Q. The law firm that I work for has a list of recommended brokers in New York City and I chose to contact one from the list. She has numerous recommendations from other lawyers at our firm, so I’m confident that I can trust her. That being said, I’m confused about the commission structure that she suggested would apply should I use her services.
She explained that depending on the listing, it would range from 12 – 15% of a year’s rent. Why would it depend on the listing? Isn’t she doing the same job? I just don’t want to feel like all of the highly desirable listings will require me to pay 15%.
A. In New York City there are generally two categories of listing types that your broker may take you to see in the rental market.
The first are exclusive listings that are represented by another broker who was hired by the apartment’s owner (the “listing broker”). That broker sets the commission that any prospective tenant will need to pay them in order to rent the apartment. Often, that rate is 15% which would then be split equally between the listing broker and your agent. Your agent has no control over what commission the listing broker will charge. Almost all condos and co-ops and some rental buildings (i.e. large apartment buildings owned by a single owner) have an exclusive listing broker.
The second category of rentals is referred to as “open listings.” For these apartments, the landlord or management company makes the listings available to the brokerage community and/or the public at no charge. There is no listing broker involved in the transaction. In this case, your agent collects her fee directly from you and can set the rate at any percentage she chooses. There are virtually no open listings for condos and co-ops but there are many for rental buildings ranging from walk-ups to doorman buildings.
I would suspect that your broker is preparing you to pay a 15% commission rate when there is a listing broker on the transaction and a 12% commission rate in the event that she is the only agent involved in the deal. In this way, she is able to show you both exclusive and open listings.
Some agents attempt to avoid showing condos and co-ops to their clients because they don’t want to split their commission with the exclusive broker and would prefer only to show open listings where they can keep a large fee for themselves. Your broker is serving you well by showing you the full-spectrum of available listings on the market. As a side point, some of the best deals on the market are in condo and co-op buildings.
Mike Akerly is a New York City real estate attorney, landlord, and real estate broker. He is also the publisher of the Greenwich Village blog VillageConfidential.
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