Have you been wondering what a broker fee is and how much will it cost you? We'll guide you through the most expensive part of renting an apartment and explain why it's often still a necessary evil.
In NYC, most apartments are available through real estate brokers, who charge you a fee for renting the apartments that they represent. While in most markets the landlord pays the broker to find tenants, extremely low vacancy rates, sky-high prices and historical market dynamics have created an environment in New York where the tenant is expected to pay a fee.
If you rent a "no fee" apartment through a broker, that simply means that the landlord is paying the broker, and the fee is already built in to the rent. This is often the case with luxury high rise buildings, or apartments that are more difficult to rent. The only "true" no fee apartments are those which you rent directly from the landlord.
In Manhattan, the typical broker fee is 15% of a year’s rent. That means for a $2,000/month apartment, you’ll have to pay the broker 12 * $2,000 * 0.15 = $3,600, at once, at the time of lease signing. In other words, you have to pay 1.8 months extra. In Brooklyn, it’s more common for brokers to charge 12%, or 1.44 months extra. Sometimes brokers will be willing to negotiate down to 10% or 8%, which comes out to just about one month.
Of course, when the fee is more than one month, it's usually quoted as a percentage of a year's rent. "15% fee" seems to sound more reasonable than "practically two months extra just to move in!"
|Fee Rate||Equivalent in Months Rent||Example for $2,000 apt|
|15% (Manhattan standard)||1.8 months (yes, isn't that crazy!?)||$3,600|
|12% (Brooklyn standard)||1.44 months||$2,880|
In most cases, the fee you pay the brokerage will be split 50/50 with the agent. So for that $3,600 broker fee, the agent who showed you the apartment will receive $1,800. Often, though, your broker will show you apartments that are represented exclusively by another firm. There, they’ll have substantially less flexibility in negotiating the fee, because instead of splitting the fee two ways between the agent and the brokerage, the fee is split four ways: 25% to the agent who showed it, 25% to the agent who got the listing, 25% to your agents brokerage and 25% to the listing agent’s brokerage. Or just $900 each. Ouch.
Why do they get away with it? Basic economics. Real estate brokers, at least as far as rentals are concerned, are basically charging for access to information that’s difficult to find. They’ve spent substantial time finding out who landlords are, when and what they have available, and who to talk to. If you tried to do this yourself in a place like New York, it would take you a very long time, assuming you could even do it. Many landlords aren’t even willing to deal with prospective tenants directly, preferring to outsource the operation to a broker. True, it’s not fair. True, the landlord should pay the broker, since ultimately the broker is doing a job on behalf of the landlord. Unfortunately, that’s not the way it works today in NYC.
If you’re looking to avoid paying the broker fee altogether, check out our NYC no-fee apartments, direct from owners.