Blog June 3, 2020

Why “instant” resident screening services put multifamily property managers at risk

By MRI

This article was written by Aaron Durkee, Director of Product Management for MRI Resident Screening and Robyn Kunz, Director of Compliance.

A recent New York Times article entitled “How Automated Background Checks Freeze Out Renters” highlights the repercussions of incorrect resident screening reports that result in prospective apartment applicants being wrongfully denied.

Such reports are known as “instant” background checks, and they rely on algorithms and computer-based “matching logic” to determine which criminal, eviction, and sex offender records are reported to a landlord during the tenant screening process. These algorithms are far from perfect, and often report records that belong to a different person with a name similar to the applicant.

When the data doesn’t add up

One example cited in the article was that of William Hall Jr., whose housing application was turned down after a background screening company labeled him a sexual abuser. The William Hall who actually committed that crime was 30 years older than Mr. Hall Jr. It would only take a minute or two for a human to determine that the record should have been excluded from the resident screening report. However, a representative from a company that provides instant background checks is quoted in the NYT article as saying that verifying the information on its reports “would be an overwhelming task.”

Risks for multifamily apartment landlords

An incorrect screening report not only creates disruption for the applicant, but it also puts the apartment landlord at risk. Wrongfully denied applicants can quickly turn into plaintiffs in lawsuits against landlords and background screening companies. Many of these cases are settled for undisclosed sums, so it’s difficult to calculate the true cost to landlords and background screeners. But even cases that are settled quickly often result in tens of thousands of dollars in legal fees alone. And those numbers can multiply when the lawsuit turns into a class action, which is exactly what happened when William Hall Jr. sued over his inaccurate background check.

Compliance violations

Additionally, inaccurate screening practices pose a compliance risk for multifamily property managers. Fair Housing laws apply to screening services, and if your property is wrongfully denying a prospective renter based on false information, then you could be in violation of the Fair Housing Act. Understanding how your screening service aligns with fair housing laws can prevent legal issues for your multifamily property.

Competitive edge

Today, as a result of the COVID-19 pandemic, the rental market is more competitive. Prices for new 12-month leases decreased by 2% from March to April 2020, according to the MRI Software Market Insights report. With increased reliance on technology and digital services to avoid face-to-face interaction, it’s important to ensure that those technologies deliver the right results. Landlords have an opportunity to leverage screening practices that prioritize accuracy over speed to select the right tenants for their community.

Human touch

Multifamily professionals are not experts in background screening, and they should rely on a provider that incorporates human oversight into the screening process. So how can multifamily property managers reduce risk and more accurately screen tenants?

MRI Resident Screening allows multifamily properties to run comprehensive credit and background checks with the appropriate efficiency and risk management. With drill-down reporting capabilities, a team of in-house investigators, and proprietary credit check technology, MRI’s resident screening service offers a configurable approach to reduce risk for property managers and their communities.

Accurate background screening is not an overwhelming task

As a society, we often think instant is better. Instant purchases, instant service, instant results from the web are all logical markers of advancement and improvement in technology and commerce. But when instant also equates to inaccurate, it’s time to take a step back. Is it really better to continue damaging the lives of renters and causing landlords to miss out on good tenants? Immediate results aren’t always the right results.

Learn more about resident screening best practices in this on-demand webinar: What your Resident Screening Solution isn’t Telling You.

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