A comprehensive guide to NYC broker fees
After getting past the initial sticker shock of how expensive apartments are in NYC, renters are often further shocked to learn about broker fees. A broker fee is a commission paid to a real estate agent for helping buy or sell a home. In NYC, there are broker fees for renting an apartment too!
In this article, we will provide you with a comprehensive guide to broker fees in NYC, including what they are, how much they typically cost, why renters have to pay them, and how you can negotiate or avoid them altogether.
What are broker fees?
Broker fees are a commission paid to a real estate agent in exchange for help finding a home to buy or rent. Before the adoption of online listings, brokers had to manually collect listings, reach out to tenants, coordinate the showings, handle and file all the paperwork and be available for tours. In exchange, they were paid a one time fee for their service.
In today’s tech-enabled world, many of the core functions of brokers have been replaced by technology. Increasingly, there are often virtual tours of apartments in place of in-person tours. As a result, many people are starting to question why there are still broker fees.
Are broker fees banned in NYC?
Broker fees were actually banned in NYC in 2020 – but only temporarily. In a broad overhaul of rent protection laws passed in 2019, broker fees were banned. In addition, legislation added numerous other protections for renters.
However, in 2020 the Real Estate Board of New York City, a landlord lobbying group, filed a lawsuit to have the ban on broker fees overturned. They were ultimately successful and as a result, broker fees are legal again in NYC.
What are typical broker fees in NYC?
The structure of the broker fee is usually as a percentage of the first year’s rent. This percent can range from as low as 8% all the way up to 20%.
Example: If you are renting an apartment for $2,500 per month, the total amount of the first year’s rent is $30,000 ($2,500 x 12).
If the broker fee is 10%, you would pay $3,000 as your broker fee ($30,000 x 10%).
You may also see the broker fee described as 1 or 2 month’s rent meaning that the fee is equal to one or two full months of rent. If the fee were one month rent in the example above, you would pay $2,500.
Why does the renter have to pay?
Landlords hire brokers because it makes their life easier. Instead of listing the apartment themselves they hire the broker to do it for them.
Someone must pay the broker though. In tight rental markets, where there is a lot of renter demand, the landlord is able to offload this cost to the renter. However, in softer markets, the landlords sometimes split the broker cost or pay it entirely.
Can I negotiate the broker fee?
Many renters don’t realize but the broker fee can be negotiated. This is not true for all apartments but many times you can try to reduce the amount you pay in broker fees.
For a walkthrough guide, read our post here on how to negotiate my broker fee.
Can I avoid paying a broker fee?
In NYC there are “no-fee” apartment buildings. In these buildings, the broker fee is paid by the landlord meaning you don’t have to pay anything. No-fee buildings are more commonly owned by larger corporations who can better afford to pay a full-time broker.
If you limit your search to these buildings, you can avoid paying a broker fee. However, there are some shady brokers who unfortunately will show you an apartment in a no-fee building without telling you. Always make sure you search the building name to check if it is a no-fee building.
In conclusion, while broker fees are yet another expense for an already high cost city, understanding how they work can help you lower their cost and impact.
When you’re ready to start your apartment search, maximize you chance of success by having all of the necessary documents ready to go.