No Deposits With Applications

An application deposit showed that a renter was serious. They were essentially saying, “I want this apartment, and if I’m approved under the agreed-upon terms, I’m moving forward.”

Now renters can apply to multiple apartments at the same time without putting down any money or making any real commitment. I do not necessarily blame them. The new system encourages them to do it.

But it has been a disaster for agents.

An agent can spend hours showing an apartment, reviewing documents, verifying income, speaking with the owner, checking references and preparing a lease—only to find out that the renter applied to four other apartments and decided to take whichever one responded first.

The deposit brought order and accountability to the process. Without it, the rental market has become the Wild West.

Think about how much time can be wasted across the industry on just one renter.

That renter applies to five apartments at the same time. Five different agents drive to five different properties, conduct showings, collect applications, review documents, communicate with landlords, verify qualifications and, if the applicant is approved, prepare and send out leases.

Each agent may spend several hours working with that one applicant. In the end, four of them are going to hear, “Thanks, but I decided to go with another apartment.”

One renter can easily waste more than 10 hours of combined agent time—and that is just one renter. Multiply that across thousands of rental applicants throughout Massachusetts, and the amount of agent time now being wasted across the industry is staggering.

The Renter’s Commitment Now Comes Last

Without some skin in the game, there is very little real commitment. Many renters do not fully decide whether they want an apartment until the moment they are asked to put money toward it.

I have already seen this happen repeatedly. An applicant gets approved, I prepare the lease and send it out with a payment link—and only then does the decision suddenly feel real. That is often the moment they hesitate, reconsider or back out.

Before the law changed, renters put skin in the game when they submitted the application. That required them to seriously think through whether they wanted the apartment before asking the agent and landlord to move forward.

Now the process is completely backwards. The renter may not make a final decision until the very end, after the agent has already spent hours processing the application, communicating with the landlord and preparing the lease.

Massachusetts has created a system in which the renter’s commitment comes last, but the agent’s unpaid work comes first.

The message to agents is clear: your time does not matter.

Renters Lost Protection Too

This is not only hurting agents. Renters benefited from the application deposit as well.

When an agent could collect a deposit with an application, an approved renter usually had some breathing room. Once accepted, the apartment could be taken off the market and held for 24 to 48 hours while the renter reviewed the lease, signed everything and paid the required funds.

That protection is now gone.

Because a renter can back out at any time with no financial consequence, an agent cannot safely stop showing the apartment or processing other applicants. The agent has to keep scheduling showings, keep getting people approved and, in some cases, keep sending out leases until someone signs and pays first.

That is not a reasonable or civilized way to conduct business.

I have already had multiple situations in which an applicant was approved, but I had to explain that the apartment could not be held for them. Until the lease was fully signed and the money was paid, another applicant could still take it.

You can hear the stress in their voices. Someone may be approved at 10:00 a.m. but be unable to review and sign everything until they get home from work. Instead of feeling relieved that they were accepted, they spend the entire day worrying that someone else may take the apartment before they have a chance to complete the paperwork.

That is not fair to renters either.

The deposit created commitment, but it also created security. Without it, the entire process has become a race—and both agents and renters are paying the price.

The State Eliminated the Tool Instead of Fixing the Abuse

So why did the state make this change in the first place?

The concern was that renters could lose multiple months’ worth of rent after backing out of an apartment. On that point, I agree there was a real problem.

Plans fall apart. Sometimes one roommate backs out at the last minute, leaving everyone else unable to move forward and potentially costing the group thousands of dollars.

But instead of limiting how much a renter could lose, Massachusetts eliminated application deposits altogether.

Now I am going to put my Einstein-level critical-thinking skills to work and propose a radical solution: instead of completely eliminating the tool agents relied on to protect their time, why not simply cap how much a renter can lose for backing out—say, at $1,000?

The deposit would be fully refundable if the landlord rejected the applicant or changed the agreed-upon terms. It would only become subject to forfeiture if the applicant was approved on those terms and then chose not to proceed.

That would still discourage renters from applying to five apartments at once and wasting countless hours of agents’ time, while also preventing someone from losing $10,000 or more because a roommate backed out at the last minute.

Apparently, proposing a reasonable middle ground now qualifies as genius-level problem-solving—at least on Beacon Hill. 🙄

For years, I collected a $300 deposit with an application. I found that amount was enough to show that the renter was serious and discourage them from applying everywhere, without putting them at risk of a significant financial loss.

I was using the tool responsibly. I was one of the good guys.

But instead of fixing the abuse, Massachusetts eliminated the tool entirely. Responsible agents, irresponsible agents, landlords and renters were all thrown into the same dumpster fire because the state apparently could not be bothered to come up with a more balanced solution.

Experienced Agents Are Walking Away

I am already seeing experienced agents walk away from rentals altogether.

Massachusetts has effectively told rental agents that their time is not worth protecting, while showing the middle finger to a licensed profession with more than 50,000 active brokers and salespersons.

As experienced rental agents leave the business, transactions are increasingly being handled by newer, less-experienced agents—and that is not good for landlords or renters.

And the elimination of application deposits is only one part of the problem.

In my next blog post, I will examine the other provisions of this law and explain why I believe the legislation, taken as a whole, was written with almost no consideration for the agents responsible for making the residential rental market function.