The Application Fee Scam – The Math Decoded

The Rental Application Fee Scam has been around for a long time, so why is it so much more prevalent today?

This has a lot to do with the current state of the Real Estate market, or should we say the “negative” market. Realtors and Brokers are all but drowning in the long battered market but most of them still have to feed their gluttonous lifestyles. They still want to drive their $150,000 Mercedes and live in their gated McMansion neighborhoods but unfortunately, they still have not received the same rules that everyone else has to live by and actually work for it and earn it.

They have MANY homes on the MLS system that aren’t selling and probably won’t sell so they take their scam, run with it (Banks Included) and viola! A house they can make money off of without actually renting it out OR ruining their chances of selling it. They open up a Property Management Company using their Real Estate License and start printing money.

Because there were so many foreclosures in the last 6 years and still more in current or pending forclosure, there are more and more families flooding into the rental market everyday. So “finding” people to pay the Application Fee just keeps getting easier and easier, it’s like shooting fish in a barrel

The math works out like this, one house can make $5,000 – $10,000 per month and here is how it works:

  • Property Management Company / Homeowner puts an ad on Craigslist for a house, let’s say a 3BR 2BA for $950 a month. Their phone starts ringing off the hook immediately.
  • Typical family of  2 adults + kids apply to rent. Adults pay on average $50 each for the application fee.
  • Property Management Company / Homeowner sets up on average 10 showings a week (20 applicants) x 4 weeks and you get $4000.00
  • Turn everyone down that comes through the door, and your making a killing!
  • They make way more off their MLS listings by way of rental application fees than they can off of actually selling the houses.

Ever wonder where all the “For Sale” signs went?


Who Qualifies to Rent?

Most agents (property management companies) will never publish their guidelines but here is the minimum guidelines of all “published” in Wake County, this really isn’t a joke. If you think were making this up – check the resource links at the bottom of this page.

Income ~ Attempt to verify that the applicant’s total monthly gross income equals on average 3 times the monthly rental amount of the property they applied for.

  • This means if you wanted to rent a house for $1150 Month, you would need to have a total household income of $3450.
  • A typical single mother who is a full time school teacher in NC makes about $2000 per month, before taxes.

Criminal History ~ Resident Screening to obtain a detailed report of any known criminal activity, sex offences or evictions. We do not approve any rental applications that include convicted felonies or sex offences. Applications with misdemeanors may be considered however, the applicants may be required to pay a larger security deposit and/or certified funds only throughout the term of the Lease.

  • Sure, we can understand the sex offenders but are they aware that a seat belt ticket is a misdemeanor? Sure they are!

Credit History ~ Resident Screening report also provides us with a credit report and score. We look at the overall credit picture, to see if the applicant’s have any collections, late payments, bankruptcies, evictions or any other housing related delinquencies in the last 5 years. Applicants with credit scores under 650 may be approved however they may be required to pay a larger security deposit. The amount of security deposit we collect will be between 1 – 2 months worth of rent.

  • Seriously, how many people have lost a house due to skyrocketing mortgage interest rates in this area in the last 5 years alone.
  • A 650 credit score “may” be approved…. Really? You qualify to BUY a house with a 620 credit score, right now!
  • 2 months worth of rent for a security deposit? Are they aware that under NC Rental Law that’s illegal? Of course they do silly but they also know that the law only applies to YOU, not them.

Landlord Reference/Residence History ~ we attempt to confirm the last 3-5 years of rental history. We will contact the applicants current or former Landlords to discuss their rental history. A poor reference from their Landlord may result in the applicant having to pay a larger security deposit or denial of their application. Any judged evictions within 5 years would result in denial. If the applicant’s currently own or recently owned their own home, we will obtain and review their current/last mortgage statement to make sure they are not/were not delinquent. In some cases and if all the other qualifications have been met, we may consider an applicant with a short sale or foreclosure, however, they may be required to pay an increased security deposit.

  • Yeah, we don’t know anyone in the last 5 years in this abysmal economy who has lost a job, got behind on their bills, been foreclosed on, been late on a mortgage payment or have even been evicted. Nope, we just can’t think of ONE person we know that could fit into this barrel. 


Resources: Golden Realty, Raleigh NC – Property Management Company – Rental Application Qualification Guidelines