There are a number of purposes to the Regal Blog. While there is an obvious desire for the company to benefit from the posts and popularity, there is an equal desire to provide Landlords and Tenants alike with more information about the industry. Why would we want to do this? Well the answer is pretty simple. We do a great deal more than most of our competitors and we would like everyone to know it. We don’t do it for fun but as a result of many years of experience in the industry.
In recent years a new type of agent has sprung up. These are often populated by individuals who after a short stint in a professional agency have decided that they know all there is to know and set up on their own. The business plan is a simple one. Keeps costs to a bare minimum and undercut all the competition. What could go wrong?
This mini series is a chance for us to demonstrate some of the methods agents use to cut their prices. The articles are not here to suggest these methods are wrong per se, but simply to point out the risks associated with cost cutting in a high risk industry.
Referencing represents the most important part of the Letting business. It is the one chance a Landlord has to identify the potential risks of any given applicant. When considering that a tenant will have access to a property worth £100s of thousands of pounds it is pretty clear that you should know as much as you possibly can.
The internet is rife with tenant horror stories. While there are always exceptions, the most common theme is that the references had not been checked correctly or in some cases not at all.
A local Rochester Agent recently moved a tenant into a property that subsequently turned out to be a serial con artist who knew exactly how to play the law to stay in the property without paying rental for as long as possible. The Landlord on searching google was able to pull up a great deal of information on the tenant that the agent’s ‘referencing’ had not picked up. Naturally when asking to see sight of these references, the agent refused.
Here is the heart of this article. Despite an ever increasing array of professional referencing companies out there, many agents are choosing to carry out the references in-house. Thankfully most agents will as a bare minimum carry out a credit check. They will then send out a request for references to be completed by a previous Landlord, current employer and in some cases a character reference.
The above sounds reasonable enough, but, if not carried out by a professional company it is easy to see holes in the process. Firstly, if ID has not been taken, how will the agent know whether the applicant is who they say they are? Proof should be given by way of photographic ID to confirm this. When giving a previous Landlord reference, how does the agent know that the tenant resided there? Proof should be requested and a check should be done on the electoral register. When approaching the employer, is the agent identifying who in the company is authorised to give that reference? The name given by the applicant could simply be an office junior who is a ‘mate’ doing a favour. With a company let, who is finding out if the company actually exists or trades? Many of them are set up with glamorous Mayfair or Canary Wharf addresses but simply turn out to have hired post boxes.
The above are commonplace scenarios for professional referencing agents. In addition to the above they employ income multiples and scoring systems that use real life data obtained from years in the industry to identify those that cannot be trusted. For that reason, many of the larger professional letting agents employ specialist firms to deal with the referencing on their behalf. However, the costs of using such a company are significant. At Regal we expect to spend over £60k per annum on references. You can therefore see the attraction to a cut price agent of carrying out the references in-house.
The final and most important benefit to using a third part referencing company is that of impartiality. The referencing company have no vested interest in passing the tenant. Indeed if anything they are protective of their reputations and want to ensure they don’t pass applicants that prove later to be problem tenants. By contrast an agent dealing with the references in-house has a clear interest in the tenants passing, most particularly on a find only basis. When tenants pass references, they earn more money…….
We hope this post has been informative. If there are any topic areas you would like more information on, please do not hesitate to let us know.
