Real estate questions I get asked at inopportune times

First, there are two types of “landlords” in NYC. One manifests itself as the massive management companies and the other are the smaller independent landlords. Management companies typically have hundreds of buildings, mainly post-war, and housed in those properties, there is typically a central leasing office.  The post-war buildings are the standard doormen, elevator, hundreds of units, rental buildings that have NO FEE plastered on their facade. These are usually buildings that were constructed after the 1950s, they tend to be in less ideal neighborhoods, and developers found a way to minimize square footage and maximize amenities to justify the price tag.  For this style of building, they can usually afford to have a central leasing office where tenants can apply directly, and since these companies know people are avoiding a large lump sum fee (which we will discuss soon), they usually hike the rent up as people are more likely to stomach a higher monthly rent versus a lower rent + a hefty down payment, even though the amortized net over a given amount of time is essentially the same. There are also large management companies that will own hundreds of tenement (5 story walk up) buildings which they control leasing over with websites where you can apply online without a broker. These also may be a tad pricier and the kicker is that most of these landlords are actually slum lords. Some will aesthetically appear that way, as with Jakobson properties, it will look like you’re walking into a third world country, but some have a way of putting up a cheap but sleek façade that is hiding a building that is in tragic shape, like 9300 and Magnum properties. Because these landlords know people are DYING not to pay a fee, they know their apartments will (when push comes to shove) always rent, so zero care is put into the quality of life for their tenants. This ranges from no heat in the winter, fake superintendents, a landlord answering service with simply audio recordings, untreated bed bugs in the building, crumbling building structure, rodents, and refusal to give back security deposit to name a few. Since it’s very hard to bring these landlords to court and they don’t feel the financial burden of a few vacancies, the living experience tends to be hellish to say the least.

Then we have the smaller, independent landlords. Usually this is a single owner or family that has a few to a dozen buildings in the city and more likely than not, is a family business. Since they’ve usually owned this properties for quite some time, they similarly tend to be in the most desirable parts of the city and have the largest floor plans, being that there’s only so many ways you can cut up an older apartment and maintain proper plumbing.  Independent landlords tend to take the best care of their properties, as it is their full time job and they would like you to return the favor by keeping the building in quality shape. For an owner who has a handful of buildings, a single vacancy will pose as a financial burden so they ideally want to ensure that the tenants are happy so they can collect rent without interruption of having a tenant move out and a vacancy sit. Often the landlord even lives in the building, which assures you that the property will stay in immaculate shape because if you’re suffering, the landlord is also suffering. These landlords don’t have the time, funds or manpower to have a leasing office, so they give their exclusive rights to rent to an agent they use (or who has pitched them) from an agency like Elliman, Corcoran, or Brown Harris. Once the agent has the exclusive agreement and keys to enter the apartment, it’s her or his responsibly to take photos, list the apartment, do proper advertising, show the apartment until it rents, conduct lease signing and deliver all checks and leases to the landlord. Most landlords in NYC do NOT pay commission; the only time you really see that will be in the off season or when a listing has been sitting for an outrageous amount of time. So the commission falls upon the incoming tenant. Most exclusive brokers will charge 15% of the yearly rent to any tenants who come directly to them, particularly in the heat of the summer market when it’s direly competitive. Only with a listing that is sitting for a while will an exclusive agent trim a few percentage points off the fee, and only at the approval of a manager. On the positive side of things, since these landlords do know their incoming tenant is paying a large broker’s commission, they do tent to be more fair with pricing the monthly rent.

In the occasion you hire a broker to find your new home, and in their showing you a laundry list of properties, you fall in love with one that has an exclusive agent, your agent and the exclusive agent will split the 15% in half  – 7.5% going to each. This is nonnegotiable on either side because 7.5% is the absolute lowest we as agents are allowed to bring back to our housing agency.  Trust me, I would make a lot more money bringing clients to no-fee apartments and charging them 10%, but at the end of the day, the listings where there is an exclusive agent tend to be the best locations, best landlords, best situations, and best monthly rent.

So what if you’re trolling Renthop and there’s a listing with a broker that says “LOW FEE APARTMENT”? First error, you were on Renthop. Renthop, Naked Apartments, Zillow, Trulia, Padlister – all those site are usually a scam. Streeteasy is the best site for the mass public to see both a both accurate and up-to-date view of the market. This is because any agent with a listing must upload their exclusive agreement with the landlord onto Streeteasy in order for the listing to be verified and become live. With the other aforementioned sites, anyone can upload any photos (even if they’re fake and not their own) for any apartment (even if it’s fake and not their own) and they can scam you. They’re either bait and switch, where you think you’re going to see what you reached out about and once you’re there, the agent will say, “DARN that just rented, but I have this apartment that is more expensive …” and try to close you. Or they will advertise the no-fee apartments and try to collect a lower fee, or really any fee.  This is what puts up the smoke and mirrors around the “what do you charge?” question. Any good agent should cut you a deal when it comes to bringing you to a management company or no-fee listing – that’s a universal and the typical fee is 10%. But like everything in life, you often get what you pay for and paying the commission to get into a lower rent, better neighborhood, better landlord building is often worth the upfront, especially when amortized over a multiple year time frame. Moving is hell, I’ll be the first to admit it, so looking at it from a longer term perspective makes the down payment a bit more tangible and worth it.

When working with an agent, they should be clear which are co-brokes and which are direct management company listings. I don’t take my commission check and waltz straight to my BOA and deposit that puppy in my checking account; the commission checks goes back to our housing brokerage, who then takes a very large piece of the pie, then we receive our chunk, which we further pay taxes on when fateful Tax day in April crawls out from it’s shallow grave. On top of that, brokers pay their own health insurance, pretty massive desk fees just to associate with a brokerage, our Real Estate Board of New York fees, Errors and Omission legal fees, and most business related expenses are out of pocket. We get zero salaried wages so the only way we pay our bills is through commission.

If you’re confused or want further clarification about any of the above, email me directly, [email protected].