Safest way to ask for security deposit?

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Submitted by plm on July 27, 2017 - 10:23am

Signed a lease with new tenants but their personal check for the Security Deposit bounced. So will need to ask for a safer way to get the money. What can be done that I know for sure I get the money and can give them the keys right away? Cash, Cashier's Check, Money Order? Which are safe? How do I know if a cashier's check or money order is real?

Also is it safe to give out your bank account number for renter's to direct deposit?

Thanks

Submitted by no_such_reality on July 27, 2017 - 10:53am.

JIMHO, I'd take my lease, the bounced check to a lawyer and see if there's an effective out, such as lease goes into effect when rent and security is paid (which it hasn't been) and cancel the contract.

Again, JIMHO, bouncing the move in money is a non-starter.

Submitted by Hobie on July 27, 2017 - 2:17pm.

+1 NSR

If they can't work out a check then this may be futile, but set up a separate bank account just for wire transfers only. Keep min amount in only to keep open. This way there is no access to your main $$ accounts. Treat it as a holding account and transfer funds out asap.

Submitted by matt on July 27, 2017 - 11:38am.

Major red flag

Submitted by plm on July 27, 2017 - 11:47am.

I checked the lease, here is what is says:

Tenant shall not be entitled to possession of the premises designated for lease until the security deposit and first month’s rent (or prorated portion thereof), less any applicable promotional discount, is paid in full and the premises designated for lease is vacated by the prior tenant.

So it seems like its ok for me to withhold keys until I get paid. I know there are numerous red flags but we've met them and they do seem like really nice folks.

From a business stand point, I agree, we should run away from this but I think we can still do the lease as long as they come up with the money.

Submitted by spdrun on July 27, 2017 - 12:32pm.

Lease is invalid without initial payment. You dodged a bullet. Tear up the lease, tell the nice folks to take their nice selves elsewhere. Not your problem. If they can't get the initial payment right, what makes you think they'll pay on time in future and you won't have problems with rubber checks?

At the very least, demand a few months up front to give you time to evict them if they make a habit of not paying.

Submitted by flu on July 27, 2017 - 12:31pm.

definite red flag imho. I always request a cashier check and or at least a bank check for the security deposit plus the first month rent. But since you went the personal check route, I wouldn't continue with the lease. I wouldn't care if it's an honest mistake.

BTW: you aren't alone. Apparently this happens a lot.

https://www.thelpa.com/lpa/forum-thread/297410/first-month's-rent-and-security-deposit-bounced.html

Submitted by flu on July 27, 2017 - 12:33pm.

"Also is it safe to give out your bank account number for renter's to direct deposit?"

Hell no.

Most bill pay services do not require this these days. Chase is part of this new thing called Zelle Quick Pay. US Bank is also part of this.

No account numbers need to be given to people.

Submitted by spdrun on July 27, 2017 - 1:14pm.

Yes, it's safe. Just create a secondary account for deposits. I had my tenant running to the bank every month and depositing a check herself for years -- I just gave her 12 deposit slips with the lease.

Submitted by plm on July 27, 2017 - 1:25pm.

Lots of good advice. I should have asked these questions before agreeing to the lease. I'll see what happens but I haven't ruled out renting to them if they come up with the money.

The bank account number I'm not sure what they can do with it. Every check you write, the other person gets your account number anyways. But this Zelle Quick Pay seems the way to go in the future.

Thanks

Submitted by ucodegen on July 27, 2017 - 1:47pm.

I second those saying that the lease is invalid. Transaction is pending the completion of the security deposit - which did not occur in a timely manner.

Did you run a credit check on these people? I would just move on to the next potential tenant. Bouncing on the first transaction is not a good idea, shows a potentially poor tenant - who you will have to be continually chasing down for rent. If this is in California - avoid this person. They can play the declare bankruptcy/non-appearance game to make eviction for non-payment nearly impossible.

Not safe to give bank account number (add routing number and guess at most recent check number - and forge away your account). Besides, if they already had the cash - the security deposit would not have bounced. That means that mentioning 'direct deposit' is a red herring.

Submitted by Yup on July 28, 2017 - 12:51am.

In this hot rental market, WHY would you even consider these sub-standard renters?

They are already working you over by making you hustle to fix a problem they created. Don't expect this to change. Once they get the keys, they have possession and all the rights our lovely state confers to renters.

If these are friends-of-family or someone you just must rent to as a personal favor to Uncle Bob, then do yourself a favor and consider doing month-to-month which will at least give you some eviction leverage if they don't pay the rent.

I'd highly recommend that you consider joining the San Diego County Apartment Association, as they provide training on tenant screening.

Submitted by plm on July 28, 2017 - 10:42am.

No credit check, there was some issue where it couldn't be done. But did verify employment.

Will provide cash when they move in so security deposit will not be an issue.

Not sure rental market is hot or maybe its the time of the year now. After initial surge of around 20 people, it slowed down quite a bit.

I know I should treat this as a business but I think its good to give nice people a second chance.

Submitted by flu on July 28, 2017 - 11:16am.

plm wrote:
No credit check, there was some issue where it couldn't be done. But did verify employment.

Will provide cash when they move in so security deposit will not be an issue.

Not sure rental market is hot or maybe its the time of the year now. After initial surge of around 20 people, it slowed down quite a bit.

I know I should treat this as a business but I think its good to give nice people a second chance.

Being nice versus possibly getting screwed are completely different issues.

What you should do is require a credit check now. There's absolutely no reason why you can't do a credit check it's easy with Experian tenant check. They pay for it, they keep the record, and they can't complain about giving you their SSN because the way it works, they won't... AND since it's all through experian, they can't fudge the actual credit report, unlike a paper copy (which some people do.)....

https://connect.experian.com/credit-chec...

Also, you keep saying they will pay cash when they move in... Ugh... I hope you meant...They will pay cash BEFORE they move in.. There's no reason why you can't demand for all the payment upfront before they actually move in. And given their track record already, i think it's perfectly reasonable to.

No money, no credit check, no lease. And the last you should be worrying about is being able to rent out the place. Even if rental is softening, it's much better you have it vacant, versus letting someone live there for free and going through eviction if it gets to that.

Hopefully we're all wrong about this, but imho you are way too trusting. Im not even that trusting, and people tell me I get suckered in all the time.

I have a colleague that rented a place to a professional in CarmelV. There couldn't get payment on the deposit from a check, to the guy brings cash for the deposit and first month rent...Now it's the 3rd month, and the person stopped paying after the initial cash deposit+1st month rent.

Sorry, this sounds like a case in which it would make sense if you turn this property over to a property manager. If you are having trouble saying "no" before the move in, I can't imagine what predicament they are going to put you in the moment they pay you late, or don't pay you at all. And then you're going to be posting here asking advice for "how do I deal with a difficult tenant that stopped paying"....If you can't firmly tell your tenant "you are late paying, you owe me a late fee" or "pay be cash before moving in plus I'm going to pull your credit now", you owe it to yourself to find a property manager that has no problem doing that. Plus, a tenant is much more likely to abide if they know they are dealing with a property manager with experience versus a mom/pop operation that is sort of "nice" and wishy-washy in enforcing basic payment/rent terms. It's just how it works.

I have one tenant that use to send it rent late all the time. And every single time I gave him a warning about a late fee. Finally I got fed up with it and started enforcing the late fee. Guy hasn't been late since.

And how the hell do you bounce a check? Are people really living by a shoestring that they can't cut a rent check if they miss one payroll week? That too should be a red flag.

Submitted by plm on July 28, 2017 - 11:17am.

Yes, totally agree with you Flu. I'm way too trusting and have too much compassion to treat the rental as a business. If it gets to be a problem, I will hire a property manager.

I'm not that trusting though. I will get the cash before I give them the keys.

Submitted by ucodegen on July 28, 2017 - 2:16pm.

plm wrote:
No credit check, there was some issue where it couldn't be done. But did verify employment.

Umm. something screwy with "it couldn't be done". I know with me that the apartment complex had a problem with my credit background because I rarely use it so there was no credit history, but I was able to prove cash assets in excess of half a years of rent which cleared everything up. I think potential renter(s) situation is different..

I also second 'flu's statement above. Don't get lost in being compassionate, particularly in California or any state that has strong renters rights laws.

flu wrote:
They pay for it, they keep the record, and they can't complain about giving you their SSN because the way it works,
I was wondering if the potential tenants were committing ID theft as part of a 'lifestyle'.

Submitted by ucodegen on July 28, 2017 - 2:24pm.

plm wrote:
Yes, totally agree with you Flu. I'm way too trusting and have too much compassion to treat the rental as a business. If it gets to be a problem, I will hire a property manager.

I'm not that trusting though. I will get the cash before I give them the keys.


It is best to do this (property manager) before the whole thing starts, not to try to do it in the middle or end after the pooch has been screwed.

Submitted by no_such_reality on July 28, 2017 - 2:45pm.

Danger! Danger! Danger! Goes my instinct on 'credit check couldn't be done' JIMHO

Before I figured it's just a standard not financially together situation, probably 95% that, 5% chance pro grifter

That last piece though sets my sleaseball meter off. I now feel like a 50/50 you're dealing with a pro squatter

Did they had some really good story about why they needed the keys right away and you just got lucky on not giving them the keys?

Submitted by flu on July 28, 2017 - 3:12pm.

plm wrote:
Yes, totally agree with you Flu. I'm way too trusting and have too much compassion to treat the rental as a business. If it gets to be a problem, I will hire a property manager.

I'm not that trusting though. I will get the cash before I give them the keys.

Sending you a PM.

Submitted by flu on July 28, 2017 - 3:17pm.

no_such_reality wrote:
Danger! Danger! Danger! Goes my instinct on 'credit check couldn't be done' JIMHO

Before I figured it's just a standard not financially together situation, probably 95% that, 5% chance pro grifter

That last piece though sets my sleaseball meter off. I now feel like a 50/50 you're dealing with a pro squatter

Did they had some really good story about why they needed the keys right away and you just got lucky on not giving them the keys?

There is no fvcking way a check CANT be done. Even IF the person has a credit freeze on his account. The Experian Rental Check does NOT require an unlocked credit file. It is initiated BY THE PERSON, and you never see his/her SSN, only the credit report content. It's completely hosted by Experian. That makes it a safe playground for a tenant prospect to share his/her credit file with landlords in a safe way. And it give landlords the assurance of authenticity (no doctored copy by the tenant, as again, it's hosted by Experian)...

Plus, as an added bonus, the fee for this report is directly paid by the tenant prospect. If for whatever reason, the two of you don't agree to a lease, he can reuse the same credit file he already paid for and share it securely with the next landord... so he doesn't need to keep paying that $19-30 application fee for pulling a credit file....That's what I tell all tenant prospects. That way I don't need to deal with collecting an application fee, and they don't feel like I'm trying to rip them off with an application fee. IT's their electronic file they buy and hold onto themselves.

Submitted by flu on July 28, 2017 - 3:23pm.

plm wrote:
Yes, totally agree with you Flu. I'm way too trusting and have too much compassion to treat the rental as a business. If it gets to be a problem, I will hire a property manager.

I'm not that trusting though. I will get the cash before I give them the keys.

Cash is nothing. If they really are a "pro" they'll get the cash for the deposit and the first month rent as simple as getting a cash advance on a credit card (maybe not even theirs)....You don't know.

In fact, cash ior the first month+deposit is often a ploy. It's easy to come up with cash for deposit+first month, and it gives many people a false sense of security the person has money, when in reality they dont.

It's not sufficient to even go the cash route on the deposit+first month rent...ESPECIALLY IF YOU HAVENT EVEN SEEN THEIR CREDIT FILE.....
If you're going to go down the "cash" route, you'll want to see bank statements showing they can afford the rent for the next N months at minimum.
Also, paystubs are sufficient... Are there judgements/liens attached to their paychecks? You don't know, because you haven't seen their credit file!

No bank statements, no credit file, no lease.

Submitted by no_such_reality on July 28, 2017 - 3:32pm.

I agree with flu. You don't want cash, you want verification from a bureau that they consistently pay their bills

I've used smartmove for my tenants which includes the background check. Something that's increasingly important. Flu does the experian one include background checks?

Submitted by flu on July 28, 2017 - 3:44pm.

flu wrote:
plm wrote:
Yes, totally agree with you Flu. I'm way too trusting and have too much compassion to treat the rental as a business. If it gets to be a problem, I will hire a property manager.

I'm not that trusting though. I will get the cash before I give them the keys.

Cash is nothing. If they really are a "pro" they'll get the cash for the deposit and the first month rent as simple as getting a cash advance on a credit card (maybe not even theirs)....You don't know.

In fact, cash ior the first month+deposit is often a ploy. It's easy to come up with cash for deposit+first month, and it gives many people a false sense of security the person has money, when in reality they dont.

It's not sufficient to even go the cash route on the deposit+first month rent...ESPECIALLY IF YOU HAVENT EVEN SEEN THEIR CREDIT FILE.....
If you're going to go down the "cash" route, you'll want to see bank statements showing they can afford the rent for the next N months at minimum.
Also, paystubs are sufficient... Are there judgements/liens attached to their paychecks? You don't know, because you haven't seen their credit file!

No bank statements, no credit file, no lease.

I meant paystubs ARENT sufficient...

And yes, I sound totally paranoid about this. But hey, Andy Grove once said, only the paranoid survive.

I rather you come back here and tell me you were totally paranoid FLU, and didn't need to be.....

..then you to come back here and say, damn I'm screwed and I wish I pulled their credit file first....

Submitted by flu on July 28, 2017 - 3:50pm.

no_such_reality wrote:
I agree with flu. You don't want cash, you want verification from a bureau that they consistently pay their bills

I've used smartmove for my tenants which includes the background check. Something that's increasingly important. Flu does the experian one include background checks?

No. Experian Tenant Check doesn't do a background/criminal check. I've been lucky that the first tenants that made my credit score requirements, by stroke of luck , were also tech workers at large companies that were hired recently and looking to relocate into San Diego. So I piggybacked on the fact that prior to them being hired, the big company already did a background check/screening prioroffering them a job. And the other tenant, simply I just let the property manager handle it.

Thanks for sharing about smartmove, I'll use that when I need to in the future.

Submitted by gzz on July 28, 2017 - 4:44pm.

Flu said it right, you have to see the credit report. Plenty of people have cash to rent a place, but credit reports full of late payments and charge-offs.

I am less concerned with work history, lots of people in San Diego have income from trust funds, dog walking, ebay power selling, etc. If they have first + last + deposit up front and a clean credit history, that is enough for me.

Submitted by Yup on July 29, 2017 - 8:25am.

Hey plm, is this the property that you decided to rent out temporarily for a few years prior to selling? (I just re-read your post last Sept.)

If so, why wouldn't you rent only month-to-month, and only to stellar renters (i.e., absolutely no bankruptcies, no evictions, great credit)?

You don't want to get Professional Renters in there. One *perceived* slight and they can run to the Tenants Legal Rights Center. Then, perhaps anything you do or say going forward could now be construed as "retaliation". Say they suddenly start paying on time, but are building a room addition/deck/chicken coop, or moving 10 people into the unit, or locking you out and refusing to give you a key, etc. IMO, what rights you thought you had regarding your property do not exist anymore. As long as tenants pay, your lease is basically worthless. They have possession.

Have you ever tried to show a property while using a police preserve-the-peace escort? Or tried to evict someone who was never on the lease but had a restraining order against the person you didn't know lived there and who is now refusing to pay the rent?

Don't think this can't happen to you. And don't think that a property manager is going to jump into your mess. Instead, you'll have to pay an attorney to tell you that you are powerless for the life of the lease if the renters pay on time. This is a renter's rights town.

Unless, of course, your rental is in Texas, in which case, let a thousand flowers bloom!

(Disclaimer: nothing stated above is to be construed as legal advice, and is solely personal and/or the experience of friends and family.)

Submitted by plm on July 29, 2017 - 10:52am.

I appreciate all the warnings but I'm thinking maybe not being paid rent on time if they have bad credit.

It's a family moving in from out of town for new jobs so hopefully there was a background check done. Being a family, I think its less likely they will be some scam artist renter.

Anyhow, I'll learn to screen tenants better next time but I've got to give them a second chance. They are going to be here soon with their furniture with no place to go otherwise. Their kids need a nice place to stay.

As for selling the house, income taxes makes it hard to sell since we lost the tax free window.

Submitted by flu on July 29, 2017 - 11:38am.

plm wrote:
I appreciate all the warnings but I'm thinking maybe not being paid rent on time if they have bad credit.

It's a family moving in from out of town for new jobs so hopefully there was a background check done. Being a family, I think its less likely they will be some scam artist renter.

Anyhow, I'll learn to screen tenants better next time but I've got to give them a second chance. They are going to be here soon with their furniture with no place to go otherwise. Their kids need a nice place to stay.

As for selling the house, income taxes makes it hard to sell since we lost the tax free window.

And all these things are irrelevant to running a rental business ... you aren't running a charity. You didn't do anything wrong ..they fked up...why should you compromise...not your problem. You should have at least insisted on a credit report after their check bounced.

good luck... Hope they pay you on time here on out.

Submitted by plm on July 31, 2017 - 2:24pm.

Looks like they aren't bringing cash which I asked for.

Is a wire transfer safe? They are very evasive about bringing cash but I noticed now there is a pending wire transfer to my account which looks legit, they said they had a well off Mom so it could be from her. Spoke with the bank and he said if legit, the pending transfer will clear at the end of the day. So I suppose if at the end of the day, if it has cleared, everything should be ok?

I'm getting the feeling I should have listened to everyone on this forum to run away. But if the wire clears, I don't see how I can avoid renting to them.

Submitted by flu on July 31, 2017 - 2:52pm.

plm wrote:
Looks like they aren't bringing cash which I asked for.

Is a wire transfer safe? They are very evasive about bringing cash but I noticed now there is a pending wire transfer to my account which looks legit, they said they had a well off Mom so it could be from her. Spoke with the bank and he said if legit, the pending transfer will clear at the end of the day. So I suppose if at the end of the day, if it has cleared, everything should be ok?

I'm getting the feeling I should have listened to everyone on this forum to run away. But if the wire clears, I don't see how I can avoid renting to them.

Why do you ask if something is "safe" or "if there is something fishy about this" AFTER you already do it?

How about asking before? What do you want us to say?

"Everything is going to be fine. There is nothing wrong..."

or do you want us to tell you the worst case scenario: "they might be trying to commit wire fraud like a nigerian wire transfer scam?"....

https://money.stackexchange.com/question...

If you really want to stop things: tell your bank to refuse the wire transfer. Put a hold on everything outgoing from the account. Tell the prospective tenant, sorry the wire transfer didn't go through, and then say...sorry no rent....Move on. And talk to a property manager from here on out.

Better yet.. freeze your bank account, refuse the wire transfer....Tell the tenant you had problems with the wire transfer...And that due to the complexity of performing this lease, you've decided to handle leasing this unit to a professional property manager. And that you will get back to them shortly with the contact information with the property manager, who I'm sure will let you you re-apply for the lease, going through the screening that the property manager sees fit.... Then talk to the property manager and let him/her take over from here so you don't continue to dig yourself into a deeper hole, including doing all the proper background checks/credit checks you should have done but didn't... If I knew you personally, I would say that to them on your behalf, because apparently it seems like you're uncomfortable even saying what you really want to do.....

Submitted by plm on July 31, 2017 - 3:04pm.

Had no idea they were going to do a wire transfer instead of cash.

All of the wire transfer scams that I found when searching online is when people ask you to send money via wire transfers. If it clears, it's not possible to get the money back easily.

So in my case, since I am receiving the wire transfer everything should be good. But I just have the feeling that I missed something. Maybe I'm just paranoid because they never seem to do what I ask for.

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