Broker's fees?

I would not assume the LL is not willing to pay the fee. Since we rented in Aug. 08, our UWS building has gone from making renters pay the building's agent a full fee to picking up the whole tab themselves. If you are in a situation where only 1 broker will get the whole fee, you should certainly have room to knock it down below the 15% they will ask for (I would still tell them you want the LL to pick up the fee). If you have a broker and the LL has a broker, there is obviously less room. If this is an amazing apartment at an amazing price (and a new listing), however, the agent will likely want to wait for somebody to pay the fee. Unfortunately, there is no one answer for all situations, except to say it is always worth negotiating. Good luck.

hmm, may need more help with broker-speak.

I viewed an apartment solo (sans broker) and the listing broker said something about "discussing a co-broke something something". Do I assume that means 7.5%?

Had another broker tell me that corporate was usually 12% but he could probably get approval for 10%. What does that mean? Approval from whom?

broker is using their corporate headquarter rules to justify their level of negotiability. they are saying that bc you came without another broker and they don't have to co-broke the deal they are happy to negotiate the commission. Often times the thing about corporate is true, some companies won't negotiate or limit the negotiation to a certain amount and the brokers hands are tied. especially more reputable companies. and if the landlord isn't picking up the tab and the apartment is a good value, broker fee included, you may miss an opportunity. otherwise pass. i prefer renting in condos and coops through a broker since those are generally the best priced apartments with most room to negotiate.

As usual, anything but straight disclosure from rental brokers. My sympathies, mom...

The answer is to ask...directly and before going to look at anything...."Who pays your fee on what we are going to see and what fee are you asking if the person you expect to pay is me?".

Repeat the above question until you get a straight answer...preferably in writing.

PS Why the State of NY doesn't step in here and mandate the above disclosure here is beyond me. You get better disclosure when you buy a gallon of milk in this state than when you commit to a $40,000 per year appartment lease.

mjsalisb

You are wrong. Very wrong.

If you are going to see something with a broker that has located an apartment for you (or more than one as is the case most of the times), how do you really expect the broker to know the full details of how much the landlord will be able to contribute, since the broker obviouosly doesn't control the product and have a history with that product. The only thing they know is what the landlord has said and is provided through their mls. If the landlord is willing to pay the fee and has noted it as part of the deal, then the broker knows. Otherwise they have not a clue, and the only thing they can tell the applicant is that they will try to work on the fee as most fees are negotiable.

The only time the applicant should ever, and I repeat ever pay a broker fee for a rental, is when the broker controls the product directly through an exclusive arrangement with the owner, or has gained control of the product as in the above scenario (introduced the product to the applicant under the pretense of some formalized agreement).

In both cases, there is no legal limit on how much or how little a broker can make. The key is to have an agreement in writing that provides a framework around the broker fee and gives that broker protection.

Asking a broker a question about a specific apartment without that broker knowing the answer is useless.

thanks all. I'm trying to figure out if we should use broker fee as part of our negotiating strategy for finalizing a price w/ owner or if it shoud be a separate negotiation, specifically between us and broker (assuming we have to pay broker fee).

am also wondering how flexible brokers are willing and able to be.

just thinking out loud...

and both of my scenarios are related to coop rentals...

co-op rental. you just confirmed that the broker probably has a lock on the apartment. you should decide what you want to pay for the apartment over the term of your lease, include the broker fee and all other application fees etc, and tell the broker to get it done.

For example, I want to pay $100,000 for this apartment over 1 year, all in. Now go negotiate with whomever you have to and let me know by end of day today.

That is a broker's job.

uwsmom: just rented. Best bet is to look at a bunch of places, find several you like and then start negotiating to see who gives you the best deal. Most people will negotiate now or they will become amenable to it the longer the apartment sits. You may lose some along the way, but that's the way it goes. If you get a free month of rent and a reduced broker's fee, it may even out. Think creatively if the broker does not. good luck.

Hi uwsmom-

Your broker should of course have gone over this with you -- I have a little speech that I give my renters that starts, "I charge 15% of one year's rent, except when I don't."

This is a lousy economy, and the smart brokers are living on thinner margins to help their clients. Therefore, one month should be just fine if there's no agent on the other side of the deal. An honest agent should tell you if the landlord is paying that one month.

Some listings now are what we call CYOFs, which is where the landlord hires a listing broker and pays them -- so it can be advertised as a no-fee -- but you should still pay your broker. There are entire threads on how this should have been worked out beforehand.

Where it gets tricky is with the big firms, because if your big firm broker goes to 12 percent and has to pay someone else 7.5 percent, sometimes their firm will stick its hand out for its "expected" 3.75 percent, leaving your guy/gal with just .75 percent, which often doesn't cover taxi fare. I have more flexibility if I cut my margin, because my boss will share the pain with me, but not every firm is like that.

But again, your agent should be willing to discuss this on a case-by-case basis. If you assume that your agent is a professional and should be paid for their services, they should be able to defend to you what they charge and why.

Separately, the building is going to have fees that they want the tenants to cover -- credit check/investigative background fees, move-in fees, move-in deposits. A co-op is going to want to see these checks FROM YOU, and will worry if they come from the shareholder that perhaps you're not a qualified tenant. Of course you can negotiate doing a "round robin" with the fees where you pay them and the landlord gets that money back to you -- everything negotiable.

Hope that helps!

ali r.
{downtown broker}

lr - that's one strategy, but i'm juggling 1) what I will pay, 2) what I may want to pay, and 3) how low can i get it all for (which is essentially #2) what I want to pay).

I have a very hard time justifying payment to a broker for a coop rental for two reasons:
1) I didn't hire them; the owner did and they are working for the owner. Yes, they showed me the apartment, but that's it.
2) oftentimes, there is no guarantee for a 2nd year renewal. why pay a fee when you may need to look for another place 9-10 months later (and maybe pay another fee)

ali r - sorry if I was unclear. I am not working with a broker.

got it.

Co-ops are generally not offering two year occupancies at this point. Sometimes they never did; they want to make sure they like the cut of your jib as far as you being quite and polite before they're stuck w/you for two years.

Even the ones that used to offer two years now won't, because mortgage lenders are being uptight about buildings with two many renters, and so they need to be able to manage the rental percentages so their owners can get out.

So you can ask for a second-year renewal option to be built into your lease, but it's all you're going to get. It's the building, not the landlord.

As far as the listing broker fee -- the landlord probably has a minimum net number in his/her head, and all you need to do is to hit it. So offer to pay one month split with the landlord, and then offer your rent number, and see how that flies.

ali r.
{downtown broker}

^^ too many renters.

Sorry, on phone and bad at multitasking

ali

uwsmom - I don't think she was touting her services, just trying to help you understand it. As far as your uncertainty, and your reasoning for not paying the broker, it doesn't make any sense.

1) If you won't pay the broker and expect the owner to absorb it, then again, bake it in with what you will pay over the course of the lease. Just give the broker a net sum figure and have them work it out. This way you are not stuck looking frugal in front of an owner (and possibly a co-op board) that wants a good tenant and you leave the hard part to the broker to figure out. That is part of their job!

2) No guarantee for a 2nd year renewal, says who? If it is a co-op board that enforces a decision on renewal each year, you need to base the risk of this into the price.

Woman, what you need to do is to have a starting point. It sounds like you don't know what you want to pay, what you will pay, what you theoretically should pay, etc. Make a decision.

lr - thanks, but the starting point is key. you're right, i haven't determined one yet.

ali r - thanks.

and why should i assume X% of broker fee to "bake in" when it could be negotiable? that was/is my question.

UWSmom - you may have read my recent posts about when a broker shows you a no-fee apartment (but then wants to collect a fee...)

In any event, I think Ali is spot on here.

uwsmom, let me be not a broker but a landlady for a minute (which is pretty easy, since I'll have a property to rent later this summer).

I'm pretty busy. I'm not having the year I had last year, but my time is worth something. I don't want to show my own apartment, or qualify candidates. I want someone else to do that.

I know that costs money, but I also assume that traditionally in NYC those costs are borne by the renter. When I hire the broker, the broker says to me, "you know, economy's terrible, renters are looking to save money. Renters might well ask you for a free month, and/or to pay my fee."

And I say to broker: "I need to net $XX. Price it however you need to price it so you get paid, and I get $XX."

So that's the assumption, is that there are two prices: the list price that you're seeing, and a bottom line price that's the lowest that the landlord will take. lr10021 is right in that the landlord doesn't care about the configuration, but they're not going below their bottom line number.

To them, $10,000 a month with one month free and they pay a broker fee of one month is still $100K a year. So is $8,333 a month, no months free, and you pay the broker. Both fine by the landlord.

But if you could swing a second-year renewal, which configuration would you pick?

ali r.
{downtown broker}

ali & lr - yes, useful way to look at...take fee out of equation altogether. thanks.

uwsmom - or put another way, offer to pay xx for the apartment over the course of the year, based on what you think it is worth, and comparables. this is not the right strategy if this apartment is a must have, but if you are deal maker I know of no better one.

If I were the LL, I would rather give you a month free or pay the broker fee and keep the rent at $10K, instead of $8333 with the renter paying fee and no free month. That way, when the lease is up, I am negotiating off the $10K rent and not $8333. So, try and get the monthly rent down to avoid starting at a higher rent after a year (if you plan on trying to stay).

uwsmom, just curious as to why you're considering a co-op sublease? The scenario you mentioned above (not being able to renew for a second year) is very real, plus you need to slog through the board approval process for the privilege of living in the building for that one measly year.

And even if you DO get approved for a second or even third year, you won't likely be able to stay beyond that per the building's bylaws on sublet length (some have a 3 out of 5 policy, others are even more strict). Why build in a forced move-out deadline (did I mention what a pain moving is? And don't even get me started on the cost...).

IMO co-op sublets are far more hassle than they're worth.

hey squid,

we're considering coops due to overall quality (of building and apartment). also, our relationship with the city is going through a rough patch right now and we may not be here for more than a year or two. regardless, i'd rather live in a nice, clean, well-maintained place and move two years later. we would only consider subleases with the option of a 2nd year renewal. but, of course, there are no guarantees. I presume, perhaps incorrectly so, that if the board approves you the first time, you would have to be a trouble tenant to not get approved for the 2nd year. if other's have different knowledge/perspective on the matter, please share.

and also do not consider a board package a hassle. i don't have a problem gathering documents and making copies.