Why Do Landlords Need Identity Verification for Potential Renters?
Nov 03, 2021 MicroBilt News
Of the 122.8 million households in America, roughly 36% of those are renters. As a landlord, you hope you get good honest renters who follow their lease agreement and pay their rent on time.
Yet, as a landlord, you probably also know there are some less than honest renters out there. Some might even be willing to lie about their identity because they feel like it might be the only way they could get a rental contract.
These, of course, aren't the people you want living in your rental properties. So, what kind of identity verification can you do as a landlord to make sure you know who you're renting to and that they will be quality renters?
Read on to learn more about identity verification for renters, why it's so important, and how you can check identity before agreeing to rent to a prospective renter.
What Is Identity Verification for Renters?
Identity verification for renters ensures several things that are of utmost importance to a landlord.
It might be hard to imagine someone working hard to cover up their identity. Yet, it's not an uncommon problem for landlords to realize they renters who haven't been honest with them before renting.
You want to know you're renting to the person who you think you're renting to. You want to verify their name and other identifying information are correct. If something goes awry during the rental, you have no way to hold them accountable if you have incorrect information.
The other problem is that you have no way of knowing if they can actually afford the rental or if they have been a good tenant in the past if you don't really know who they are.
Why Is It Important to Verify the Identity of Potential Renters?
There are many obvious reasons why it's important to verify identity. You need to know who you're actually renting to for the reasons already stated.
Yet, in today's tech-driven world, it's easier and more common for renters to try to pull off a fraud. Don't underestimate the lengths some people will go to in hiding their real identity.
People will attempt to use fake IDs and fake social security cards too. This is where verification becomes absolutely necessary.
How Can a Potential Renter's Identity Be Verified?
As a landlord, doing your due diligence to verify the identity of a potential renter is critical to protect your interests. What methods can you use for verifying identity?
Let's take a closer look at your options for identity verification.
The common forms of government identification include:
- A state-issued driver’s license
- A valid passport
- An international or travel visa
You could also ask to see a social security card. Now, these can be falsified. So, one thing you can do is ask for two pieces of identification. You might then take the identification and run it through an identity verification program. Many landlords, especially ones who've experienced fraud before, feel the investment into a program like this is worthwhile.
Another verification tool is to look at the tenant's employment background. Most landlords ask where a prospective renter works and even their income. That isn't really enough.
You also need to call and verify both employment and income. Many tenants are willing to lie about income to get into an apartment. You don't want to get caught renting to someone who can really afford the rent.
If a prospective renter doesn't provide complete contact information for their employer, this is a red flag.
Background screening should also get access to employer information.
You also want to check a prospective tenant's rental history. You want to know what kind of tenant they have been in their previous rentals. You should ask the tenant to provide previous places to live as part of their application and you should check with their previous landlords.
Now, be prepared that a renter could lie and you could be calling a friend who's covering for them. Be sure to ask the landlord questions only they could likely answer. You might ask the address of the previous property, the rent amount, or even the dates the person lived at the property.
If the previous landlord can't or won't answer those questions, that's a red flag for you. Look for gaps in their rental history. If there is a gap that shows they weren't living somewhere, you need to question it. It's possible it was left off because they didn't want you to know about something that happened during this time period.
You not only want them to be a good tenant, but you also want to know they can afford where you're renting. One way to do this is to ask for documents that would allow you to do income verification.
Some of these documents might include:
- Pay stubs
- W-2 tax forms
- W-4 forms
- Bank statements
- Employment contracts
You want to verify their income and make sure they have enough to pay the rent. How do you know how much they should make? Most experts suggest using the rent-to-income ratio of 3 to 1. Rent shouldn't be more than around a third of the income coming home to make it affordable.
While it can be time-consuming, it makes sense to go the extra mile and check references. You should ask potential renters for names of references and contact information.
Sure, a renter can provide names of people they think will say what they want them to. Most people are willing to offer opinions. One thing is to ask some fact-based questions that will tell you whether the tenant has been truthful on their application. For example, you might ask what was the address of the last place this person lived?
Many landlords are opting to run background checks on prospective tenants. Much of the information listed here would come up in a full background check.
You get a full consumer report too that tells about the person's credit history as well as other pertinent information.
Use Identity Verification for You Renters Portal
Identity verification is an important tool to make sure you are protected as a landlord. With so many renters willing to be fraudulent, you need to protect your interests.
If you want help with the process of identity verification for your prospective tenants, we can help. Contact us today to learn more about our background check services.