental market until you have the good faith deposit.
Applicants Get Excited
You might ask “What do you mean he won’t follow through”. One of the biggest problems that you will have is that the person who told you he wants the house may just disappear!
It is very easy for someone to get excited when about a house and fall in love. But, then reality may set. Once he leaves, he may realize it isn’t what he needs, it is too big or too small, it is out of the kid’s school district, it costs too much, it is too far away from work or any number of other factors may come into play. You will never hear from this person again!
Lessen The Chance The Applicant Will Flee
Making an applicant give you a substantial amount of money up front will lessen the chance that this person will just back out. But, if he does, then you have basically gotten a month’s rent up front and you haven’t lost anything when he backs out.
Be sure and check the laws in your area to make sure you are allowed to do this.
Explain The Good Faith Deposit To Applicant
I explain to the applicant that this deposit is needed to remove the house from the rental market. Be sure and explain your rules to the applicant.
It should be explained that you will not show a home once you have a good faith deposit. Remind the applicant that it is only refundable if he is not approved to rent the home. Keep in mind that in some areas it may also refundable in some cases if the applicant changes his mind BEFORE he is approved to rent the house.
The good faith deposit puts a hold on the rental home. Click To Tweet
But, once the applicant is approved and indicates he wants the house, it is NO LONGER refundable. The good faith deposit will then be rolled over as the security deposit. Then the applicant will only need to bring the first month’s rent to the lease signing.
You may need to add this to your rental application. Also point it out when you collect the deposit and the rental application fee. If you use an online service, make sure that it states the rules of the good faith deposit.
Refund The Good Faith
You may find that you have to refund the good faith deposit after you run the applicant’s credit and check his references. That is ok. It is better to take the time to find a great tenant.
Your goal is to move through the qualification process as quickly as possible so that the house is not off the market for more than 2-4 days.
Back Up Plan
One thing that I have gotten in the habit of doing is that when I have the security deposit, I don’t remove the home from the market. Instead, I make a note in the ad that an “application is pending”. That way, you haven’t completely removed the home from consideration but are telling other interested parties that it is on hold for now. But, that could change!
If you have a home that has a lot of interest, you need to keep talking to people and tell them that an application is pending. I keep a list of pre-screen applicants that I can call if this applicant doesn’t work out. That way I am not days behind and can just move on to the next applicant. It really speeds up the process of getting the house rented.
Having trouble finding a great tenant? Find out how to properly pre-screen potential tenants.