Renting an apartment for the first time can be intimidating, especially when you’re blindsided by rental fees. In addition to the first month's rent, tenants often pay security deposits, pet deposits, administrative fees, and application fees. In most cases, these payments need to be made upfront which can easily overwhelm a first-time renter.
In this blog, we'll focus on what renters need to know about rental application fees. We’ll cover what rental application fees are, why they’re necessary, and how they differ by state. We'll also provide advice on how to minimize rental application fees and protect your interests as a tenant throughout the rental application process.
A rental application fee is collected by a landlord when a prospective tenant submits a tenant application for a rental unit. Most of the time, this fee is used to run tenant screening reports. Since property owners can only obtain these reports through third-party companies, they charge tenants a rental application fee to cover the cost. The average rental application fee is usually $30-$75, per person.
In addition to obtaining tenant reports, an application fee also covers other administrative tasks used to cross-reference the information provided on a tenant’s application. Although property owners are not legally required to charge a rental application fee, it’s in their best interest to do so.
Without a rental application fee, landlords are unable to conduct standard background checks on potential tenants or will have to pay for these checks out-of-pocket. If an unruly tenant slips through the cracks this can be a challenge not only for the property owner but for neighboring tenants as well.
In some cases, property owners will waive the rental application fee, such as when they are reconsidering a previous tenant. However, property owners should be careful when waiving the application fee. Federal law requires everyone to have equal access to rental properties. Waiving a substantial amount of fees for one tenant over another may classify as preferential treatment.
If a landlord chooses not to conduct background checks on prospective tenants, they shouldn’t charge application fees. These fees are not intended to be a source of revenue for property owners.
The purpose of a rental application fee is to help a property owner assess whether or not a rental applicant would make a good tenant. In addition to obtaining credit reports and background checks, landlords can use this fee to obtain eviction reports, income verification, and other information relevant to the applicant's tenancy.
Depending on the state, property owners may have to provide applicants with a detailed breakdown of how the rental application fee was applied. Most landlords have a standard tenant screening process. It can be helpful to share this process with tenants to confirm that the funds will be used appropriately. Property owners usually screen tenants by performing the following checks:
Rental application fee laws differ by state. Most states don’t have any restrictions while others prohibit rental application fees altogether. Here is a comprehensive list of laws governing rental application fees across the country:
Although a rental application fee is not as significant an expense as the first month’s rent or a security deposit, the fee can still impact the rental application process. This is especially true if you are submitting applications to multiple rental units with little to no chance of getting these rental application fees refunded.
It's also important for you to understand the laws governing rental application fees in your state, as well as what you can do to minimize the overall cost of rental application fees. Prospective tenants should be cautious of scammers who are unable to explain how the rental application fee will be used, as well as property owners who are minimally concerned with whether or not you'd make a good tenant.
By being selective with the properties you apply to, confirming the cost breakdown of rental application fees, and including smaller properties in your apartment search, you can secure a rental unit confidently and with minimal stress.
You may not be able to avoid application fees completely, but there are ways you can reduce the overall cost of rental application fees. Consider the following tips when applying to rentals to save money on application fees:
Individual property owners may be more willing to negotiate with prospective tenants than large property management companies. Small-time real estate investors don't always fill their units the same way large-scale real estate investors do. This provides them with more flexibility in terms of how they accept and process rental applications.
Before applying for an apartment, find out how many other prospective tenants have applied. In competitive housing markets such as New York and San Francisco, it’s not uncommon for property owners to receive hundreds of applications for a single unit. Property owners usually prioritize early applicants with strong applications, so if you’re facing stiff competition and a nonrefundable application fee, consider looking elsewhere.
Ask the property owner how much the application fee costs and what it will cover. If they propose an absorbent amount or change the price after you've already agreed to one, consider this a red flag. You should also check if the fee is refundable. If it is, find out what is required for you to receive a refund. Tenants should never have to pay a fee to view a rental property and should be especially cautious of property owners who don’t at least check their credit. These individuals may be trying to attract tenants with poor credit because they plan to provide substandard housing.
Once a rental application fee is paid, it usually cannot get refunded in full. This is because the fee covers the tenant screening process which is required whether the applicant gets approved for the apartment or not. When state law requires rental application fees to be refundable, it means that the landlord must refund the portion of the rental application fee that was not used. For example, if a landlord charges a prospective tenant a $75 rental application fee, but only spends $35 assessing a tenant’s eligibility, a total of $40 must be refunded to the applicant.
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