New York City Broker Fees Explained

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8 Responses

  1. POPS says:

    Great article. Really like the no-fee map. Keep up the great work.

  2. Wow, Max, you know this is a hot spot for change, and I’m sure your software can help these renters in their decision a lot. I guess it’s easy on the person renting the unit, but there’s no way somebody won’t step in the create a tech method for fixing this dea.

    • Max Galka says:

      Agree. Our no fee map is a one-off project we thought people would find helpful, but it is far from a permanent solution. I think disruption is on the way for real estate, and look forward to seeing how it plays out.

  3. Matt says:

    Thanks for the article! Question on the landlord side.. In NYC, where tenants typically pay the brokers fee, does a landlord who found his own tenant have any obligation to pay a broker that had an informal arrangement to find a tenant for the landlord?

  4. Max Galka says:

    Good question. The landlord has two options.

    He can do an exclusive listing, in which he agrees to let one broker list the apartment. If the apartment gets rented, the broker collects a fee — doesn’t matter how the tenant found the apartment.

    The landlord can also do an open listing. In this case, the listing is open to any broker. And if the landlord finds the tenant himself, he does not have to pay anyone.

    Exclusive is more common (about 70% of listings)

  5. Jordan Vidor says:

    Great piece – thanks.

    Like many other industries in 2015, the rental-broker industry is dying and candidly needs to die faster… would be helpful to see regulators step in and expedite its death. Insurance brokers are capped at X% of premium (figure depends on market and line of business) – yet – we continue to drastically overpay for a service that is (in most cases) largely unnecessary.

    The tack on of the “broker fee” (which… by the way… is a $5-$10K fee we pay to just-out-of-college ‘salesmen’ and bored housewives) has inflated rental costs to a point that has made affordable rentals few and far between.

    We have had a healthcare overhaul. This next election will focus on an education/pension overhaul. Where is the real estate overhaul??? Specifically the rental market?!

    If I was governor – I would have these guys paid nothing. Posting a few pictures to a website a couple of times a month is a task interns and college students should take up.

    This industry needs to go and not sure why it’s not getting more limelight.

  6. judy says:

    There are wonderful real estate brokers who are true professionals …. and then they are others. And there’s a big difference. If people want to sit and do the due diligence of finding apartments to look at … that’s great. And then there are those who just don’t have the time. We all have choices in life. The choice is yours … to work with a TRUE PROFESSIONAL broker …or not.
    I, myself, am a broker … and I’m often told how easy I’ve made the process …. verses theier past experiences. So, again … it’s always your choice.

  7. Justin Duffy says:

    *Sorry for the double post — the original has odd spacing for some reason. Moderator please remove the previous post with the odd spacing. Thank you :)*

    Any industry with 27,000 workers will have some bad apples, and in New York City (the BIG apple), real estate agents are definitely no exception. However the rental brokering industry in Manhattan was born out of necessity and was created to benefit both landlords and apartment hunters.

    Landlords don’t want to put up the funds for someone to manage their properties, advertising, applications and apartment showings, and prospective tenants don’t want to spend time toiling through the internet (and historically, phonebooks and magazines) to find contact information for landlords to find the best deals.

    The way that the internet listings portals currently presents the rental process in New York City is at best a fairy tale, and responsible for a lot of the bad blood between rental brokers and renters. Because of the pace of the rental market, it is impossible to expect any one landlord or broker to keep their listings 100% up-to-date every second of every day. If they did, they would have no time to take anyone out and let them into the apartments in question. The listings portals are not paying them and landlords are not paying them, so their paycheck is dependent on client acquisition and providing a positive and useful service.

    Any service that acts as an intermediary to multiple parties in a fast-paced product acquisition situation opens the possibility of foul play. Because of the business model of these listings portal sites, there is no incentive for them to monitor and police the listings that come through their sites, making it very easy for the bad apples to post and maintain fake or expired listings. Most of these sites make their income from the broker’s themselves, through monthly subscription packages that allow them the privilage of advertising their apartments on the listing platform. The more listings they have on their sites, the more broker’s are paying their monthly subscription.

    Ergo, profit for the listings portals at the expensive of every other party.

    Broker’s fees can sometimes be an overwhelming amount of money, but you are paying for the luxury of having access to listings before the rest of the internet world does and for doing minimal legwork to find a good deal matching what you’re looking for. Landlords have no incentive to pay these fees because they are in control of the supply. So if you want the service, you will need to pay for it.

    This is, of course, if you are able to find a broker that you trust, and that you are willing to buy into their process and allow them to be your ally. It is important to be vigilant whenever you are meeting a stranger from the internet for any reason, but you cannot be unwilling to participate in the service you are requesting. If you want to navigate the internet and make contact with landlords directly on your own, then that is what you should do — but there is no way around compensating a professional for their services should you choose to utilize them. You wouldn’t go to the doctor and say “I can probably get the syringes direct from the manufacturer for cheaper, so I’m not going to compensate you as much as you are requesting”.

    The internet listings portals fantasy that tells you you can just click on a link and then you will magically have access to an apartment that looks as fabulous as the photos is a ridiculous claim. Even when everyone has the best of intentions, the chain of communication between property managers to landlords to brokerages to agents to the internet to the prospective tenant and back again has many links that can easily snap. This is not a result of the industry of rental brokering, but a result of the wasteland of listings portals.

    Broker’s aren’t getting paid by landlords or by listings portals, and most of the work they do (maintaining listings, client outreach and followup, sending over listings of availabilities, photographing apartments, copying keys) goes unpaid. The one money making activity rental brokers participate in (showing apartments), will often go unpaid as well — as clients can and will disappear without warning. So the 15% fee you are paying is likely covering their past few weeks of work. If the rental brokering industry didn’t offer enough income to live above poverty, no one would do it — and without people to open doors to apartments, everyone’s life would be much more difficult. Because landlords aren’t going to do it. StreetEasy isn’t going to do it.

    Use a broker or don’t, and if you do, make sure you do your due diligence as you would when hiring any provider of a service. But don’t outcast an entire group of people, many of which are well-intentioned professionals trying to support their families while offering a necessary service to those who are seeking it in a fast-paced and confusing product environment. You don’t need to use a broker, but there are people who can benefit from the service who are unnecessarily confused by comments like these.

    Best of luck to everyone on their collective apartment search, from one well-intentioned sleazy scumbag broker in Manhattan.

    -Justin Duffy

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