Are you a property owner that wants to sell their condo, investment property or needs to rent an apartment or retail space in New York City? Call or text me: Sam Moritz, licensed real estate agent, 203–209–3640.
Do you know a property owner that might need real estate help? Refer me! I provide great and professional real estate services across all five boroughs.
I’ve been working as a real estate agent in NYC, selling property and renting apartments and commercial spaces for six years. What do I think about tenant-paid broker fees, even if a landlord hires me to rent their apartment?
Well, firstly, and most importantly, if an owner gives me a listing, I do what they say, within reason. If I’m given a listing, and they tell to me to get the commission from the tenant, then I get the commission from the tenant. Period. I depend on property owners and landlords to give me business so I make sure to listen and cooperate with who is giving me the unit to rent or sell.
I was inspired to write this article because recently a new bill was introduced to eliminate the practice of tenants paying the broker fee when an agent is hired by the landlord to list and rent an apartment.
As a reminder, In 2020, a different bill was passed, and then later rescinded, briefly eliminating tenant paid broker fees. In June of this year, another similar bill was introduced in congress (NY Post article above).
This new bill states that if the tenant hires an agent to help them find an apartment, then the tenant will pay the broker fee. But if a landlord hires an agent to list and rent an apartment, then the landlord will pay, which is different than what the situation is now — where landlords hire agents, but agents charge the tenant the commission.
So, now, am I worried about losing business if this bill somehow passes, and the landlord is now required to pay the commission, every time? Not really.
Why? Firstly, if tenant paid fees become illegal, then free-market rental prices are going up (more). Let’s say an apartment is worth $2400, if the tenant pays a one month broker fee. If the landlord now pays the fee, the rental price for the apartment will now be $2600, maybe $2700. The cost is just going to shift. A tenant paid broker fee makes the price of the rental lower.
Side bar: don’t try to tell me that maybe I, or other agents, aren’t doing a good job of selling units with high monthly rents. Demand outweighs the supply of apartments in NYC, greatly. Every apartment rents, but the price is everything. Renters judge apartments based on how much value (size, amenities, sunlight, etc) an apartment has compared to other sort of similarly priced apartments in the neighborhood. If an apartment is not getting rented, but it’s being shown consistently by an agent, then the price needs to be reduced. When apartments don’t rent, then the price of the apartment doesn’t align with the value. Lowering the price $100–$200 can be the difference between getting an apartment rented within two weeks or having it sit for months.
Now, I’ve heard of agents charging more than a one month broker fee to tenants. Apparently, last year, an agent charged a $20,000 broker fee for a $1725 rent-stabilized apartment on the Upper West Side.
I usually only charge a one month broker fee for apartments that are rent stabilized and stuck at a low monthly amount, because it makes the apartment easier to rent. The higher the fee, the longer the time it may take for me to get the apartment rented, including more than necessary schlepping required to get to the apartment and more money spent advertising it (I get charged for every day an apartment is posted online by StreetEasy / Zillow).
Charging a substantial broker fee, I think, should maybe be eliminated. The only person it benefits is the agent, which seems weird to me, because they are not the ones who own the property.
There’s been a few situations where I’ve charged a few hundred dollars more for a broker fee than the monthly rent on underpriced, rent stabilized apartments, but not a substantial amount where it slowed down the speed in which it took to get it rented.
But often times, these rent-stabilized apartments are stuck at such low amounts, that the demand for them, as you can imagine, is intense. Like, people calling and texting your phone non-stop through the day and night. These types of apartments go so quickly, that I wonder if landlords would just rent them themselves if they had to now pay a commission on them.
So maybe it’s possible I’d lose some business on low-priced rent stabilized apartments, where renting it is fairly easy.
But then again — the value of an agent comes from removing the annoyance of showing apartments. The commuting to the apartment, the talking and meeting with lots of clients, the paperwork, getting the lease executed. Not to mention we have market knowledge about other listings in the area. These are reasons why we’re hired. I do think we provide value and free up time for those that hire us. Maybe that’s irreplaceable.
Are you a property owner that wants to sell their condo, investment property or needs to rent an apartment or retail space in New York City? Call or text me: Sam Moritz, licensed real estate agent, 203–209–3640.
Do you know a property owner that might need real estate help? Refer me! I provide great and professional real estate services across all five boroughs.