When a broker shows you a "no fee" apartment

If you have the contact info of the landlord just contact them directly to avoid any problems and avoid the fee entirely.

If the listing's a no-fee, it's a no-fee whether or not you view it with a broker. The broker's fee is paid by the landlord. You don't pay any fee, period.

Most likely the broker asked you to sign a document stating that he showed you apartments located at such and such address and that if you move in there within a year of him/her introducing you to that address you owe him a commission even if you circumvent the broker and go direct.

Also if you do now circumvent the broker, the landlord may be hesitant to rent to you if he thinks the broker has grounds to pursue a claim.

Be aware that many buildings pull tenants from several sources and advertise on their own and offer no-fee to tenants and also use the resources of brokers who may collect fees from you to make their time worthwhile.

I specifically tell brokers NOT to waste their time introducing me to apartments from well known Management Companies as I can go there direct and get a better deal.

As for your situation, perhaps the broker can provide added value to the deal by negotiating better terms or a price drop making the commission fee a wash-out.

"We are OK with paying a fee if that's our only way to get into a building we like...
but we are not so OK with paying a fee to a broker for showing us an apartment that we could
have rented ourselves without the fee."

It sounds like you are reverse engineering the brokers listings by googling them after the showings.

Craberry and Squid are both right, though the Devil is in the details of a particular listing.

Are you willing to post the address? No need to specify the unit (though the address might give that away).

We live in an Archstone (no-fee) building. I can't believe how often I see poor newbie schmucks come in on the arm of a shameless broker, who will no doubt be collecting a fee. Do your homework, people! TripleP, good luck going forward, glad you discovered SE (and NYBits?), you owe NOTHING to that unscrupulous broker.

Actually, there's an intermediate status called "CYOF" -- Collect Your Own Fee -- where the landlord covers the listing broker's fee, but if you come in with your own agent, you should pay them.

Your agent should have explained to you that this was a possibility.

This is just another of the many screwed-up situations that everybody lands in by using different computer systems.

I can't tell if this is a CYOF and you should pay your agent, or if this is a true no-fee and your agent is just trying to rip you off. Arguably, however, if the agent showed you something that you hadn't found on your own, they've added value to your search and should be compensated.

So you guys will just have to work this one out. But in the future, you need to clearly delineate who pays what BEFORE you look at apartments.

ali r.
{downtown broker}

nybits.com - all free.

Rose pays the broker fee in most buildings; if you go by yourself they will often credit you for one month's rent free, in lieu.

Ali: Exactly. CYOF seems to be the norm in your new nabe these days.

stevejhx: That's nice, but there aren't that many rental buildings on the UWS where you can deal direct.

The apartment in question is not a NY Bits listing or through a big management company. In fact, through some simple searching, I have found that this building requires that you use a broker to get in... so contacting the landlord independently would not have been an option.

We never signed any kind of exclusivity with the broker - or filled out any paperwork at all for that matter. We have conducted our search largely on our own at this point (which this broker is very aware of), but decided to allow a broker to set us up on a "tour" yesterday. For the record, he did a great job of showing us listings we had not yet seen that met all of our criteria - many of which were listed in the last few days.

West81: 51 W86 - many listings.

I will tread carefully here. The problem lies in the current system and the way brokers are compensated. The options for a broker to scale the fee are very limited if they are working for almost any firm. I am trying to create an environment that allows brokers the means to be creative, with how they are compensated.(splits up to 95% to the broker)

In my case if the owner is paying the fee I accept it as payment in full regardless of the amount. If the owner is paying a month fee I return a portion back to my client, to date I have given back approx. $15,000 dollars to clients. I also work for a flat fee determined before we start the relationship.
With sales I will rebate a percentage of my commission to my client(buyer)

TripleP: Looks like the listing is an exclusive for Rachel Realty. Assuming that's the case, you can tell your agent he's working for Rachel Gavrieli, not for you, and whether he gets paid or not is between him and Rachel Realty. If the listing agent is trying to stiff him, it's not your problem.

If you want to be nice about it, tell him what he can do to earn a fee from you - lower rent, free month, whatever. Give him a chance to deliver a deal that works for you, even with the extra fee added on top. You can always call Rachel Realty directly, and it's up to them whether they pay the agent who showed you the property.

That said, I'd defer to Ali and Keith on rental etiquette. They know this stuff much better than I do.

Thanks for the thoughts, West81. We emailed Rachel Realty directly this morning and they assured us it was "100% no fee". I hate being in this position, but I just can't justify paying $7K for no reason - no matter how nice the broker. I would rather just rent from Rachel Realty and give the nice broker who donated three hours to us a great case of wine.

Keith - it sounds like you would not put your client (renter) in this situation.

TripleP: The case of wine would be a nice gesture, but I don't think you owe him anything. Looks like he's acting as a sub-agent of the listing broker. Translation: he probably works for the other side, and has no obligation whatsoever to look out for your interests. On the contrary, he may have a fiduciary responsibility to make sure you pay the highest rent possible.

If that's the case, he's just trying to pick up an extra check from you, in addition to his commission split. He also may have broken the law by not disclosing his agency relationship.

Did you discuss the question of whose agent he is?

Update: Broker says that the landlord is not contributing to his brokerage fee. He admitted its not a "co-broke".

We never discussed whose agent he is...

Grrr. Now I am getting frustrated.

Ok, now I'm a bit confused (forgive me if I've missed something in the above posts)--is the broker who showed you the apartment NOT with Rachel Realty? If not, and if Rachel is exclusive and not co-broking the apartment, then how in the hell did your broker manage to show it in the first place?

Squid: Exactly. And whether he works for Rachel or not, seeking a payment from TripleP appears highly inappropriate.

"Broker says that the landlord is not contributing to his brokerage fee." Strictly true, I suppose, but completely misleading if the landlord's exclusive agent is offering him a split of the commission paid by the landlord.

There may be an innocent explanation here, but the most likely scenario is that the broker is simply looking for a second check.

The broker who showed us the apartment was not from Rachel Realty, but rather from a different firm. There was a representative from Rachel Realty who met us at the building to let us into the apartments during the viewing.

In a nutshell, the Rachel Realty broker is going to get paid by the landlord.

AND the broker who was bringing us around will get paid entirely by us.

I am starting to think this is criminal.

I don't know -- it doesn't seem right to me that you got a valuable service, and now you feel it is criminal that you may have to pay for it.

"For the record, he did a great job of showing us listings we had not yet seen that met all of our criteria - many of which were listed in the last few days."

Offer the broker a fee you think is fair for finding you this listing and move on. $7000, yes too much. I assume your broker's fee is negotiable considering you hadn't discussed financial arrangements before you went on this "tour." Learn from your mistakes, and let go.

No, I'm not a broker.

TripleP --

Your broker performed a service for you, I agree that you should pay him/her.

This ought obviously to have been discussed at your first meeting, just as when you hire a lawyer, your lawyer says "I charge XX an hour."

However, you didn't discuss it, so go discuss it now.

ali r.
{downtown broker}

We agree that we should pay some fee if we rent this apartment, but not a full 15%. If that is a show stopper for the broker, then we will move on and look at other apartments.

This has been a very valuable lesson. We will make sure to have the fee discussion at the onset going forward.

Thanks to all of you for your input.

Valldejuli: There's nothing criminal about charging for a valuable service. The crime would be charging both sides for the service, lying about it, and not disclosing a dual agency.

Imagine your employer sends a car to take you to the airport. The driver is delightful company, and he does a great job of avoiding traffic so you can make your flight. When you arrive at the terminal, he tells you apologetically that your company did not arrange for payment, so you'll have to pay cash. You pay the fare gladly, with a generous tip, and tell him it's no problem. A month later, you learn from Accounts Payable that the car was pre-paid directly from a corporate account. I guess you have no basis for complaint. After all, the driver provided excellent service, and you were happy to pay him at the time. So really, what's the problem?

I don't see how the broker could expect to get paid from both parties. Either he has a responsibility to the owner to get the highest price for the rental or he has a responsibility to you to get you the best deal. How can he represent competing interests and collect a fee from both the owner and the renter?

West81st, the other day I was walking down Madison, and two couples were walking ahead of me, and I moved ahead and I heard one guy say to the other "you know, sometimes you get taken, you just have to accept it," and I wanted to turn around and say something, but I didn't.

If folks don't realize there are a lot of dishonest people out there that will take advantage of situations, then the only way these folks are really going to get it is by being taken and learning from their mistakes.

Yeah, OK, TripleP's broker, well whatever, TripleP doesn't have to work with him/her if what they did was so damn egregious. They can just end the relationship right now. There are PLENTY of apartments for rent.

Buyers and sellers who use brokers without having an upfront conversation about fees, services, etc., well, that's foolish and a perfect setup for getting taken.

>>The broker who showed us the apartment was not from Rachel Realty, but rather from a different firm. There was a representative from Rachel Realty who met us at the building to let us into the apartments during the viewing.<<

If this is what happened, then it is a co-broke, plain and simple. The Rachel agent and your broker will have to duke it out over the commission. If the Rachel agent allows an outside broker to bring in a prospective tenant and that tenant takes the unit, then the Rachel agent will have to share his/her commission with said outside broker. End of story.

Your fee for this advertised 'no-fee' apartment is still $0.

^^Remember, the broker's fee in an advertised 'no-fee' apartment is paid by the landlord, who has made an agreement with the representing agent. If that agent chooses to co-broke, then he/she must share the commission. Either way it is not paid by you, the tenant.

Getting this kind of situation out in the open for all to learn from is the reason SE is so helpful. I think Squid is right on here....you should leave this to Rachel Realty to work out with their co-broker.

But I have a further question for Burkhardt Group above:

"In my case if the owner is paying the fee I accept it as payment in full regardless of the amount. If the owner is paying a month fee I return a portion back to my client, to date I have given back approx. $15,000 dollars to clients. I also work for a flat fee determined before we start the relationship.
With sales I will rebate a percentage of my commission to my client(buyer"

How do you square your rebate program (which makes perfect sense) with the State of NY legal prohibition on sharing commissions with unlicensed individuals (NYS Article 12 Sec 442 "Splitting Commissions")?

mjsalisb: Your question is a common one. In fact, I asked it too when Keith explained his business model to me.

At the moment, I'm helping Keith with a rewrite of theburkhardtgroup.com that should make it easier to understand how the rebate program works, and how it fits with NY statutes, recent case law and DoJ guidance related to commission splits and kickbacks. We'll post an announcement when we launch the retooled site.

The short answer is that the legal environment appears favorable, and DoJ has taken a strong position in favor of rebates. The obstacles are more problematic in the dozen or so states with "minimum service requirements" that tie the hands of discount brokers. New York isn't one of those, and the language of NYS law doesn't appear intended to preclude rebates.

Michael W.
Licensed Salesperson (affiliated with The Burkhardt Group)

In this situation, the broker can legally charge you a fee, but not the full 15%.

"No Fee" usually means that the landlord is paying 1 month of the rent as a fee, which comes out to 8.3% of the anual rent. Since the fee is typically 15% (not that that isn't negotiable, especially today) of the annual rent, the agent can charge an additional 1 month fee to cover the rest of the 15%.

The agent should have explained this to you before you saw the apt, such as, "The landlord is paying one month of the fee, so we require you to pay a 1 month fee for this apt"

To which you could say, "is that negiotiable at all?" or "we really prefer an apt with no fee at all". The broker may then waive the one month fee, and just take the 1 month that the landlord is paying.

If your agent asked for a full 15% on top of the fee the landlord was paying, then yes, that's illegal. If he asked for a fee that totaled one month of the rent, it was legal (although, he was indeed trying to squeeze more money out of you).

Hope that helps,

Shea Thomas
Downtown Broker

I like the math: 8.3% + 8.3% = 15%

Yeah, it comes out to more than 15%, but that's what they're allowed to charge.

You can negotiate it down to nothing though, which is why I didn't bother pointing that out.

Squid, it's not a co-broke, it's a CYOF-- collect your own fee. I just had this happen as listing agent -- people would show up with their brokers to see a place, and I would say "the landlord is covering MY fee, what you do between yourselves is up to YOU."

Fees and application procedures -- say the fee the building might charge for move-in -- are usually explained as notes in our brokerage computer systems, which y'all aren't reading. A longer, more thorough explanation is made at first contact -- which can be a pre-showing phone call but is generally a showing -- and the broker and his/her client have the option to walk out.

It makes sense for the agent and the client to have negotiated in advance what the fee structure would look like, but since they didn't, mercuricoxide's suggestions are good ones.

ali r.
{downtown broker}

ali: I don't think it's a CYOF. Check the database.

mercuricoxide: You wrote, "In this situation, the broker can legally charge you a fee, but not the full 15%." What law are you citing? I don't think New York State cares about the percentage a broker charges. If a client is willing to pay 50% or 100% of annual rent, so be it. What the law forbids, I think, is deception, as well as undisclosed dual agency. I'm no expert, but my understanding is that the issue isn't whether the broker makes 1% on the transaction, or 15%, or 1000%. He can't mislead the customer, and he can't be paid by both sides without disclosure.

Wow, so much misinformation for one thread.......

let's start with:
"I don't see how the broker could expect to get paid from both parties. Either he has a responsibility to the owner to get the highest price for the rental or he has a responsibility to you to get you the best deal. How can he represent competing interests and collect a fee from both the owner and the renter?"

An agent can collect a fee from both the landlord and the tenant AS LONG AS THEY DISCLOSE IT TO BOTH PARTIES.

"In this situation, the broker can legally charge you a fee, but not the full 15%."

This is just plain silly, since there is no "15%" fixed fee. There can not be fixed fees by law (in other words, brokerage firms, landlords, etc. can not have gotten together and determines 15% or any other number as "the fee". The fee is whatever is agreed to by all the principals involved. The tenants broker and charge him a 30% fee (if he can get away with it). As pointed out above, this is NOT a co-broke situation: it's a broker working solely for teh landlord and a broker working solely for the tenant.

The confusion comes in talking about apartments as "no fee" vs "situations" as "no fee". there are very few true "no fee" apartments. these occur when a landlord is willing to pay a "marketing agent" or managing agent to handle the rentals of their units, and also to pay a fee (usually one month) to outside brokers who bring in their clients (tenants).

Now, there are some special situations, like an owner can not send a tenant to a broker and insist he use that broker and then have the broker charge the tenant a fee when he is obviously working for the landlord. But, oddly enough, the AG et al have decided in the past few years to abandon enforcement of this.The original reason was that landlords (or, more likely, managing agents) of severely under market rent stabilized units would have brokers charge an exorbitant fee and then get kicked back part of that.

Now, as far as advice on what to do with the current broker:

They are obviously going around showing other broker's listings. I would guess that in at least a bunch of cases, they are showing units where they ARE co-broking. So, in those cases, they are collecting half of a 15% fee. I would start by reminding them of the fact that going in, they were not expecting on ending up with a 15% fee, but HALF of a 15% fee, since that is what they would get on any co-broke. I would use that as a starting point, letting them know that in any case, you expect some negotiability on 15%, and that for cases where they are not co-broking, that they should expect that after the negotiation on the 15% fee, if they aren't co-broking, they should be expecting to still be splitting the fee in half and "giving that to the phantom broker" (the phantom broker being you).

"^^Remember, the broker's fee in an advertised 'no-fee' apartment is paid by the landlord, who has made an agreement with the representing agent. If that agent chooses to co-broke, then he/she must share the commission. Either way it is not paid by you, the tenant."

The tenant, if he calls on THAT AD, it is a no fee apartment. But if that's not how he gets there, the agent is not bound by that advertisement (face it, it's not like that with ANYTHING else, is it? Is ANY industry bound by law to give every customer the best deal they have advertised, even if the customer did not come thru that ad? not that I know of). And the broker doesn't "choose" whether or not to "co-broke". For a reasonable amount of time, brokers have been barred by various agreements, etc. from keeping what are known as "pocket listings" which is a listing they do not share with other brokers. Saying a broker must both co-broke (in the sense of splitting their fee) AND co-broke 9in the sense of being forced to let any broker bring their clients) is untenable. What if a broker knows a landlord long term and agrees to take a $1 commission, advertises it as a "no fee" listing, and only after the leasing broker's tenant/client discloses the "no fee" really was NO FEE? (and, of course, you could have an even more nefarious version where the ACTUAL fee paid to the landlord's broker was one month, but they both agreed to tell everyone else it was only $1).

In any case, the tenant is only protected as far as "no fee" if that's the ad they called on. in other words, if you call on a "no fee" ad and the broker shows you that apartment, they can't then turn around and charge you a fee.

In the old days, when almost everything was 15% but there were a few OP's, JI Sopher had a separate phone line installed in each office which was the "No Fee" phone. The ads wee legal since they did include the necessary "bkr" de minimis declaration. Agents usually HATED having their "up" (i.e. trun in the rotation for getting a new client) taken up by a "No Fee client".

"We emailed the broker asking if the landlord was covering his fee, and said they were willing to cover a small % (under 5). This smells fishy to me."

Do you have this in writing? I would use it as leverage on many fronts: it was a lie; there was no up front disclosure of collecting any $ from both sides, etc.

"Also if you do now circumvent the broker, the landlord may be hesitant to rent to you if he thinks the broker has grounds to pursue a claim."

It's not just that. I can tell you as a landlord rep that while I would submit any such offer to the landlord, I would advise against the tenant simply because it would be evidence to me that you are dealing with someone who doesn't keep their agreements when they think that for some reason "they are in the right to". As a landlord, those are the exact same people who use the security for the last month's rent, withhold rent when they make demands whether they are reasonable or not, break stuff and then expect you to fix it, etc.

30RE - Yes, we have that email saved. The broker later recanted and said that deal was no longer being offered by the landlord.

In any event, your logic on the fee is very solid. We agree that approaching this as a co-broke (with us as the other broker) makes the most sense. After we agree upon a fee, we will offer to pay 50% as if it were a co-broke. If this is not amenable, we will continue our search.

This has been an extremely informative thread.

SO much hassel when its a renter's market. I can't imagine its that hard to find something else for no fee and tell this broker or "broker" to sit on a pole and spin.

"SO much hassel when its a renter's market. I can't imagine its that hard to find something else for no fee and tell this broker or "broker" to sit on a pole and spin."

It depends..... if you want to live in the "fat" part of the market, I agree. But what about if you want a duplex in a brownstone with a garden? In a very specific location? Find all those in Chelsea for $X with no fee.

True, but these days I hear lots of people finding non-doorman in Chelsea SPECIFICALLY where the landloard will pay the fee.

to 30 yrs -

Sorry, I meant to use "unethical", not illegal.

>>if they aren't co-broking, they should be expecting to still be splitting the fee in half and "giving that to the phantom broker" (the phantom broker being you).<<

30yrs, much of what you've said makes good sense, though you lost me at the above-referenced quote. If the prospective tenant wants to negotiate to pay his broker half of what a co-brokered deal would have brought (since that's all the broker would have gotten anyway), fine. But why confuse the issue with 'phantom broker' nonsense? That will never fly. The OP is NOT a broker and cannot argue to be compensated as one. By trying to argue his case with "us as the other broker" (as he seems to be planning in his above post) is ludicrous and won't fly. If he honestly wants to use this tact, he will need to drop the 'phantom broker, us as other broker' BS and simply and plainly tell the broker what he wants to do and why.

By the way, I still stand by my original comments that the OP should NOT owe a fee on this advertised no-fee apartment. OP's broker, IMO, should have mentioned the no-fee status (which is clearly noted in the listing) and discussed his own fee requirements BEFORE showing OP the apartment. Not to have done so smacks of impropriety on the broker's part.

I guess, according to the brokers and benevolents of this board, that if a car salesmen takes you on a test drive and you elect to buy that model, you absolutely should buy the car from that dealership regardless of price because the salesperson's time was so valuable. While I am sure the broker is a nice person, a no-fee apartment is a no-fee apartment unless the broker stipulated UPFRONT the fees related to their services. Think about the last time of someone referencing a car salesmen as a testament of how proper business should be conducted ;-)

Transparency leaves a lot less room for bad things to happen in any business transaction, and as easily as the broker could have gotten a major payday out of brokering a no-fee rental to an unknowing client, the broker can also get $0 for brokering a no-fee rental to a client who isn't a moron.

TripleP, you need to understand that the Broker is not your FREE tour guide, he offered you a service for a fee "that is his JOB",I am sure if you were in his/her position and it was your JOB, and someone tried to pull the same thing on you, how would you feel, I understand how you feel, but you in the real world you don't get something for nothing. All a broker is, is a service agent, he is there to help serve his/her client, which in the end of the day, includes some type of compensation. What you are trying to do is just WRONG.

jfragoulias
about 3 months ago

jfragoulias, did you and TripleP resolve your 4 year old dispute yet?