This is the way outsourced referencing has been carried out for decades; using a specialised third-party service to provide a recommendation as to the applicant’s suitability. It typically includes obtaining and verifying references from employers/accountants and previous landlords.
Whilst traditional methods have their place, and certainly offer a robust approach, they can fail to keep pace with the expectations of today’s tenant consumers who often now want fast, online services. It’s estimated the use of virtual tour technology has increased 600% since late 2019. If this, the most physical aspect of the lettings process, is now able to be digitised, it’s logical that those same tenants will begin to expect the administration of the let to be fast and seamless too.
Open Banking referencing
Open Banking technology was developed for consumers to securely share their data to access more personalised financial services. The application of this technology to the referencing sphere has enabled letting agents and tenants to benefit from the best of both worlds; a fast recommendation based on verified data that is quick and easy for the tenant to provide and, importantly, is secure.
Open Banking has now become a standard expectation to balance the need for speed with accuracy of data. Over 50% of our referencing applicants now consent to use Open Banking, that’s a huge indicator that consumers are more willing than ever to use technology to speed up the home-moving process.
In our experience, whilst letting agents also want to benefit from the faster-paced referencing that Open Banking technology drives, there are some things that it cannot fully replicate. We introduced a hybrid Open Banking product to provide a same-day result, but which has still been assessed by our team. It is actually now the fastest-growing referencing product in our range. This suggests that, whilst the industry may be ready to adopt new technology, it isn’t yet willing to take the plunge to a fully digitised referencing process as it still values the comfort of a human “common sense” review.
Tenant passport references
Tenant passports follow a model popularised in Scotland where tenant fees have been banned following guidelines introduced in 1984. It’s a type of “renters CV” which is owned by the tenant so they can provide their details upfront when enquiring about any property. It typically contains similar checks to a traditional reference verified by an independent third party. This includes credit history checks, ID and address verification and may also include verified income and rental history details (including Open Banking), depending on the Passport product used.
This more consumer-led form of referencing allows viewing appointments to be pre-qualified, so negotiators are only investing time where they know the applicant is likely to be a good match for the tenancy. They’re typically free to create so comply with all devolved tenant fees legislation, reduce decline rates by 50% and ultimately cut referencing costs for letting agents and landlords. It also serves tenant consumers better than traditional referencing, as they can see their results at all times and therefore make more informed tenancy applications.
In-house referencing software
Some agencies may prefer to retain control of their referencing process and complete their own checks, rather than outsource them to a third party. There are now software solutions that help agents standardise their checks, automate the reference chasing and centralise their data so it can be accessed by anyone in the team at any time. Critically it also enables these agents to provide an online process and access to Open Banking which is now expected by tenant consumers so they can compete with neighbouring agencies who outsource their referencing.
With prices in the market starting at just £2.50 per reference, the admin savings alone could far outweigh the costs, particularly if integrated into a wider tenancy progression platform.
Which is the right choice for your agency?
Overall, it’s a balancing act. Every agency has its own business priorities, whether that is speed of results, cost, quality/depth of checks, degree of automated tenancy recommendations, or eligibility for insurance products. But at the same time, it would be remiss not to consider what each landlord and tenant consumer wants too, which often varies from tenancy to tenancy.
Vetting tenants is not always a simple process, and what works perfectly for one tenancy or applicant may not be the best solution for another. Sourcing a supplier who can offer you a good range of choice in referencing products is a good starting point. It’s then about weighing up other elements of your landlord and tenant demographic - what are their key drivers? Speed? Costs? Time? Having easy, online access to a flexible product range can be the differentiator in meeting their needs.
Using technology where logical to save time and/or reduce costs doesn’t necessarily mean you’re compromising on quality or doing your tenants or landlords a disservice. The question is no longer about whether digital or traditional referencing is the way to go. It’s now a question of finding providers and tech that give you access to a full range of flexible tenant referencing options, that you can use as required to meet the unique individual needs of your landlords and tenants.
By securing choice for your agency, you can give yourself the ability to adapt quickly as consumer demand dictates. And it means there is no upheaval or barriers to trialling new innovations in the market so you can find out what works best for your specific business model.
*Heidi Shackell is Chief Executive Officer of The Lettings Hub, offering technology-driven services, including 12 referencing products, to simplify and speed up the lettings process for tenants, landlords and letting agents.