Broker 101: Using Brokers in NYC
Prior to my move, I really disliked the idea of paying for something that I feel like I can do myself, using a broker in NYC was one of things. For this reason, I started to look at apartments that was listed by the owner on Craigslist. That way, the owner and I could both avoid the middle man (the Broker), and I wouldn’t have to pay a fee. Day after day of looking, I quickly realized just how difficult it was going to be for me to quickly find a place to rent without even being in the city during my search.
Note to self: Moving cross-country from California to New York is no stroll in Central Park.
Given the difficult nature of my task, I gave in and decided it would be okay for me to use a broker. A broker’s fee is negotiable, but typically 15% of the annual rent. The math on this: for an apartment that’s $3,000 a month, a 15% broker fee is $5,400. Eeps!!
Second note to self: Moving cross-country from California to New York is not cheap.
If you’re using a broker, no matter what, someone is going to be paying the broker’s fee – it is their source of income after all! So, here’s the difference between a no-fee, partial-fee or full-broker fee apartment. Depending on how desperate the landlord is to rent out their place, they might or might not be willing to shell out the money for the broker fee. In the case that the landlord is offering to pay the broker fee, that would be a no-fee apartment for you – score!!
Back in 2008, when the economy was horrible in New York, people were fleeing the city left and right. As a result, there were a lot of vacancies in apartments. During this time, my friends who were looking for places were able to find the best deals on apartments, where the owners were willing to pay for the entire broker fee and even have the first few months rent free! Fortunately and unfortunately for us, the market here is picking back up and this is no longer the case. Don’t count on finding a no-fee apartment anymore as the rental vacancy as of May 2011 is very low and people are once again fighting to pay to live here.
Partial-fee apartments is when the landlord agrees to pay for a part of the 15% broker fee, so you would pay the remaining difference. During my apartment search, this was rare as well.
So what’s the main takeaway from Broker 101?
Everything, and I mean EVERYTHING is negotiable (to a certain degree, of course). As you might have read in my post: How To Handle Your Business & Save Money In The Process, it never hurts to ask.
Keep in mind that at the end of the day, negotiating for your apartment is merely a financial transaction. However much you end up saving or spending, is based on who ends up taking the loss in that 15%.
Scenario 1: Landlord ends up paying any part of the broker fee. This could easily mean that whatever the landlord is forking out for the fee ends up back in your monthly rent. If you’d rather pay that money up front, you might want to consider negotiating for lower rent and paying the broker fee on your own. (And having the math work out in your favor, of course.)
Scenario 2: You’re paying all of the broker fee. Always always try to negotiate for a lower broker fee. This is where I ended up failing myself in my negotiations. Given, right off the bat, I was able to negotiate with my broker to lower his fee to 10% after finding the apartment of my dreams. However, I let my personal excitement cloud my rational judgment, which would have told me to renegotiate for an even lower fee.
Number 1 Rule of Negotiations: Poker Face. No matter how much you love what you’re negotiating for, you should never let your negotiating partner know how much you want it or otherwise you just gave them all your negotiating power. Here’s how my negotiations should have played out. (Hopefully my broker isn’t reading this post right now, haha).
Broker: Alright, I guess we can reduce the fee to 10%.
Me: Well, since the cost of this apartment is still above my budget, is there any way we can reduce the fee to 1 month’s rent? (Remember: for an apartment that’s with $3,000 monthly rent, 10% would be $3,600 fees vs $3,000 fees)
Broker: This apartment is so great, blah blah blah, you love this apartment, blah blah blah, does $600 really matter that much? Blah blah blah.
Me: Broker, I’m not the only person who decides on the budget, this is something that I might have to go home and figure out. Perhaps we can continue looking for a cheaper place tomorrow…
With a bit more back and forth, I can bet you that your broker does not want to spend any more time with you than necessary to find another place, and would be willing to take a loss of $600 out of their own pocket than to take the opportunity cost of working with a new client. Time is Money!!!
At the end of the day, brokers have to meet their own monthly quota, and their personal salary is what they set their own fees to be. In the grand scheme of things, the loss they take from you, is easily a gain they can take from another client who will probably not even try to negotiate the fee. It never hurts to ask, and if I wasn’t so excited about my apartment, I could have easily saved myself over $600 with just a few minutes of conversation. I’ll personally take this loss as one of my biggest lessons learned in negotiations.
Thanks for reading! I hope that Broker 101 helped you out in learning more about the process of finding a place in NYC and be sure to comment with your own experiences. 🙂