House shopping can be overwhelming, especially for those who are new to New York City. We’re here to help explain what “broker’s fee” and “no-fee” listings mean, and help make your apartment hunting less stressful.
NYC Real Estate Market
New York City’s real estate market has started booming during the 1870s to early 1900s, around the time of increasing housing and office space demand in the Manhattan area.
This was a large developmental shift from the once farmland filled land to apartment buildings and skyscraper offices. Since then, the NYC real estate market has continued to grow along with property sales and rent price hikes.
The biggest reason for the high demand of real estate in New York City is due to its land size. Since NYC is made up of islands, it has limited space for new construction. Instead, buildings are forced to go up and can only be built up to a certain point, depending on zoning and developers’ budgets. Due to this limited supply and hundreds of thousands new tenants moving to New York City every tear, NYC’s real estate value and demand keeps increasing.
Moving to New York City? Read our rent vs. buying guide.
New York City Broker Fee Laws
If you’ve ever looked for a rental apartment in NYC, then you know that it can sometimes be challenging and competitive to score the perfect place. Not to mention the expensive broker’s fee you could end up paying. So what is a broker’s fee and how does the new broker fee law in NYC affect your home hunting process?
A broker’s fee occurs when an apartment is not directly leased by the building’s landlord or management. Instead, a real estate agent is used to represent the property and helps the landlord market their space and find a tenant to rent it. This fee can range from 8%-15% of a tenant’s full year’s lease.
The new broker fee law in NYC passed at the beginning of February 2020 limits the broker’s fee an apartment renter will pay. Instead, these real estate agent fees will be paid by the landlord unless the tenant themselves has hired a broker to find a space.
This is great news for renters as they no longer need to shell out thousands of dollars in broker’s fees. However, a week into this new law, a ruling by a New York State judge has temporarily blocked it. This means that while both sides of this law work to present their cases and a final ruling is set, brokers can continue to collect their rental commission from tenants.
Why Do You Need a Broker?
Since a broker’s fee can be costly, you may be wondering, “do I have to pay a broker fee? And why do tenants pay a broker fee?”
Now, if this fee is so pricey, then why do people still choose to use a broker? This is because having a real estate agent that help you look for places can be a lot easier for those who don’t have time to apartment hunt on their own. They are useful because they can help you navigate the confusing parts of NYC real estate and assess the best apartments and neighborhoods for your particular wants and needs.
However, many times a tenant pays a broker’s fee because the apartment they want to rent is represented by a real estate agent hired by the building’s landlord. Due to this, the broker’s commission falls upon the tenant. It is important to note that even if you found the apartment on your own, if the landlord has a contract with a broker, you will still end up having to pay the fees.
No-fee Apartments in New York City
You may be wondering, what is a “no-fee apartment” and “how to find apartments by yourself in New York City?” Well, we’re here to help answer all your apartment shopping questions!
A no-fee rental apartment is rented directly from the landlord or management company of the building. No-fee rentals in New York also include apartments where the broker’s fee is being paid by the landlord.
A great way to find an apartment in NYC without a broker fee is to search and filter for no-fee spaces online. Many listings will also directly state if it is a no-fee apartment. Localize.City monitors thousands of apartments and houses in New York City, ensuring you will find exactly what you are looking for, without the need of any leg work or broker fees.
Is It Safe to Rent Without a Broker?
While it is understandable for you to want to avoid the expensive broker’s fee, is it really safe to rent without one?
There are two potential cons in renting without a broker.
1. Many landlords are aware that a no-fee apartment can be potentially more popular for apartment hunters. So for those spaces that aren’t rent-regulated, landlords can choose to pay the broker’s fee at first and then raise the monthly rent to compensate for the difference. This can be costly for you in the long term if you stay past your yearly lease compared to if you just paid the commission fees themselves.
2. Landlords will choose to pay the broker’s fee if they need a tenant to quickly fill the space. This can sometimes mean there could be something potentially wrong with the apartment or even the neighborhood. To avoid this, be sure to research not just the unit, but also the building and neighborhood beforehand so you don’t end up with nasty surprises after you move in!
Decided to rent without a broker? Localize.City‘s algorithms can easily help you find the truth about any apartment or house you are looking at. Don’t wait for last minute surprises and make sure to check out all the information before you sign your lease. Get the latest insights about constructions in the neighborhood, school districts, transportation, dinning, sun light and much more.