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The bed bug discount: "They just skeeve people out totally...what are landlords going to do?"

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As the Wall Street Journal reported yesterday, some NYC landlords are worried that their buildings will be branded with a “scarlet B” now that New York's new bed bug disclosure law has taken effect. So can a bed bug discount be far behind?

That depends on who you ask--and whether renters are willing to move into a building with bed bugs in the first place.

“This is like AIDS in the beginning,” says Gus Waite, managing director at Manhattan real estate brokerage Bond New York.  Right now, bed bugs are a deal killer. “They just skeeve people out totally.”

On the other hand, with the new disclosure law in place in our bed-bug embattled city, it may soon be hard to find a building in NYC that can swear it hasn't had bed bugs in the past year. (A sample of the new disclosure form that must accompany all leases is attached below as a PDF. It requires landlords to disclose any bed bug problems in the past year and the floors involved.)

And we predict that for some renters, knee-jerk avoidance will give way to a more nuanced assessment of the particulars:  It may be wise to avoid an apartment that was recently infested--or a building in which half of the units are infested—but it's reasonable to move into a building where a couple of units far away from yours have had bed bugs and the landlord is dealing with it responsibly.

As for using bed bug history as negotiating leverage, it is worth a try, say several brokers we talked to yesterday.

“If the building has that sort of scarlet letter and a 4, 5 or 10 percent vacancy, what are the landlords going to do?” says Waite. 

He advises first comparing rents on similar apartments in the neighborhood to deduce whether the landlord may have already lowered the price. (BrickUnderground's CompsQueen notes that it's probably too soon yet after the implementation of the disclosure law for many landlords to have started discounting asking prices yet, though by winter it may be a different story.)

Next, says Waite, “I would ask the building whether there’s any discount because of the infestation issue.  Of course, it could backfire. If the landlord has gone through unbelievable expense and made a good faith effort to exterminate the bed bugs, and on top of that you’ve got someone saying I want a 10% reduction in my rent, the landlord might say 'Screw you.'”

Irit Haitin, a rental agent at Barak Realty, agrees that the request demands tact.

“Show them you are very interested in the apartment but also very concerned about the bed bug situation," she says. "Negotiate not by overtly asking for a price drop. Instead say that you have found very similar apartments without bed bug issues, but this location is perfect.”

As for how much of a discount bed bugs might be worth, it’s a little too early to tell, says Jeffrey Schleider, founder of Noho-based brokerage Miron Properties.

Disclosure by landlords is “such a new phenomenon that the amount is yet to be determined,” suggests Schleider.

He notes that just as buildings that acquire reputations for harboring other vermin—mice, roaches etc—have had to lower their prices and start targeting shares and lower-rent tenants, “we will in all likelihood see lower pricepoints for buildings with bed bugs.”

But Gordon Golub, the executive vice president and director of rentals at Citi-Habitat quoted in yesterday's Wall Street Journal story, told us that he rejects the notion of a bed bug discount.

“Bed bugs are a problem that can be solved, and landlords in this city typically don’t succumb to pressure unless the issue can’t be resolved,” says Golub.  When it comes to bed bugs, he says, landlords “would rather hold vacant apartments off the market in the four or six weeks it takes to solve a bed bug issue than lower the price."

And even if bed bugs are leverage today, they may not be tomorrow. Who knows? The few buildings with no one-year bed bug history to report might even start charging a no-bug premium. 

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