While it’s possible to get a deal on your dream home at the auction house, buying a home at auction isn’t always a bargain. The starting price may seem reasonable, but several bidders can force the price well over market value.
Avoid overbidding by doing research. Are any outstanding property taxes or liens that you’d have to pay for upon purchase? What are comparable homes in the area selling for? Is the neighborhood on the way up or on the way out? On auction day, set a strict budget and don’t let emotions take hold of your paddle in a bidding war.
Sellers don’t always disclose the whole truth to potential buyers, or they might have done a Band-Aid job to cover up issues until the deal closes. The average home buyer takes 15 minutes or less to choose a home, but many potential problems, like plumbing and wiring trouble, might not be visible to the naked eye.
Home inspectors can look beyond the fresh coat of paint to find costly underlying problems. Splurge on an experience professional — it will save you time, money and house-induced heartache later on.
Showing units can be a pain because 50% of the time, tenants will not show up. To combat this, I use one of two techniques:
- I give them the address to drive by first and tell them to call me back if they are interested in seeing the inside. This eliminates the people who are disinterested because of the location.
- I try to “batch” all the showings to one time. I will tell all the callers that I will be at the house from “5:00 to 5:30 on Friday afternoon” and if they want to see it – show up then. Having multiple tenants look at a property at the same time can be a little bit awkward, but it creates a sense of competition and scarcity which allows for more applications.
It’s also a good idea to include the criteria and application process with the application. This makes it easy for the prospective tenant to understand how the process is going to work and gives you yet another way to pre-screen for duds.
If the tenant’s income is high enough and you feel confident moving forward, it’s time to dig deeper.
There are many different sources you can use to run a background or credit check on a tenant, but I recommend using Smart Move. Smart Move is offered as a service through Trans Union and is great because all you need is your tenants email address. Smart Move will email your prospective tenant and that individual will enter their information online; you’ll receive the results of the background check in hours and can make your decision.
Deciding what kind of “background” or “credit history” you’ll allow is largely dependent on your location and the strength of your market. If you have a lot of applicants to choose from, you can be pickier and only accept the highest qualified tenant. However, if you are struggling to get applicants, you may need to loosen your standards slightly (and I mean slightly) in order to move someone in.
For me, I look at the rental history and income with a lot higher regard than I do credit – because I live in a lower income area where the vast majority of prospective tenants have terrible credit. Your area might be different, so if possible, talk with other landlords in your area or ask for advice on the Edward Casey.
The things I look closely at on the background and credit checks are:
- Prior felonies
- Prior evictions filed
- Prior evictions carried out
- Other criminal or bad financial history
I make it a policy to never rent to a person with an eviction on their record or recent felony (within 7 years.) Yes, people do change – but I don’t find the risk worth taking. I’ll leave that risk to other landlords.
Schedule a time for the tenant to meet with you at the property. Don’t sign at a coffee shop or via the mail/fax, but actually meet at the property on the day they will be moving in. I find it helpful to go through the lease ahead of time and mark all the signature or initial areas with post-it notes or a highlighter so nothing will be forgotten or missed.
When you meet with the tenant, walk them through each provision in the lease – step by step – and sign (with a blue pen) as you go. This may be time-consuming but will help protect you when the tenant says, “Well, I didn’t know that” months down the road. You may consider having the tenant initial next to important items as well, such as a “no pet” policy. It’s easy for a tenant to later forget details, so having an initial is helpful in jogging their memory later on.
Always – I repeat- always take an application fee with the application. Don’t even bother processing any part of the application unless the tenant has paid the “application fee.” This amount can be whatever you’d like (and whatever the market will bear) but I recommend finding out what the local property management companies are charging and charge a similar amount. Currently, I charge $35 for the first adult and $20 each adult after this. Be sure to check with your State laws and make sure there are no laws dictating how much you can charge.
The application fee covers the cost of the background check, but it doesn’t have to be equal to that amount (you can get paid for the hassle of needing to check their background.) However, I recommend not being dishonest and don’t take advantage of tenants with this fee. The application fee should be reasonable.
A home might have gorgeous furnishings at the showing, but it needs to accommodate your furnishings and lifestyle after the sellers pack up their sofa. Look past a home’s decor and make sure the space will accommodate your lifestyle and furnishings.
Are the spaces functional and efficient for your daily routine? You might love how a seller has transformed an extra bedroom into a crafting space, but will it be big enough for your twins’ bunk beds? Focus on the floor plan and the square footage to decide if a home is right for you.