One of the biggest surprises for those new to New York City is the fact that, when renting an apartment, you often have to shell out a fee to the rental broker on top of the landlord-required security deposit, first and last months' rent, and application fees.
It's something that stumps (or, at the very least, annoys), long term-residents too. Complicating things even further: The fact that many apartment listings are advertised as "no fee" and sometimes the same apartment will be listed as "no fee" or with a fee. Confused yet?
Well, you're in luck. RentHop — a nationwide apartment listings site that typically has over 50,000 rental listings, around a third of which are no fee listings — has the scoop on fees, no-fees and how to pay the very least when securing your apartment.
What is a no-fee listing?
There are a couple of types of no-fee listings out there (you've probably seen them advertised if you've done even a little bit of apartment searching online). The first kind of no-fee listings are those posted directly by the management company or landlord. That said, don't assume all listings posted by a landlord or management company are no-fee unless they say so, as some management companies will require you go with their preferred brokerage (and pay that broker) even if you reach out to them directly. (Brokers bring landlords a lot of business, and they want to keep them happy.) Also, even if an apartment is currently being advertised as 'no fee' by a landlord or management company, you may still have to pay a broker's fee if you find it through a broker, unless it's an "OP" listing.
This bit of industry shorthand means the "owner pays" the fee instead of passing the cost on to the tenant. OPs are most common during slow seasons (think winter and late fall) and in buildings that are brand new, with a lot of vacancies. Landlords know that apartments that sit vacant cost them money, and they're often willing to pay up to avoid this. Sometimes if an apartment has lagged on the market for a while, an owner will pay the fee. In that case, though, it's often a less-than-ideal apartment.
Finally, don't assume that just because you go straight to a management company and save the landlord from paying the broker fee, he/she will lower your rent to reflect their savings. The New York real estate industry is a small one, and if word got out that landlords were doing that — essentially bypassing brokers altogether — it would upset the broker community and stop them from showing that landlords' buildings.
How much you'll pay if you don't find a no-fee apartment
On average, brokers charge 12 to 15 percent of the first year's rent for their fee. Often they'll tell you that their fee is 15 percent. However, it's sometimes possible to negotiate, especially if it's slow season or you have particularly strong financials and are prepared to move quickly (read: you're a strong candidate the landlord would like to hold on to). One way to approach this process is to tell the broker that you're happy to fill out an application, but only if the landlord agrees to lower the rent by, say, $100 (or even $150-$200 if the prices seem well above market rates). Often the landlord won't budge, so the renter can ask if there are any other ideas, and maybe lowering the fee will be just as good.
A piece of advice, though: Figure out how low your broker is willing to go before you head out on your search, or risk a rather awkward situation. Also, a lot of brokers will have you sign a form saying you agree to pay them a certain broker fee before you start searching for apartments, so read the fine print and don't sign anything you're not comfortable with.
The best ways to find no fee apartments
If you have a particular building in mind, you can try to go directly to the management company (or landlord if it's a smaller building) and try to rent sans broker. But as we mentioned earlier, some buildings require you go through a broker. (Either way, confirm with the management company ahead of time to find out whether you're expected to pay a fee.) Many online search sites including RentHop let you select search filters for no fee apartments. In addition to great no fee listings, you'll find tips on the overall rental process (fee vs. no fee) in RentHop's rental guide.
Another option is to ask a broker show you only OP apartments. Keep in mind, though, that looking only at apartments where the landlord is paying your broker's fee may limit your search in terms of scope of apartments available, especially in the busy months of late spring and summer. If you can move in the slower winter months, you'll have a better shot at making this option work without sacrificing the quality of the apartments you see.
Traditionally, popular Manhattan neighborhoods such as the Upper East Side, the East Village, and Hell's Kitchen have a good number of no-fee listings, but as much as possible, be open to new neighborhoods.
That's because "up and coming" neighborhoods — often those that are far from transportation and slowly becoming more residential — are usually prime spots for OP listings. Also, now may be a good time to try the brand-new apartment route. As we mentioned earlier, management companies in new buildings tend to be more amenable to offering their apartments without fees. “Brand new rental buildings offer OP when they first open to attract new tenants in general," says Samantha Dong, an agent from Town Residential.
The downside of no-fee rentals — and how working with an agent can pay off
We've heard brokers say time and time again that a "no-fee apartment" doesn't come free, meaning that the savings a renter sees in broker fees is usually reflected in the (higher) montly rent.
But many times, working with a broker can be your smartest option.
"A great agent adds a ton of value," says RentHop founder Lee Lin, who worked as one himself in RentHop's early days, trying to prove that RentHop's initial focus (connecting renters directly to landlords, while bypassing agents) was the way to go. Instead, after getting his real estate license and showing NYC apartments all day long for months, he saw firsthand how brokers "save everyone a lot of time by visiting dozens of apartments a week and only showing the top 10 percent or so to customers. Brokers know buildings and neighborhoods better than anyone. And they often have negotiating power with the landlords, because they know them and have established relationships."
And in a city where the vacancy rate rarely climbs over 2 percent, having someone on the inside looking — and negotiating — for you, may very well pay for itself.
RentHop is a search engine to find apartments for rent that uses mathematical algorithms to aggregate and score listings inventory from top landlords and brokerage firms. With over 6 years of NYC apartments rental data and millions of listings observed, RentHop's proprietary HopScore sorting ensures renters find high quality listings posted by trusted managers and agents.