Introduction to Qualifying Guidelines

Well, greetings. Robert Locke here. Thanks for taking the time to hang around with us today. The conversation we're going to have is kind of a boring one. It's about qualifying guidelines.

It's not sexy. Nobody really wants to talk about it very much. They want to talk about how to get more eyes on their website, and how to get more doors, and how to charge more fees. And this topic of qualifying guidelines is, I can find a lot of other things I'd like to do today other than train on this, but it is such a cornerstone of our business. It's such a critical part of growing up a good management company and keeping yourself safe from the hazards of this business that we have to spend some time on it.

Hazards of Accessing Personal Information

So we're going to answer the question, do we really need them? And let's describe initially what the problem is. The problem is having access to someone's personal information is hazardous to your financial health. In other words, under the laws of our country, when you have access to somebody's credit, employment, residency, criminal history, registered sex offender, all the kind of private and personal stuff that you can pull off the internet today as a property manager, you have a huge responsibility to be a good steward of that information and to follow the laws exactly as they're written, not bend to the owner's demands, "I want this information.

When are you going to let me help make the decision on who lives there?" You've got to resist all of that because you expose you and your broker and your owner to huge liability if you're going to cave in and don't follow the rules that govern this side of the business.

Laws Governing Personal Information

Now, there's three sets of laws generally that govern this. There's more, but there's kind of three primary. The first one is the Fair Credit Reporting Act, and that's kind of a big ominous bill that nobody wants to read. It's hundreds of pages long, and there's sections of it that apply to what we do. There's parts of it that apply to people who get applications for insurance.

There are sections that apply to employment. So we've taken the sections that apply to property management and then make instruction notes and help you get a good thorough understanding of what the law mandates of you when you pull somebody's personal information. The second big one is HUD guidelines, and of course, that's huge because discrimination in property management is a lot more prevalent than discrimination in employment and discrimination in real estate sales. So this industry is fraught with fair housing claims. We've got managers in this town that I know that have had, let's see, it's June of 2018 or 2019.

We've got one manager in this town that's had two this year. We have a different company that had a total of three last year.

Consequences of Non-Compliance

And the reason I know this is because our attorney, Monica Gilroy, defends a lot of those because she's kind of a fair housing litigator, and she knows this space really well. So these are huge bodies of laws that govern everything you do and every way you handle tenants' personal information. You've got to know this stuff really well as a property manager. And then lastly, even the Americans with Disabilities Act addresses this. So when people come in and say, "I have a wheelchair.

I want to build a ramp up to the front door to rent this house. Is that okay?" See, you have to follow the law in giving that answer. And when somebody says, "I've got a comfort pet," you're going to know exactly what you can and cannot say. You can't ask certain questions, and this is very tightly regulated and governed, and you're going to get yourself thrown under the bus. You're going to throw yourself under the bus and drag the broker and the owner with you if you don't do this just right.

So the consequences could be a complaint against you. It could be you go out and hire an attorney to manage that complaint. That's an expensive process. You can get fined by HUD, and it is totally disruptive to your business. When you get a fair housing claim, it's really hard to think about rent collection and hiring new staff and developing new policies.

Those things you can handle in the course of a day-to-day business in property management. But when you have a fair housing claim bearing down on you, and you're digging through records and looking for emails that you can put in your defense and having conversations with a lawyer, it's real easy to get the attorney fees in the 5 to 10 to $15,000 range. And we have a client here in town that settled one a year ago, and it was 8,000, 9,000 to the attorney and another $5,000 fee. And then the tenant threatened to sue for civil damages, and if they did that and won, then the manager would also pay their attorney fees in the process.

So this is one of those areas you do not want to learn from experience. You want to learn from the experience of other people. And this is an area where if you're not proactive and do and kind of work hard on prevention, then you'll wake up someday and realize that was a very, very big mistake.

Prevention and Preparation

So reality goes something like this. It's not a matter of if, but when. If you're leasing five houses a year, probably be a long time before you get a fair housing claim. If you get up to 5, 10 a month, if you get a big volume going over a period of years, the longer you're in the business, the better chance there is of you getting a fair housing claim. And secondly, this is the area where prevention is better than winning.

There's people say, is it better to win a lawsuit or prevent one? If you've ever been in one, you kind of know the answer to that, don't you? So reality is you work at avoidance. Reality is you prepare in advance to defend what you're doing in the approval and denial process. It's something you want to be proactive about, not wait around.

It's part of the body armor that we talk about throughout our site. This is CYA stuff. This is body armor. This isn't fun. This isn't sexy.

This isn't exciting. This is kind of a drag and boring. I get that, but it's one of those things, if you don't do it, you're going to pay dearly. You're going to pay dearly for it. One of the challenges that we have in this area, nobody ever admits that they have a fair housing claim going.

You don't sit around tables at NARPM conferences or lunch at the local tavern with NARPM guys or gals and tell them how your fair housing claim is going. Nobody brags on it. We want to brag about how many doors we signed up this year, how much more money we made, how we got a certain client that agreed to go with us. We got all kinds of things we want to brag. Nobody brags about this.

Everybody's kind of embarrassed. They're kind of like they don't want to talk about it. It's not something that they engage in. It feels like failure. When you get a fair housing claim against you, it feels like you've failed.

You didn't. It's just part of the business, and you got to be ready for it. So the whole thing of qualifying now, again, this is repeat, I get that. We did this for 35 years. We had somewhere around 18,000 to 20,000 applications go through our system.

We had to train 25 or so staff on the proper execution of the qualifying process, made sure they were following our guidelines, and we never had a fair housing claim. Now, I'm the first one to admit there's some dumb luck in there, but a big chunk of that is because we learned it, we trained on it, we did it for our staff, we made sure everybody was doing it just right. So qualifying guidelines, I'll tell you how we kind of started getting on the right track with this.

Legal Guidance and Training

I met attorney Monica Gilroy about 20 years ago. Monica, being a fair housing litigator, really began to bear down with me and help me think through how to build a great set of qualifying guidelines. And so we've tweaked that over the years, and she's nurtured us in this area. So I give Monica an awful lot of credit that we didn't have any fair housing claims in the last 20 years. Now, our solution is this.

We have a ton of training documents that we've put together in a package that you can download, so you don't have to create this by yourself. We equip you to develop your guidelines. Now, if you're doing student housing, and I did North Atlanta, 1,300, we do it differently. I get that. If you do Section 8 housing and the other guy across the street, average rent's 3,500, you're going to do it differently.

I understand that.

Customizing Guidelines

But if you set up a system, a process of doing it, then you get to morph it to your model. You get to say, "We'll take a credit score anything over 500." Or you can redesign it and say, "We don't look at anything under 650." So there's opportunity here for you to tweak it to your model. This is not, "Here, do it this way." This is to give you the framework and the systems and the training documents so that you can fill in blanks and build your own, make it just right for your model and the way you do property management.

Video Training Library

And then we put a great big video training library. There's a ton of stuff we cover in this. We haven't shot the videos yet. This is kind of on the front end. I think there's going to be somewhere around 35 or 40 training videos.

So we get down in the weeds. We get really granular at this and deal with every imaginable situation that you can face when you're doing tenant screening.

Guidelines and Compliance

So we all know the rules are your guidelines must be in writing, right? You must train on it constantly. You must apply them consistently across the board. You must follow the law in doing this. So you can go to our site, okay?

It's trainingpropertymanagers.com. You can go to our documents section, and you'll see this graphic there called Qualifying Guidelines. You can download that package.

Cost Savings and Protection

It is a fraction, I mean a fraction of the cost that you will end up paying in attorney fees and fines and civil damages by ignoring this and going through your learning curves based on an experience you have. It's always smarter to learn from other people's mistakes. We made plenty, and I've got clients all over the country that are fighting these kind of battles. You're going to fight it, too. So we're just trying to give you our experience of 35 years, make this a lot easier for you to put together.

This isn't a six-month process for you to build this on your own. You can get this done in two, three, four weeks. Collaborate with your staff, make it something that is just right for your company. Well, thank you so much. We appreciate it.

Look on our site. Download that package. Protect yourself. Put on the body armor. CYA stuff.

Protect yourself from the hazards of this business. Thanks for hanging out with us.