Application Fees, what do you think of this practice.

[liverpoolharryk]

Hi all,

I had a very nice lady in my office today that was looking for a rental home, with a very interesting story. I showed her a few homes and she decided to apply for one. Upon giving her the application she asked "do you take an application fee of one weeks rent, and if you do, does she get it back if unsuccessful" The answer was no I do not take an application fee, but do so once I have approved you and it then goes towards your first weeks rent. If you pull out after this is paid then it is not refunded and passed onto the landlord.

Do you think this practice of agents taking a non-refundable application fee is right. Would you be worried as landlord if your agent did this?

a) That the agent may scare off prospective tenants.
b) The agent is keeping a lot of this money and not passing it onto the landlord.
c) What happens if 3 people want to apply?
c) Is it morally right.

I told the lady to phone the office of fair trading in Brisbane and see what they say about this practice.

Les & Asy what do your offices do?
what do you guys as landlords expect your agent do?

Jarrod
Jarrod Lane Real Estate

 

[Aceyducey]

Taking a non-refundable deposit - I don't know whether I'd call that soliciting or profiteering.

But I certainly would not be happy if one of my PMs was practicing such a tactic.

And as a renter I wouldn't deal with such an agent.

It certainly doesn't fit within my definition of morally right.

Taking the bond & first week-month's rent at the time of signing the tenancy agreement is what I would consider reasonable.

Cheers,

Aceyducey

 

[duncan_m]

Originally posted by liverpoolharryk
Hi all,
Do you think this practice of agents taking a non-refundable application fee is right. Would you be worried as landlord if your agent did this?

Hi Dorothy,

I dont sign a lease without the bond and two weeks rent. I dont require an Application Fee and in SA the Tenancies Act would prevent you from doing this.

 

[always_learning]

Originally posted by Aceyducey
Taking a non-refundable deposit - I don't know whether I'd call that soliciting or profiteering.

But I certainly would not be happy if one of my PMs was practicing such a tactic.

And as a renter I wouldn't deal with such an agent.

It certainly doesn't fit within my definition of morally right.

Taking the bond & first week-month's rent at the time of signing the tenancy agreement is what I would consider reasonable.

Cheers,

Aceyducey

Tip for Acey
=> Dont move to Japan and try to rent an apartment!

 

[asy]

Hehe, AL, are you referring to the 'key money' gifts of up to a month's rent just to be 'considered'?

Wow...

Never did understand how they did that...

Jarrod, to answer your question, no, we don't do this, we have the same policy as you aparrently do. Nor have I heard of this being done.

Also, do you mean Les? or Kev? I'm sure les has an opinion, but unless he's been a very busy boy, I don't think he has an agency!

asy

 

[always_learning]

At one time particularly after WWII (in which america fire bombed everything) few houses were available, you would be lucky to get one. Naturally this lend to the concept of a little "bribe" in the form of thank-you money one or two months rent to the landlord to help with your tenancy acceptance ie getting your door "key".

Now there are plenty of places to rent, however "key" money didn't die. BTW In Japan the REA takes one month rent from each of the landlord and the tenant to leasing fee for the property (ie 2 months). So in fact the key money is used by the landlord to pay the REA tenancy finders fee! Which is probably why the practice is so keenly followed by the RE Agencies.

So there you have it to move into your own apartment can cost 2 months key money, one month for the REA to process your tenancy, 2 months bond and of course 1 month rent in advance.

 

[Jas]

Wow on the key money in Japan... how long does it take to settle a property over there then if its two months to rent?


Maybe the little old lady heard something wrong from another agent/friend and was worried? I can imagine my grandmother doing something like that...

Jas

 

[liverpoolharryk]

Sorry Asy, I did mean Kev!

 

[geoffw]

Originally posted by liverpoolharryk
Do you think this practice of agents taking a non-refundable application fee is right. Would you be worried as landlord if your agent did this?

a) That the agent may scare off prospective tenants.
b) The agent is keeping a lot of this money and not passing it onto the landlord.
c) What happens if 3 people want to apply?
c) Is it morally right.

I would be completely p'd off if I saw this happening.

Immoral- and it certainly would scare off applicants.

It might work briefly in a market where there is a very low rental vacany rate (with a high demand)- but there are at least some parts of Brisbane getting longer vacancies now.

I'd suggest anybody doing that will be losing potential tenants to trhe REA down the street.

 

[asy]

Geoffw, I agree with you, I hope that in the near future all the agencies in Capalaba start doing this practice!!! (Imagine all the management's we'll get!!! hehehe)

Wow AL, that's 6 months rent!!! Just to get in the door!!!

What's the average rent in the city you live in v/. the average wage???

Amazing.

And the agency gets 2 MONTHS letting fee?

Time to buy a rent roll in Japan, methinks...

asy

 

[Kristine..]

Asy

Just think -

With all the hot competition just to be accepted, what whould the delinquency rates be?

Minus, negative, non-existent.

Would a tenant who hadn't left the apartment spotless, or who had been even five minutes late in paying the rent, be likely to ever be trusted with another tenancy again?

Personally, I think that liverpoolharryk's 'little old lady' must have been mistaken. Australia has some of the best estate agency acts & regulations and consumer protection legislation in the world. Perhaps the 'little old lady' was either exaggerating or dramatising the situation.

But in reality, in Australia we also suffer from 'pay me' cultural cringe. Everyone is so busy telling everybody else that their services are free, but does anyone value anything that is free?

And if the worst that can happen to a tenant is an afternoon at the tribunal and a civilised, courteous eviction and can walk straight into another property, then where is the incentive to respect another person's property.

Equally, I would be interested to hear the tenant protection system in eg Japan.

Certainly in Australia, there can come a time when an agent can refuse to manage a particular property any longer as the owner won't pay for even emergency repairs.

So would a tenant in a tight rental market be more inclined to turn a blind eye to the condition of a property, or are there council or building committee regulations regarding habitability standards?

Actually, it's too early in the morning to be considering these things. Happy Australia Day!

Kristine

 

[liverpoolharryk]

Kristine

Where did I say it was "a little old lady" and no she was not mistaken. She was in fact in her mid 30's and a very bright business women. She also owns a property in Canberra and was horrified that an agent would do such a thing.

The agents reasoning was that it will weed out anybody who might think of applying for a couple of houses through different agencies and stop wasting their time processing an application for it only not to be taken.

Yes you are right in saying that we have some of the best acts, regulations and consumer protection practices in the world. Hence why I posted, as it came as a great shock to me, and her as well.

I refered her to the Office of Consumer Affaris here in Brisbane, hopefully she will follow it up (she said she would), I beleive they need to be aware of such things. There is always a few that try to push laws to the limit.

Jarrod
Jarrod Lane Real Estate

 

[Kristine..]

Mea cupla

That's right - your description was of a 'very nice lady'.

My apologies (grovel, grovel)

However, as a landlord, unless a potential tenant had signed a lease - and not just an application form - then any money paid would be refunded.

I once signed a lease as a tenant then circumstances changed and I decided not to take up the lease. Naturally, I was responsible for reletting fees and for rent until another tenant was found. Fair enough.

But if an application has only gone through the selection / reference check / submission to landlord stage and the tenant for whatever reason decides not to proceed, then I would consider that as just a part of doing business. Possible, just possibly, they could be asked to reimburse the landlord for the actual costs of the application eg credit reference checks but these costs are relatively minor and would certainly not exceed $100.

Unless a lease had been signed effectively withdrawing the property from the market and therefore perhaps causing financial inconvenience to the landlord I would consider it inappropriate to charge the applicant any money at all. 'Win Some, Lose Some', is all part of the game.

Personally, I only want tenants who want to be there. A reluctant tenant would be a potential nightmare.

As a tenant or as a landlord it is worth asking the policy on this prior to dealing with an agent. The policy will also indicate the calibre of the agency and perhaps their willingness to 'go the extra mile' for their clients and customers.

Cheers

Kristine

 

[Kevin Hockey]

Originally posted by Kristine..


But in reality, in Australia we also suffer from 'pay me' cultural cringe. Everyone is so busy telling everybody else that their services are free, but does anyone value anything that is free?

And if the worst that can happen to a tenant is an afternoon at the tribunal and a civilised, courteous eviction and can walk straight into another property, then where is the incentive to respect another person's property.

Kristine [/B]

Although we do not practice the point Jarrod has raised I do know of this happening, it was raised by an American speaker at ARPM ( Property Management conference) and like Japan they have so many ways of making profit that we haven't yet even dreamed of. I agree 100% with Kristine, Real estate offers many FREE services which in my opinion are not good for our industry. As Kristine says we then earn no respect because no value has been placed on it. Why is a salesperson expected to appraise a property for FREE because an owner has been told to by his bank because they want to re-finance their loans. They aren't even considering selling.

Watch me lose friends here . There is little PROFIT to be made from the day to day running of most rent rolls. Income does NOT equal profit. Most agents do not seperate their sales and managements to know what their profit points are, if they did they would get a big shock. Its biggest value is in selling them or it's value when you want to sell the business. A rent roll does not truly become profitable until you achieve around 350-400 managements. Not many are at that level. This is why you so often recieve poor service.

Tenants do make more than one application on properties, it does take considerable time to process the application ( if done properly ) and after making the application they do often say "we've changed our mind". Why is it so offensive that they be asked to pay for the work, because it's not the "norm". Maybe it should be and if it was paid for maybe the PM's would put more effort into the process to make sure your tenant was suitable to your home.

I would suggest that although some people may not like that agencies policies, it would be operating at a profit. And that is what the owner would be most concerned about. If you have market share than you control the marketplace and can set your own rules (as long as they are within legislation of course )

Jarrod By posting these questions you could be doing one of 2 things, wanting to learn and improve your business or pick up brownie points to get business. I hope it is the first one and I have no reason to believe otherwise. But, consider this, there is a lot to learn as your business grows and you might be shooting yourself in the foot with some of your statements now.

Have a great Australia Day weekend everyone.

Kev

www.nundahrealestate.com.au

 

[liverpoolharryk]

Kev,

By no means am I trying to pick up brownie points!, just trying to see how landlords, who give us our business, would see this type of practice and what they would think if their PM was doing it.

I compare it to say a clothes store. you go in, get the salesperson to fit you out with a few outfits and then say thanks for that I'll but just keep looking around. What if they started to charge for this SERVICE? We are not the only industry that is expected to offer free services. Do you expect to get free quotes off your tradespeople? It costs them money to travel, write out the quote etc and all my tradies do it for free it's expected.

I could never charge a tenant a weeks fee just to submit an application, it's part and parcel of the business.

Jarrod
Jarrod Lane Real Estate

 

[JoannaK]

When I was running my business I would have a quick look over the application the tenant put in, and if at first glance it looked like a strong application I would ask the tenant to leave a deposit. The deposit would be equivalent to one weeks rent; no more, no less.

This did 2 things, confirmed that the tenant was in fact genuine about his application on the property, and showed the landlord that the tenant was genuine. It also effectively took the property off the market, as it's against the law to show a property to a prospective tenant whilst a deposit is held against it.

The deposit (not application fee!) was always refundable if the landlord did not approve the application. If, however, the tenant changed his mind, the deposit was refunded LESS the number of days the property was held in the tenants favour for; eg, if the rent is $70 per week, the deposit is $70, and if the tenant changes his mind after 3 days, then $30 is withheld ($10 per day). It is law that the balance of the deposit retained by the agent be passed to the landlord!

If the landlord approved the application then the deposit was applied against the first payment due by the tenant when he signed his lease.

Note: this is applicable to NSW only, I'm not sure on the laws of other states.

 

[Aceyducey]

What if they started to charge for this SERVICE? We are not the only industry that is expected to offer free services. Do you expect to get free quotes off your tradespeople? It costs them money to travel, write out the quote etc and all my tradies do it for free it's expected.

They do charge for the service, it's already in the cost of the goods. If you don't buy there you don't pay for it....it's the people who do buy who pay for the time the shop assistants spend with you.

Sounds a bit unfair, but generally what goes around comes around - you'll pay for the service someone else receives at another shop

Cheers,

Aceyducey

 

[astroboy]

Originally posted by Kevin Hockey
Why is a salesperson expected to appraise a property for FREE because an owner has been told to by his bank because they want to re-finance their loans. They aren't even considering selling.

Kev

www.nundahrealestate.com.au

Jeez Kev,
I have *never* had a bank suggest getting an appraisal from an RE salesperson for the purposes of refinancing. Are you seriously suggesting they would accept that appraisal for revaluation purposes ?

astroboy

 

[always_learning]

This is exactly what I did.

I knew my IP's had increased in value, so I asked the PM to ask the REA sales-persons their estimated value (not a legal valuation), I then put those values in my finance application. Naturally up to the bank to do a real valuation, but I did use the PM and the REA time for free (which I think is all part of the service to the owners).

 

[Pamela Yardney]

From what I understand the practice of taking application fees or lease prepartion fees or whatever you want to calll them is illegal in Victoria.

I believe they are accepatble in some states - possibly NSW

In the 60's and early 70's when there was a shortage of rental accomodation here and less regulation "key money" , that is a payment of a sort of goodwill to get a leased premises was the norm.

Often the outgoing tenant received it.