What am I paying you for!? A Renter's Guide to Understanding Broker Fees in NYC

New York City is famous for it's bustling and competitive rental market.  Finding the perfect (or simply adequate) apartment can be quite a challenge with so many qualified renters (most of whom move every 1 or 2 years) chasing so little inventory .  And let's face it, unless you have a corporate re-location budget, or an executive assistant, you simply can't afford (or refuse) to pay a broker to spend hours searching online and making appointments for you.  So why pay a broker fee, when you're doing all the heavy lifting?

Our goal is to de-mystify this uniquely NYC phenomenon and help answer that very question for countless renters, hopefullly our future clients :) 

First, let's understand what Broker Fees are- essentialy the Landlord's COST of leasing a property.  This includes PREPARING the listing (cleaning, staging, photography), MARKETING (advertising, showing), and FACILITATING the transaction (Deal Negotiation, Lease Preparation, Building Approvals, Move-in, etc).  

Since these are Landlord responsibilities, they must pay their Brokers to execute all these tasks, right?   Well, That depends mainly on two things:  1.  Mr. Market and  2.  Pricing  

1.  Mr. Market, why do you charge such sky high fees?

The dynamics of the NYC market fluctuate based on the current environment.  Remember COVID, or the 2008 Financial Crisis?  During these weak periods of the rental market, it was nearly impossible to demand a fee from tenants, except in some unique situations.   Remember after COVID lockdown ended, and EVERYBODY was moving around NYC, upsizing for that home office, and of course ANY OUTDOOR SPACE!?  Renters bent over backwards to pay broker fees of 10-20% (sometimes up to 40%!) for any apartment that had a terrace or balcony- and Landlords were back in the good ol' days of never going out of pocket to get their apartments rented!

Generally speaking, In a strong rental market, Landlords can pass down the Leasing Cost (or Fee) to incoming tenants who are willing to pay out of pocket in order to secure the apartment over a field of competitive renters.  In a weak rental market, the opposite is true- Landlords must attract a larger pool of prospective tenants, and cannot Dis-Incentivise renters that have more options, and less competition; in these cases they pick up the tab themselves, and offer the apartment to the renter with "No Fee".  After all, vacancy is the greatest killer of profit for a Landlord.

2.  It's all about the $

Let's just say the quiet part out loud:  Renters... you are always paying the Landlord's Costs! Sometimes that might be a Broker Fee, but if they forego that requirement, it will be made up in the monthly rent!  

When Landlords hire us to Rent out their property in NYC, we generally offer them 2 options- and I'm sure you can guess where this is going by now.  

Listing A - Price $X/month - Pay for our brokerage services - Offer Tenant "No Fee"

OR

Listing B - Price $Y/month - Don't Pay for our brokerage services - Require Tenant to pay a "Fee"

It goes without saying, that The Price (Rent) you will pay for Listing A will be substantially HIGHER than Listing B, but they are the same apartment!  There are certain pros and cons for both Landlord and Tenant in each of these Fee Structures, but that is a much longer converstaion that we would be happy to have with our future clients :)

The message we want to get across now is Pay attention to the pricing of similar units on the market.  When comparing listings online, make sure you are comparing apples to apples, and normalizing the total monthly costs based on the Fee Structure.  

WHO's ON YOUR TEAM?

It is important to know that just because you have paid a broker fee, does not mean that you have a broker representing you.  Huh?

Real Estate brokers (and agents) are required to disclose who they represent in every transaction.  Chances are, unless you have explicitly hired an agent to work on your behalf, you are likley dealing with a broker/agent who represents the Landlord, and their interests in any negotiation, lease that will come as a result of the showing.  In most cases (especially Manhattan and North Brooklyn), recognized brokers are part of a Trade Organization called REBNY (Real Estate board of NY) that REQUIRES by its membership, that Listing Agents (Landlord reps) allow tenants to be represented, and share the broker fee with the agent of the incoming tenant.  So it is worth talking to another broker (hopefully us :) before going into a lease negotiation, even if you visited the apartment on your own and met the listing agent directly.  It is always better to have professional representation in ANY Real Estate Transaction, whether it's a Lease or a Sale.

COASTAL PROPERTY ADVISORS

Our mission is to provide exceptional service to our clients, customers, or prospects to help them achieve their real estate goals.  We are a boutiqe firm, dedicated to our clients' success in all matters pertaining to real estate, with a life-cycle approach to all projects including Sales, Leasing, Managing, or Improving Real Property.  We offer our services to clients in NYC, Los Angeles, and South Florida