What Every Renter Needs To Know About Saving Some Money on Application Fees

Getty Images

Finding a place to rent in today’s tough market can sometimes feel like a full-time job between all the potential homes to view and all those applications you have to fill out—for each and every place.

Let’s face it: Competition is fierce for a great rental. So sometimes you have to fill out a ton of applications to land a new home.

And depending on the location, most renters pay anywhere from $25 to $75 per application. If you’re applying for more than one apartment and tallying up all those application fees required to apply for a rental? That’s when you start wishing house hunting was a full-time job—with full-time pay.

While application fees are intended to help landlords screen potential tenants, sometimes it can feel like the fees are in place to help them make money.

So let’s break down the do’s and don’ts when it comes to rental application fees and how you can save some money in the process.

What is a rental application fee?

Landlords typically use rental application fees to cover the cost of background checks, which often include financial, employment, rental, and criminal reports.

Most landlords must use the services of a third-party company to run relevant reports, which in turn, costs them money. So application fees are intended to cover the cost of obtaining those reports.

The fees are also meant to compensate for any time the landlord spends reviewing and confirming the information in a rental application.

So in a nutshell, the fees are intended to protect landlords who use the reports to ensure they are renting to a responsible tenant.

The problem with application fees

While fees protect the landlord, paying fee after fee can be a drain on a renter’s bottom line. And all too often, landlords collect fees knowing full well they won’t rent to someone for various reasons. (Sometimes there aren’t even rentals available.)

“Under federal law, landlords are not allowed to charge a fee for a rental application unless they intend to process the application and consider the applicant for the rental,” says Andrew Lokenauth, personal finance expert and founder of Fluent in Finance. “Additionally, landlords cannot charge a fee for a background check unless they intend to use the information to decide on the rental.”

Several states have gone as far as to adopt legislation that places limits on rental application fees to protect potential renters.

Landlords are also required to adhere to the Fair Housing Act and ensure they are not discriminating against any one tenant. This could include waiving an application fee for one would-be tenant but not another.

Which states offer rental application fee limits

While most states recognize it takes time and money to screen potential tenants, localities also want to ensure that landlords aren’t simply pocketing fees.

Laws governing rental application fees vary widely by state. So always research your local and state laws before applying for a rental property.

And while a majority of states do not have any regulations in place about rental application fees, the states below have enacted laws regulating them:

California: Landlords can’t charge an application fee greater than the out-of-pocket costs of gathering information—usually no greater than $30. (But that can be adjusted annually to match the Consumer Price Index.) Delaware: Landlords can charge only whichever number is greater: a fee equivalent to 10% of the monthly rent or $50. Massachusetts: Landlords cannot charge an application fee. Licensed real estate brokers, however, can charge a fee for rental applications. Minnesota: Landlords can’t accept an application fee when there are no units available. And any application fee must not exceed the cost of the rental screening. Landlords are also required to return any leftover money that wasn’t used for screening purposes. New York: Landlords can’t charge an application fee that is greater than $20. That fee must also be waived if a potential tenant provides a copy of a background check or credit check conducted within the past 30 days. Virginia: Landlords can charge only up to $50 for an application fee. Washington: Landlords can only charge a fee that is equal to the cost charged by a screening service. Wisconsin: Landlords can charge up to $25, for obtaining a consumer credit report. That fee can be waived if the tenant provides a consumer credit report from a consumer credit-reporting agency that is less than 30 days old.

Renters also need to be aware that in most cases, the application fee is nonrefundable if their application is not chosen.

How to save money on rental application fees

The best way to avoid multiple application fees is to create a sharable renter profile, says Nicholas McMillan, a real estate agent and owner of Hire Realty in Pleasantville, NY.

A renter profile saves time and money by gathering all necessary information in one digital rental application.

Renters can create online profiles with relevant information like renter and employment history, income verification, and answers to common application questions. Renters can also add a recent credit check, background check, and eviction report (for an additional cost).

The profile can then be shared with any landlord, cutting down on time filling out paperwork and saving money on multiple fees.

Other ways to save

Landlord won’t accept a digital application? Another option is to show up to an apartment prepared to showcase your potential as a renter, says Leonard Ang, CEO of iProperty Management.

“Present a portfolio that provides evidence of your reliability and financial history for potential landlords,” he says. “Include proof of income such as pay stubs, bank statements, and other documents that demonstrate solvency.”

And always include references from past landlords or employers in your applications.

Rinal Patel, a real estate agent and founder of Suburb Realtor in Landsdale, PA, advises also asking a landlord for a written breakdown of the fees you’re being asked to pay.

“If you feel the fees are excessive, or if you believe that you’ve been discriminated against, contact your state or local house agency for assistance,” says Patel.

The post What Every Renter Needs To Know About Saving Some Money on Application Fees appeared first on Real Estate News & Insights | realtor.com®.