Whether you are moving to New York with a friend, significant other, or found your next roommate on Diggz, you will need to make the decision whether to use the services of the New York real estate broker. Brokers in New York often get a bad rep and with a typical broker fee of 12-15% that could amount to a few thousands of dollars, it’s no wonder that many try to avoid them when searching for a new apartment to rent. However, there are cases where using a broker during your apartment search will pay off and add value.
Leverage a broker’s local knowledge
If you are new to the city, a local real estate agent is a great source of knowledge about the various neighborhoods characteristics, points of interest, local restaurants and tips on getting around. Trying to explore too many neighborhoods and getting a flavor for them on your own can be quite time consuming. Further, a broker can hone you in on areas and apartments that fit your criteria (location, amenities, space, etc.) and budget.
Using a broker could mean cheaper rent in the long run
There are plenty of buildings in NY that are advertised as ‘No Fee’ which do not command a broker fee upon signing an apartment rental lease. What many people do not realize is that often the broker fee is baked into the rental price and spread across the rent payments throughout the year. This means that you are effectively paying a broker fee, just not all upfront. These ‘No Fee’ apartments typically go for a higher rent price, since the landlord himself pays the broker fee, or has had to spend more on marketing or a leasing office. Further, if you manage to find these apartments on your own by searching online or just walking in, the rent will be the same regardless if you came with a broker or not.
If you are looking for an apartment to stay at for more than a year or two, going with a broker may pay off substantially. Since a broker fee isn’t embedded in the base rent, you’ll often find lower base rents on apartments that do have broker fees. So while you do need to pay an upfront cost, your next year’s rent will not be as high is it would be at a ‘No Fee’ building for an equivalent apartment (this might not hold true in a non-rent stabilized building). For example, let’s consider choosing between two apartments, one with a rent of $3,500 and no broker fee and another apartment with a rent of $3,200 and a 15% broker fee. In the case of the ‘no fee’ apartment, you will pay $42,000 in rent for the entire year. As for the second apartment, you will pay $38,400 plus a $5,760 broker fee, for a total of $44,160. This means your rent in year one (including the broker fee) will be $2,160 higher if you took the apartment with the broker fee. However, let’s assume that in year two your rent went up by 6% in both scenarios. The ‘No Fee’ apartment’s annual rent will amount to $44,520 and the apartment that originally had a fee will total $40,704. That’s a $3,816 in extra rent if you rented a ‘no fee’ apartment, more than what you paid extra in year one. And the gap will keep growing each year as rent goes up.
Broker fees might be tax deductible
If you are moving to New York for work, some of your moving related expenses can be deducted from your income taxes. If you use a broker’s services as part of your move, you could claim it as a moving expense and reduce your overall owed taxes. This also makes the difference in rent between a ‘No Fee’ apartment to a broker fee apartment even wider.
Broker fees are negotiable
Depending on the rent, how long the apartment has been sitting on the market and some other factors, the broker fee might be be negotiable. In a typical rental lease deal, there are two brokers who will usually split the broker fee, 7.5% each. One represents the landlord, and the other represents the prospective renter. If you find a listing that does include a broker fee, but you are only dealing with the landlord’s broker then you may have room to negotiate since he or she will not be splitting the fee with anyone else. Often in this situation the broker will be happy to take a 10% fee instead of the typical 15%.
Access to exclusive listings
Lastly, real estate brokers have access to information of what’s available on the market, as well as access to exclusive listings that you would not be able to find on your own. Using a broker affords you the chance to see more options, and sometimes apartments with more added value.
In summary, If you can afford to pay the upfront broker fee and find a knowledgeable and trust worthy one, using a real estate agent could save you a lot of time and money in the long run and more importantly help you find the apartment that’s right for you.