Booking Fee for a Tenancy Agreement

You see… this is the 1st time I am actually getting a tenant.

After reading a couple of “Get rich & become millionaire real-estate” books, which constantly warn about the horrors of getting the wrong tenant…it kinda freak me out.  Hence, I became really careful on picking the right tenant, which ended up my property being empty for a good 6-7 months….
It may have been the rental rate… I don’t know.

I try to follow their “teachings & theories” pretty diligently. Some are pretty interesting.

An example, is requesting for a “standing-instruction” from potential tenants in monthly rental income.  IMO…. It doesn’t work. Well, at least for me.
The dealings end up feeling “picky” and demanding.  This is one example of good in theory bad in practice. Sure… biz is biz…better be safe than sorry… but I will skip this step.

Another theory is giving a rent discount, say RM 50, if rental is paid early…
I get the idea of using incentive to ensure tenants pay. But IMO it’s added process and subjected to create confusion. I say the simpler the better.

Anyway… good news is I manage to get a good tenant (so far).
But… made a major mistake with a rather unscrupulous Agent and here’s what went wrong.

Scenario
Property dormant for 6-7 months even though engaged several agents.
Desperation sets in. Mom finally found Agent whom found tenant who’s interested.

Significant rental price reduction due to desperation & realization that my “fully furnish” property ain’t exactly “fully” after all, compare to the market. It’s more like “partial furnish”.

I requested for a “meet-up” before any offer is accepted.
Met up with Tenant & Agent…. Good vibe with the Tenant.

Here’s where the mistake is made.
Agent requested for a booking fee from Tenant.  About 90% of monthly rental…
Tenant paid… we both sign “booking” papers. The tenant requested to move in asap like next 2 days,
which is fine by me.

The next day, Tenant “bank in” the 2 month deposit + ½ month utilities to me
and 10% of the remaining monthly rental to the Agent to cover the agent fees.
Agent gave keys to Tenant. The End.

Find the problem with this process?
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Problem -> there’s NO Tenancy Agreement sign at all and yet the Agent is fully paid and Tenant having keys to the house.

Here’s what happened.

It didn’t help that the Tenant just handed me the money with no document sign for Tenant’s own protection and mine. Besides….. the Tenant shouldn’t be passing the 10% remaining amount to settle the agent fees.

Although it’s the job of the Agent to prepare and ensure a proper & fair Tenancy Agreement is in place and sign before handing out any money or keys….. it wasn’t done.

There’s now no incentive for the Agent to “finish up the agreement” since she’s gotten the money.
Basically she could just walk away.

When I confronted the agent on the process…. she has the guts to tell me it’s a normal process
and she’s been doing this for the past 13 years as an “experience” agent.
I just told her…. “You should change your process”.

Later I found out she wasn’t even from the “well-known” real-estate agency she claims to be in.
She quit 3 months back but was still using the name card and “booking” papers with the company letter head. I was really tempted to report her….. but ….

Solution
Just constantly pressuring the agent to get the Tenancy Agreement ready & stamped.
I now do more “running around” to minimize delay since I want the Tenancy Agreement ready, stamp and sign asap.

Remember…  The agent has no incentive any longer for serving me.
(besides reputation, long-term client prospect, etc… which I believe she didn’t care)
She got the money.

Lucky thing the Tenant is good and the Agent is “manageable” hence no serious damage was done but a possibility nevertheless.

I definitely no longer want to the same mistake again!

Key Learning
-    There’s no need to sign “booking” papers for tenancy deals. This isn’t buying a property dealing. If Landlord is comfortable with the Tenant and vice versa… all money and keys exchanges can be done once Tenancy agreement is ready to be signed.  No need the extra “booking” step.