While I do agree with the spirit of this, doesn't this mean that any fees that brokers require will be included in the rent?
replies(7):
If it's in the rent, it's better to amortize the cost of the broker fee over a year vs. pay upfront.
Between the fee + first month's rent + security deposit (+ sometimes an additional month's rent) it is common to have to front 10K - 20K just to get into an apartment here.
Even now, when a landlord has a lot of available apartments they need to move or when the market is soft (for example during peak COVID), they’ll typically offer a “1 month OP.” Meaning the landlord pays the broker a 1 month’s rent fee, and the broker markets the apartment to renters as no fee. Even if the landlord just roles that into the rent, it’s a savings over the 12-15% fee standard today.
Also, landlords with larger buildings or geographic density are already figuring out that they can rent apartments cheaper with a few salaried leasing agents, instead of paying brokers. If more of them are forced to internalize the broker fee, more of them will figure that out.
If you have 2 buddies and going on a $5500 3 bedroom in Boston, you'll likely be requested first rent + last rent + deposit + broker fee (=1 rent) = 4 * rent = $22k just to get the keys. That's $7300 per person. This is only to get the key, the next month you pay rent #2.
If you're going on a $4k 1 bedroom by yourself (or with your partner) you'll be hit with 4 * 4=$16k upfront cost, or $8k if you're lucky and have a partner.
Renting is extraordinarily expensive in big cities in the US right now. I'm sometimes surprised people can survive this market. I make ~$150k a year in a lucrative software engineering role, and rent is still too expensive for me. It's very difficult for e.g. teachers, researchers etc making ~$70k a year etc.
Some cities will be cheaper, some will be more expensive. E.g. I know that Philadelphia is particularly cheap when it comes to cost of living. Chicago is expensive, but seems to be slightly cheaper than NYC/Boston etc...
One's personal definition could mean $1000/m difference compared to someone else's.
I imagine some other cities have done the same.
Where I live, in a desirable Manhattan neighborhood with an old building stock, you can find a decent 1-bedroom for around $3500/mo and move in for a total of $7k. If you hunt for a deal and can make a few sacrifices, you can bring that down to $6k.
Real estate agents don't even do that; a dedicated title company will take care of this aspect of it.
After doing a few real estate purchases with realtors, I've come to the conclusion that they're not really necessary as a buyer, unless you really need/want someone to hold your hand the whole way. The offer and purchase forms are standardized by the state realtor's association (technically they are not free to use, but you can find them online), and the seller will be responsible for filling out all the disclosure forms and whatnot, which you just have to sign that you acknowledge receipt.
As I said, the title company (often also the escrow company) will handle all the title-related stuff. Your mortgage lender will help you fill out the mortgage application, and either the title company or a notary hired by the mortgage lender will walk you through signing the final forms. In states (like NY) where you're required(?) to have an attorney when you're buying property, I feel like a realtor is even more superfluous.
On the seller side, I do believe realtors provide quite a bit more value. Whether or not it's enough to justify their commission is of course up for debate.
Regarding rentals, yeah... before buying I lived in 9 different rentals (upstate NY, SF bay area, SF), and at no point did I need any third party to help with it, even when several of these were before the prevalence of listings on the internet. Find listing, contact landlord and/or attend open house, submit application, sign lease, done. There were certainly some rentals I didn't end up getting due to high demand, but that's life.
They ultimately provide a lot of value to landlord — paying for marketing, showing the apartment to a bunch of people, answering the NYU student’s parents questions about crime in the neighborhood, making sure that applicants have provided all the right paperwork, etc etc.
The best part is that as a renter, just before you hand over the many thousand dollar check, you sign a piece of paper that says “this person you are paying does not work for you or represent your interests in any way in this transaction.”
Sometimes it seems like they are the only governments that can!
I am not arguing that it will end up in the rent. I was only arguing that, if it did, that would still be a better arrangement.
However, you are wrong that the service provided by the fee offers no value, and that the fee will not end up somewhere (even in a diminished way).
- To landlords it offers upfront vetting, no required face time with prospects, and less work to land a tenant. We have a 1.4% vacancy rate in NYC -- apartments on the market will have hundreds of interested people and multiple applications. Landlords basically manage none of this.
- To prospective renters who actively hire a broker -- and these do exist, I did this once -- it offers zero time on the prospect's part to look for, schedule, and research units. You tell the broker your parameters, they will do the research, and then set up a multi-hour tour of apartments.
(Unless you are only looking at no-fee apartments, you are better off just hiring a broker so you get at least some value from it if you rent a fee-ful apartment)
The value the fee provides to the people who care about it, will end up somewhere. This work doesn't go away. Many landlords and prospective renters will take on the work themselves, but many won't.
These people will pay for the broker fee. Those broker fees end up with the landlord or the prospective renter.
It is not my conclusion that eliminating the broker fee will result in higher rent. I think what will happen is:
- The broker market will shrink.
- Some landlords or renters will pay for it.
In a nutty housing market like NYC's, there is actual value provided by brokers, to some people.
Finally -- to be clear, I'm not arguing against the FARE Act. I am fully supportive of it and wish this happened years ago.
Actually, we had these arcane things called "newspapers" that were filled with hundreds and hundreds of ads for apartment/house rentals, sales and even shares.
You figured out what you could afford and went through these arcane things and marked the ones that interested you. Then you gasp made a phone call to find out:
1. If the place is still available;
2. When can you come to look at it;
3. If you like it, snap it up (by writing a check[0]) before someone else does.
As for brokers, the ads generally noted that it was 'no fee' if the rental was direct with the landlord. Apartment shares were generally 'no fee' as well, since you were just moving in with roommates you didn't know.
I had some really weird experiences looking for both shares and apartments back in the 1980s and 90s. But it wasn't all that difficult or that much more time consuming than using the real estate websites these days. They're essentially the same thing, except with more photos.
Firstly, I was talking about goings on 30-40 years ago, and GP's (incorrect) assertion that "In the past, there was some informational benefit for average Joe/Jane. Without internet, finding apartments, knowing which neighborhoods, buildings, or landlords were good or not was quite difficult." It was not.
As far as checks are concerned, I've been paying by check. The last time was for this month's rent.
Regardless, and I'll say it a second time in this message as you, apparently, missed it in the first message, my previous message was replying to the assertion that back in the 1980s/90s, it was much harder to find/get an apartment than now. It ain't true. I was there. I did it repeatedly.
The only real difference is that I don't have to go out and get the Village Voice or Sunday papers for the expanded classified ad pages. Oh, and more photos on the websites.
Edit: I went and checked and you, ics, were the GP to whom I referred. Please re-read my initial reply to you -- you obviously misunderstood.
"In the past, there was some informational benefit for average Joe/Jane. Without internet, finding apartments, knowing which neighborhoods, buildings, or landlords were good or not was quite difficult."
Which I helpfully quoted at the beginning of my reply. I then (at the end of my comment) clarified that I was talking about 30-40 years ago.
I suppose if GGP has just as poor reading comprehension as you appear to have, they might have gotten confused. Which would be a shame.
That said, I assume at least a modicum of English proficiency and reading comprehension skills when posting here. Perhaps I should reevaluate that assumption.