It is absolutely right that landlords should expect first-rate tenant referencing. After all, they are opening up a home they own to total strangers and asking a letting agent to be their gatekeeper.
‘Let and forget’ no longer relevant
The importance of referencing has stepped up a gear in light of the tenant fee ban, especially as agents are increasingly switching from let-only or tenant-find to offering a full property management service. Simon Tillyer – founder of Vouch and a former letting agent himself – highlights how the ‘let it, forget it and move on’ attitude isn’t applicable when you manage a tenancy from start to finish.
The quality and reliability of the tenant is crucial; agents are held accountable and landlords view referencing as the filter that ensures the most reputable renters are found. Simon Tillyer, Vouch.
“With more agents cultivating relationships with tenants that last months – even years – the quality and reliability of the person they are placing in a let is crucial,” says Simon. “Agents are held accountable and landlords view referencing as the filter that ensures the most reputable renters are found. If an agent is serious about asset protection and keeping clients onside, they will take referencing seriously.”
Keeping pace with clever tenants
Is there anything wrong with today’s referencing? No, not at all but it is a specialism that is having to adapt all the time in order to keep pace with tenants pulling ever-more sophisticated tricks (more on that later) and to keep up with proptech developments.
There is plenty of room for traditional and proptech-led referencing. In fact, a blend of the two is often best.
Vicky Quinn-Campbell at HomeLet alludes to cross-referencing against numerous touch points as the strongest pro- and re-active approach. Its 120 employees have regular fraud training and historical data at their fingertips, as well as access to CIFAS (Credit Industry Fraud Avoidance System) – the UK’s largest organisation for sharing data relating to fraud.
We check our referencing applications against the CIFAS database to add an extra layer of security for our clients, Currently we find over 300 matches each month. Vicky Quinn-Campbell, HomeLet.
“We check our referencing applications against the CIFAS database to add an extra layer of security for our clients,” says Vicky – and she has a warning for agents who may be softening over the time and costs associated with quality referencing. “Currently we find over 300 matches each month; however this number is constantly increasing as more cases are logged onto the database.”
Each match is a trigger for the HomeLet team to delve a little deeper, perhaps speaking directly to past landlords and employers for background information, and examining submitted documents for inaccuracies and inconsistencies.
This rise in referencing red flags is being felt across the industry. According to data from LetRef, the number of fraudulent rental applications is increasing, presenting an uplift of 117 per cent between 2018 and 2019. Some tenants are doing their best to hoodwink agents, especially if they are hatching a sub-letting scam – and there is an army of fraud factories to facilitate the deception.
When it comes to documents, it is the subtle nuances that give the game away but these are often the hardest to spot. The letter ‘o’ instead of a zero, the incorrect number of pages in a passport or a column of numbers that don’t line up – letting agents may not have the time or experience to spot these minute differences.
Every precaution is taken to review tenant information when a new application is created and we review each and every reference carefully before offering the final results. Simon Skinner, LetHQ.
Simon Skinner at LetHQ says, “We believe that we have a good balance between using automation and traditional methods to turn around a fast and accurate result. Every precaution is taken to review tenant information when a new application is created and we review each and every reference carefully before offering the final results. Should there be any internal concerns with the tenant application data with results that appear to be incorrect or bogus our highly trained referencing team will raise this and further action is taken before a final report can be issued.
Open banking revolution
Introduced two years ago when the Competition and Markets Authority ordered the largest current account providers in the UK to open up their data, Open Banking is becoming an indispensable – but not exclusive – part of the referencing process. All it needs is permission from the tenant and a rich mine of financial data is laid bare for inspection.
HomeLet is one of the more traditional referencing agencies starting to incorporate Open Banking into its procedures but newer companies are making it the backbone of their business and Canopy is one of them. “Historically, every new reference comes from a starting place of ‘I don’t trust you’,” says Canopy’s Tahir Farooqui, “but the current referencing system is invasive, stressful and time-consuming. Many involved in the process are unaware that Open Banking allows tenants to automatically verify their income and past rental payments by sharing their data with agents.”
Historically every reference comes from a starting place of “I don’t trust you”, but the current referencing system is invasive, stressful and time consuming. Tahir Farooqui, Canopy.
Those harnessing Open Banking receive almost immediate access to a tenant’s online banking and anyone dialled in to this proptech can see what money is coming in and going out. This provides a valuable snapshot of a tenant’s financial health and also provides another cross-referencing point: does the amount on the provided wage slip match the amount being paid in by the employer; does the company name on the bank statement match that given by the tenant; is the current monthly rent leaving the account on time every month and for the correct fee?
Not a stand-alone service
“Open Banking is getting very good traction and 40 per cent of references we complete go through this process,” says Andy Halstead at Let Alliance. “People are becoming more comfortable with Open Banking. It’s rather like contactless card payments – it took a while but now almost everyone trusts and uses the facility.”
Our tech-hub replicates the way banks and credit card companies access data. The result is far better outcomes, backed by our rent guarantee and nil deposit options. Andy Halstead, Let Alliance.
While Andy and Vicky are both fans of Open Banking, they agree that it’s not a stand-alone solution. “Open Banking without accessing the full credit file only offers a partial solution,” says Andy. We have our own bespoke tech-hub that replicates the way that banks and credit card companies access data. The result is far better outcomes, backed by our rent guarantee and nil deposit option, which is offered to all agents and their landlords when a tenant has successfully completed our referencing process.”
Andy says Let Alliance’s combination of processes and products attracts tenants faster, and removes the risk of renting a property for agents and their landlord customers. Note, however, that it’s a ‘combination’ that provides the safeguard, rather relying solely on one product.”
However, Simon Skinner has a note of caution here, “Open banking can be useful in some referencing situations. However, it is far from perfect for use as a one size fits all approach.
Some tenants may be reluctant to provide their bank details for checks to be carried out, especially those from certain demographics or older generations who may have concerns over providing personal data.”
A new stamp of approval
Plugging in to Open Banking are tenant passports, offered by Canopy and now being rolled out by The Lettings Hub, among others. Essentially a passport is a digital reflection of a tenant’s financial habits and suitability to rent – an electronic trail rather than a mass of paperwork. For this reason, it’s also easy-to-update and not tied to a specific property.
So where do tenant passports sit alongside traditional referencing? The Lettings Hub’s Property Passport includes the same quality checks as its traditional referencing service and includes additional information to provide what Heidi Shackell at The Lettings Hub calls a more ‘holistic view’ of a tenant’s circumstances, so letting agents should be confident in accepting both passports and traditional references.
Using our passport, agents can eliminate 1.8 days lost waiting for tenants to submit their application and spend less time on a let and more time on income generation. Heidi Shackell, The Lettings Hub.
Heidi likens its Property Passport to a CV. Available in two stages – a free uncertified passport with enough key information to allow agents to make an initial assessment, and a bolstered certified passport that adds extra layers, which includes a verified affordability check, a validated rental reference, an overall suitability score and a full fraud check.
A passport to better productivity?
Ask any agent and they will grumble at the speed at which references are returned and time wasted progressing tenancies that turn out to be unsuitable matches, so any development that quickens the administration process should be welcomed.
Despite it feeling counterintuitive, it may actually be safer to see digitally verified documents rather than physical copies that may have been tampered with.
“Our product is designed so agents can make quicker, more informed decisions, saving time and money that might otherwise be wasted,” adds Heidi, who promotes compelling statistics in terms of increased productivity and efficiency. “When using a passport like ours, agents can eliminate 1.8 days lost waiting for tenants to submit their application; half their view-to-let ratio; and spend less time on each let and more time on income generation.”
It’s an aspect that Tahir wholeheartedly agrees with: “Innovative technologies, such as rental passports that access Open Banking data, let agents know immediately if a tenant is suitable for a property. Passports also can reduce the back-office costs historically associated with the screening of prospective tenants and reduce the risk of rental arrears.”
Credit where credit’s due
Much is being made of improved referencing techniques that help letting agents but Open Banking is also helping tenants too – an upsell of asking renters to embrace more digital methods. Prompt mortgage payments have always aided homeowners improve their credit scores but now tenants can do the same if they pay their rent on time, thanks to a fairly recent initiative with Experian – currently the only credit reference agency signed up to the scheme.
Tenants want to use their rent payments to improve their credit position, our belief is that landlords and agents who help facilitate this will have more desirable tenants. Sheraz Dar, Credit Ladder.
“We know tenants want to use their rent payments to help improve their credit position, and our belief is landlords and agents who help facilitate this will find themselves with more desirable tenants,” says Sheraz Dar at Credit Ladder – a company that shares rent payment details with Experian via Open Banking and its digital platform.
Sheraz touches on the aspect that letting agents can use new technology to draw in more reliable tenants (it claims tenants using Credit Ladder are 20 times more likely to pay their rent on time) and give themselves a USP when the ability to improve credit ratings is included in the listing. It’s a thought process that revolves around luring tenants in with the possibility of better rates on loans, credit cards and utilities, and even a smoother path to homeownership via the ability to secure lower mortgage rates.
Digitally does it
Providing ID is a cornerstone of tenant referencing but getting scans and photocopies of documents can slow the process (and feel like pulling teeth). If the thought of checking ID documents loaded to a phone is frightening, you won’t be alone, but in a world where people pay with a tap of their device, paper is old school.
With our app, people pre-verify their identity by adding their ID and face. We use approved facial recognition technology to match people’s Government-issued ID with the biometrics. John Abbott, Yoti.
Despite it feeling counterintuitive, it may actually be safer to see digitally verified documents rather than physical copies that may have been tampered with. Yoti is providing a modern, efficient and secure solution to the age-old challenges faced when checking ID.
So far it has partnered with good2rent.co.uk to illustrate how people’s identities can be verified in seconds, and for those already doubting the security and authenticity of Yoti’s service, the company’s John Abbott has words of reassurance.
“With our app, people pre-verify their identity by adding their ID and face. We use NIST-approved facial recognition technology to match people’s Government-issued ID with their biometrics. This is also reviewed by a trained team of experts in our security centre to ensure people match the documents they share. We also use 256-bit encryption to protect and safely share details for the most robust identity system.”
You don’t need a crystal ball
Letting agents can be forgiven for feeling there’s a proptech takeover happening but in the absence of an accurate crystal ball, tenant referencing is blessed with some excellent providers whose different approaches build detailed pictures.
“Proptech fatigue has sunk itself into the industry,” says LetHQ’s Simon Skinner, “We are completely self-backed and funded. It feels like there is endless chain of pop up online solutions, applications and platforms almost on a daily basis. Some will fail and others will succeed. LetHQ have combined the resources and experience with one of the UKs largest providers of employment checks with that of veteran estate and letting agents to build and design our systems.”
This review shows what a variety of options you have – ‘belt and braces’ services for more complex tenants and a lighter, automated touch for low-risk renters. The choice is yours.