30 Sep The Importance of a Quality Reference
Letmojo’s Senior Account Manager Emily Groves gives her opinion on what you should be looking for from a referencing provider, and how a quality tenant reference will save you time and money in the long-term
Referencing – it’s not a legal requirement, there’s nothing mandating you to conduct references to any standard, and yet it’s standard practice.
Why?
The main thing it boils down to is risk. If you put an unsuitable tenant into your property, the ramifications are endless. It starts with potential late or missed rent payments, damage to property, other breaches to tenancy such as sub-letting or other ‘darker’ activities. The knock-on effects of this include potentially losing your landlord and reputational damage.
This is why it’s so important to make sure when conducting referencing, it’s done by a reputable company to best protect yourself from potential business loss.
Look out for:
- A company that specialises in referencing first and foremost
- Be aware of what your provider is selling to your tenants, or even your landlords, and how
- A provider that takes potential fraud seriously – ask them what measures they have in place
- A company that answers the phone – test them! That way you know they’ll be there when you need them
Most of all, look for a company that cares about your business.
Any referencing company worth their salt will be open and honest on these points, and happy to share their processes with their customer base – after all, you need to know how you’re being served!
A word of caution – with referencing, as with most things in life, you usually get what you pay for! If you currently have free or very cheap referencing, while that may be helping your front-end costs, make sure you take the time to weigh up the cost implications if a less-thorough reference allows an unsuitable tenant to slip through the net!
Top 10 Reasons you should be outsourcing your tenant referencing.
- It saves you time! Your time is precious and shouldn’t be wasted on chasing down employers/accountants/landlords for references. Your time costs a lot more than the price of an outsourced reference.
- Use the specialists. Referencing is a small part of what you do, it’s the main thing a referencing company does. Any experienced referencing executive will have looked at an extremely high number of documents such as bank statements or payslips, or company websites, or email addresses, or letterheads – they can tell quickly if something is not adding up, which might be missed by someone who doesn’t do it as often.
- Referencing is objective. A good referencing company will get your references back as quickly as they can to offer the best service, while (more importantly) maintaining a high level of quality. The speed or quality of referencing is not driven by individual lettings targets needing to be met, and so corners aren’t cut to get a tenant in.
- Get access to market insights. The hard numbers in terms of lets achieved, average rents etc are widely available – but what about the more qualitative insights? What are other agents saying their current barriers are, or best practices? What does their average tenant look like at the moment?
- Fraud prevention. By using a referencing specialist, you are more likely to get a multi-layered protection against fraud. 185,578 cases of Identity Fraud were recorded by CIFAS in 2020, you don’t want to be part of this statistic next year!
- It’s a second pair of eyes. It’s completely understandable if you want to do a certain level of pre-checking in-house, but however much you do – it’s good to have the back up of an external company to verify the information is as it should be too. Normally, you’d only reference tenants who you think are going to pass muster – your referencing provider just confirms (hopefully!) the information. It’s a belt and braces approach to make sure your landlord is protected.
- Reduces your liability. A risk shared is a risk halved! If the worst should happen, and you have the wrong tenant in your property, your conversation with your landlord is going to be much smoother if the referencing was completed by a professional referencing company, rather than in your office! The referencing company will have a clear audit trail of any referencing and conversations which took place, meaning you have someone to turn to for evidentiary support.
- Independent sounding board. Your referencing company is more than just someone who does your references, they’re a partner company. Any referencing company who values their customers will give you a dedicated account manager who you can speak to about all things lettings, not just referencing. Sometimes it helps to bounce your thoughts off someone outside of the business!
- Consistency. Any referencing company that completes full referencing will have stringent, recorded processes and procedures, refined over years of experience referencing thousands upon thousands of tenants. While there may be, and should be, some scope to allow for common sense, because the referencing company is truly unbiased, every applicant goes through a similar process. This may not be true if you have different people in your office completing referencing, who may be conducting different levels of check.
- Formalises the process. Having an external, professional referencing company conduct references can encourage tenants to be a bit more ‘exact’ or honest with their circumstances. For example, a tenant might tell you they earn £30,000 – however they might tell the referencing company it’s £27,000 and they just rounded up when talking to you. This could be the difference between them meeting affordability or not. You should have the option to check the information your tenant submits prior to submitting them for referencing, allowing you to check if the information relating to addresses, income details, or adverse credit matches what you’ve already been told!