Apartment hunting is all about getting the best place for the lowest price. But with rental rates being the highest in US history, the hunting process is now more like a safari, with home seekers going head-to-head, making grandiose promises to landlords, and describing themselves as saintly entities just to pay too much money for too little space.
Competition this fierce makes phrases like “no-fee” increase the appeal of many properties. Although mainly found in New York, New Jersey, Massachusetts, and a couple greater metropolitan areas on the East Coast, you can also find no-fee listings in other parts of the country.
What is a Rental Fee?
Real estate agents and agencies often charge a fee for finding you an apartment that meets your specifications. That means you don’t have to spend time trudging around town checking out available spaces you find through online ads and agencies, but that convenience is far from free. The more formal term “broker fee” simply refers to the amount you pay the broker for their assistance, which is how they make a living (and why they are so persistent in finding you the perfect new home).
How Much Are Rental Fees?
Rental fees vary from around eight percent of an annual lease, which is usually about one month’s rent, to 15 percent. That may seem like too much to pay for convenience, but if you’re busy or even just a little lazy, you’ll be able to rationalize that fee. Still, you should consider the fact that the broker typically has to pay the brokerage firm a percentage, too, as well as the listing broker — so it’s not exactly like they’re not pocketing a lot per rental transaction.
What Does No-Fee Actually Mean?
If you limit your search to no-fee apartments, that means that as a renter, you won’t pay the broker’s fee up front. The broker will be paid the fee by the brokerage firm, however, which means that one way or another, that “fee” will be incorporated into your monthly rent payment. Upfront fees can also be avoided if you approach the landlord directly without getting a broker involved. This route is often labor-intensive and requires you to sleuth to find properties before they’re publicly listed.
Does the Landlord or Brokerage Firm Actually Ever Waive the Fee?
In highly popular areas where rental demand is high and availability is low, no-fee deals are nearly non-existent. In these places, the landlord and brokerage firms wield all the power. However, in some cases, the landlord or brokerage firm will pay the fee for you if they need to rent out a unit that’s costing them money. For instance, if a $2000-a-month apartment has been vacant for three months, the prospect of losing another $6000 on an empty apartment is impractical, so they may lower the monthly rent on the annual lease by a few hundred dollars, giving you a pretty good deal. However, you should keep in mind that there’s probably a good reason why the apartment hasn’t been rented out. Always weigh the pros and cons before signing any binding documents or handing over a deposit.
So Which is Best for Me: Fee or No-Fee Rentals?
While the words “no-fee” are certainly enticing, you still have to run the numbers for both options, and consider what you’re getting for your money, to get the best deal. Make a list of both fee and no-fee options. You may find that the rentals with fees are cheaper in the long run. If bargaining appeals to you, you can haggle with the leasing broker to bring the price of the fee down, but you’ll have to make sure that there are no loopholes in the terms before signing any kind of formal agreement. The safest and most practical approach is to simply compare the actual money you’ll pay per year for the apartment, both when fees are involved and when they aren’t.
Are There Scams I Should Be Wary Of?
No-fee deals are more likely to be accompanied by underhanded tactics. You might visit one of these apartments and love it, but just before you’re ready to sign the lease, the agent might casually mention that there was a typo in the ad, and that there’s actually a “small fee” you’ll have to pay to execute the agreement. They will generally downplay the “small fee” and apologize for the confusion, insisting that a little extra money shouldn’t matter if you really love the place. You can walk away or pay…but consider the fact that if they lied about the fee, there may be other little white lies afoot, too.
Signing a lease agreement is a big commitment, and once you put your name on a legal document, it’s pretty hard to back out. Don’t sign any papers before giving your decision some serious consideration, preferably after at least 24 hours of deliberation with a trusted friend or family member.