Property Grunt

Tuesday, May 17, 2005

Friend or Foe: The Broker

Let’s get it out right now. We all hate rental brokers. It’s ok. I have heard it all before and I have been called a scumbag in my face from strangers. Whether you like it or not you will most likely have to work with a broker if you want an apartment in Manhattan.

Why? Unless you are looking for a new development or the particular building you love advertises online or you know somebody who can hook you up, a broker will be the only person who has the information that you need. Now why pray tell would a landlord/property management company provide this information to a “scumbag” broker?

Two answers. Time and Money. When you are a landlord you always have a full plate. From going to court to dealing with renovation issues to hiring new staff, the landlord is bombarded with an endless amount of work. It also takes a ton of money to advertise these apartments in the New York Times. This is where the broker comes in.

The model works like this. Landlord has some vacant units in a building that need to be filled up. The landlord contacts a broker and lists the units with that broker. Agents preview the apartment and proceeds to advertise the apartment and show the apartment to prospective clients. The beauty of the model for landlords is that all advertising costs are passed along to the broker. What if the broker is unable to bring a qualified client after all that work? Tough sh*t.

A lot of landlords are now getting on the act by engaging in co-broke for their own apartments, which is completely legal. It pisses off the broker but there is nothing they can really do about it. It also leaves no leverage for the client to negotiate the rent. It’s bloody brilliant because they not only collect the rent but the fee that was paid to the broker showing the apartment.

Standard fee is 15%. Is it negotiable? You can try to ask for less but not likely especially if it is a co-broke. A lot of people think brokers are evil and collect a big fat fee since all they do is show apartment but it’s not that simple. Brokers need to develop a strong sense of product knowledge about a particular area which takes time and they also need the skills to facilitate a deal which requires knowledge in leases and negotiations.

In my next entry I will discuss how to use a broker.