The Guide to Real Estate Background Checks

The real estate industry is one that virtually every person will interact with at some point in their lifetime. Whether renting an apartment, shopping for a house with the help of a real estate agent or purchasing property, you will find yourself exploring the unique world of real estate and the professionals who make that industry run. 

For many reasons, ranging from the high-value nature of most real estate to the ethical missteps that led to the Great Recession, this industry tends to be bound by the concept of trust but verify. Said another way, you can put your trust in a real estate agent, a tenant, or a buyer, but finding ways to verify that trust can save you from costly mistakes. No strategy is more central to the trust-but-verify philosophy of the real estate world than conducting real estate background checks. 

What exactly are real estate background checks, you may ask? In truth, there is no one concise answer to that question. Instead, real estate background checks can vary in shape and form depending on the application at hand. 

For instance, the term “real estate background checks” is often used to describe the vetting protocols employers or prospective clients use to ensure that real estate agents and other professionals working in the real estate industry are safe and trustworthy. Real estate agents have unique responsibilities that allow them to enter customers’ homes, drive their clients from one showing to another, and share one-on-one meetings in empty houses. Agents often have keys or access codes to the homes of clients or sellers. A great deal of trust is needed to give a person you don’t know any of these privileges. The companies that employ real estate professionals and the clients who work with them need to know these professionals won’t abuse their position. As a result, real estate background checks tend to be highly in-depth for real estate professionals.

However, not all real estate background screenings are directed at realtors or other industry professionals. On the contrary, another equally common real estate background check is aimed at tenants or renters. Landlords who own property but rent it out to specific tenants want to ensure they place their real estate assets in good hands. As such, tenant background checks are an everyday part of many leases or rental agreements.

At backgroundchecks.com, we pride ourselves on offering a dynamic range of background check services that clients can use to build sound vetting processes for their businesses. We work with numerous clients that do business in the real estate industry and can provide background check solutions that are effective for vetting agents, employees, investors, buyers, renters, tenants, and anyone else who might need to be screened for real estate purposes.

What is a Real Estate Background Check?

Whether it’s a background check of a real estate professional or a screening aimed at determining the trustworthiness of a prospective tenant, a real estate background check will typically consider various factors, including criminal history, sex offender registry listings, aliases, address histories, and more. (To learn why landlords run these types of checks on their tenants, read our blog, Top 5 Reasons to Perform Tenant Screening.) Read on to learn more about the different background screenings that make up the typical real estate background check.

Criminal background checks

Why do landlords run criminal background checks on prospective tenants, and should they? These questions are frequently bandied about in conversations about housing access and criminal justice reform. One argument is that criminal background checks for tenants create substantial housing challenges for the formerly incarcerated. Advocates for criminal justice reform ask questions like, “How are ex-offenders supposed to rejoin and make positive contributions to society if they are denied housing based on past mistakes and misdeeds?” Denying a leasing application based on a criminal conviction, these advocates argue, only makes it more difficult for past offenders to rebuild their lives, in turn exacerbating problems with homelessness, recidivism, and mass incarceration.

Simultaneously, there are reasons why a landlord would wish to know about a prospective tenant’s past criminal activity. For instance, someone previously convicted of murder, assault, or rape, may pose a risk to the landlord, other tenants, or neighbors. Alternatively, a person whose record shows convictions for manufacturing meth may pose risks to the physical property.

Ultimately, landlords should use their best judgment when using criminal history checks for housing decisions. Crimes of violence, sexual assault or property damage may indicate bigger risks or liabilities than the landlord is willing to accept. Other less severe offenses, meanwhile, may be less expressly relevant to housing decisions.

Criminal background checks also hold considerable value for prospective real estate professionals. Real estate agents spend a good deal of one-on-one time with buyers, have access to sellers’ homes, and will often be a go-between for paperwork containing sensitive personal or financial information. For all these reasons, it’s vital for real estate agencies to make sure they hire trustworthy, safe people, and criminal background checks can be a significant part of that process.

At backgroundchecks.com, we offer criminal background checks at the county, state, and federal levels, as well as a multi-jurisdictional search that spans 650 million records from across the nation.

Sex offender registry searches

Sex offender registry checks are another vital consideration for landlords. While most sex offenses will show up on a criminal background check, many of those crimes only require perpetrators to register as sex offenders for a specified number of years.

Meanwhile, a person on a sex offender list should stand out as a bigger liability to a landlord than someone who committed a sex crime 40 years ago and is no longer required to register as a sex offender. Specifically, there are laws around how close to schools sex offenders may live, and registered sex offenders are broadly considered to be at a higher risk than many convicted criminals. For all these reasons and more, landlords will often use sex offender registry checks to inform their leasing decisions.

Employers in most sectors will incorporate sex offender registry checks into their background screening policies. Real estate firms are no exception to this rule. Running sex offender registry checks can help ensure the safety of buyers, sellers or other agents who will need to interact with the real estate professionals you choose to hire.

Alias and address history checks

Alias and address history checks are valuable for their ability to add extra information and contexts around criminal background checks. Criminal history searches are often conducted on a name-based search model. This model means that a person can sometimes avoid detection in a criminal background check by lying about their name.

Similarly, background checks are often geographically-based since most criminal records are filed at the county level. A landlord who only runs criminal history searches in one county or state can risk overlooking convictions that a prospective tenant has from a different geographic area.

At backgroundchecks.com, we can incorporate aliases and address history checks into our criminal background checks. While a person can adopt an alias or relocate to a new area, their real name will still be linked to their Social Security Number, as will their address history. We can provide this information to our customers and use it to expand background checks to include other names, counties, or states.

The value of alias and address history checks is the same for real estate professionals and tenants. Just as landlords can expand the reach of their background checks with this extra information, so too can employers get a better sense of their potential hires.

License/certification verifications

While the checks we’ve covered have value for both sides of the real estate world – tenants and real estate professionals – the license verification part of the process is only necessary for real estate agents. Prospective tenants don’t need any specific license or certification to be eligible for most housing. However, real estate professionals must be licensed to work in the profession.

Different states have different rules and processes for real estate agent licensing. In most cases, agents will have to complete an educational process and pass an examination to prove they are knowledgeable enough about the job to be qualified. Real estate employers should take care to verify the credentials of each agent they hire to avoid problems with competency or any liability that may result from unqualified, unprofessional performance.

Employment verifications

Regarding verifying employment, landlords are primarily concerned with current employment. The typical landlord wants to know that a tenant is stably employed before granting them a lease, as stable employment helps minimize the chances of late or missed payments. Some landlords conduct a formal background check to verify employment, while others merely ask for a recent pay stub or other proof of income.

Meanwhile, real estate agencies may verify employment history to check a candidate’s past jobs in the real estate field. Hiring an experienced and successful real estate agent is a boon for any agency. Verifying employment and sales volumes at past agencies and other on-the-job statistics can be essential to the vetting process.

Reference checks

Reference checks can be a part of both real estate background checks. When vetting tenants, landlords may want to hear about their experience with a tenant from previous landlords. Speaking with a previous landlord about payment reliability, property care, noise, manners, and other key tidbits can be the difference between leasing a house or apartment to a problem tenant and avoiding that situation entirely.

For real estate agencies, meanwhile, reference checks can help to hire managers to learn more about a prospective hire’s character, work ethic, demeanor with clients, and more. This information can be as important to a people-centric industry like real estate as any educational credentials or work history details.

Driving history checks

Some real estate agencies may conduct driving history checks on their agents simply because real estate agents drive their clients to showings. Ensuring an agent has a driver’s license in good standing and doesn’t have a history of reckless driving, driving under the influence of drugs or alcohol, or other dangerous behavior is an important way to keep clients safe in these situations.

Driving history checks are irrelevant to tenant background checks and should not be included in that process.

Best Practices for Tenant Screening

Are you a new landlord putting together an effective tenant background screening policy or a long-time landlord revising your tenant background checks? In either case, consider the four tips below as your best practices for smart tenant screening.

Familiarize yourself with all laws and regulations

The most critical thing to remember with tenant background checks is that you don’t have free reign. There is considerable debate about the ethics of tenant screening, including whether landlords should even be allowed to consider the criminal history and other background information during the tenant application process. In jurisdictions such as Seattle and Detroit, ordinances now restrict which background checks landlords can run on prospective tenants.

As a landlord, you need to familiarize yourself with all relevant legislation. Every landlord or potential landlord should be aware of the tenant background checks controversy and how the debate around tenant background checks is shifting the legal landscape around them. For instance, while tenant background screening may be legal in your area now, that doesn’t mean it always will be. If you need to find and vet a new tenant in six months or a year, you should plan to review the latest legislative happenings again. Because of this fair housing debate, it’s possible that what was once allowed in your state or jurisdiction is now banned or restricted.

While the biggest factors here are restrictions and outright bans on tenant background check strategies, also remember that landlords must abide by the Fair Credit Reporting Act (FCRA) when vetting potential tenants. The FCRA is a federal law dating back to 1970, which outlines the protocols you must follow when conducting any tenant background screening.

Plan a compliant and relevant background check

Once you know what you’re legally permitted to do with your tenant background checks, you can begin the next step: crafting a tenant screening policy that is detailed, relevant, and fully compliant. If you’re wondering what to include in a tenant background check, the question of relevance is typically the biggest determining factor. Regarding relevance, you want to focus on categories such as criminal history, credit history, employment, identity and address history, and rental history. Other background checks, including driving and education background checks, are irrelevant to housing situations, and landlords would be wise to skip them.

It is also wise to take proactive steps toward eliminating bias in tenant background checks. One of the biggest criticisms of tenant vetting policies – and one of the top reasons that landlords in some parts of the country have been restricted in running background checks on tenants – is the worry of bias and discrimination. Sometimes, background checks and other screening policies (such as rental applications) can be designed to introduce or reinforce housing biases. Policies that create intentional or unintentional biases against any group – whether families with young kids or People of Color – can lead to costly lawsuits.

Look beyond the credit report

For many tenant background screenings, landlords emphasize the financial situations of would-be renters. Simply put, the top consideration for the average landlord is ensuring they are getting a tenant who can make full and timely payments every month. As a result, while they typically include criminal history searches of some variety, tenant background checks will often focus just as much on factors that might indicate a tenant’s ability to pay.

Specifically, landlords want to know if their tenants are employed, where they are employed, their income, whether a former landlord has evicted them, and if they’ve generally made payments on time throughout their credit history. At backgroundchecks.com, we offer screening services to verify employment and check a tenant’s credit history.

While employment, income, and credit history can undoubtedly speak to a tenant’s likelihood to make rent payments consistently and on time, landlords should avoid putting too much weight on the credit report.

Bad credit can result from many factors, from student loan debt to unexpected medical expenses. Sometimes, landlords are overeager to read any credit report that shows considerable debt or a few late credit card payments as a red flag. Just because a person doesn’t have perfect credit or a totally stable financial situation doesn’t necessarily mean they aren’t financially responsible, and it shouldn’t mean they aren’t allowed fair housing opportunities.

Too often, dire financial straits result from unforeseen circumstances, some of which happen to people through no fault of their own. Take, for instance, the Covid-19 pandemic, during which many people lost their jobs and found themselves in difficult financial situations. No one could have predicted those events, and avoiding them was equally impossible. Such is the case for many people, for many diverse reasons, and landlords should be sensitive to those struggles. The bottom line, landlords should try to avoid penalizing prospective tenants for past financial mistakes or unavoidable periods of economic struggle.

A better option might be speaking with past landlords and other references to understand a tenant’s character and reliability. These personality traits often contribute more to “good tenant” behavior than spotless credit.

Don’t overlook spouses and partners

When couples apply for housing together, one member often does most of the paperwork and interfacing with the landlord. In these situations, remember that you’re considering two tenants. Running a background check on only one of the prospective tenants leads to the risk of overlooking a red flag in the other person’s background. Vetting the two tenants identically will give you the information you need to make a smart leasing decision.