Broker Fees — $$$ — An Explanation

When you sign that fee check you may think to yourself, “wow, they’re getting a lot of money. I should become a broker!” But what most renters don’t understand is that a broker is usually not getting the full broker’s fee.  And if you sign a no-fee apartment, the broker is not getting the full fee that your new landlord pays them. (Any apartment advertised as No-Fee just means the landlord pays the fee for you.  Read more about this concept in our previous post,  What Does No Fee Mean.)

Instead of going entirely to your broker, the money is typically split several ways.  The brokerage firm that your broker works for will take the largest cut – usually 50%.  And if someone else helped show the apartment, they also get a cut.

Why is so much owed to the brokerage firm?

1) Licensing/Legal Responsibility

This gets confusing, but hang in there.  The broker you’re working with is probably not a “broker” in the legal sense of the word.  They’re most likely a “licensed salesperson” who is associated or sponsored by an officially licensed broker.  Your “salesperson” can only collect a fee (take a commission) because of this association, even though they hold a license and have passed the required courses.  In addition to enabling their salespeople to collect fees, the brokerage also assumes some of their legal responsibility.  If the salesperson violates one of the state’s real estate laws, the brokerage may also be held responsible.

Fees are split by brokers and salespersons.

2) Full support

The brokerage doesn’t make money unless their salespeople help you sign your next lease.  In order to ensure that happens, a brokerage provides all the support that enables your salesperson to help you find your apartment.  They may provide offline and online marketing support, training, administrative support, benefits, office space, a receptionist, telecom and internet access, etc.  All of this costs money – a lot of it.

Licensed salespersons are sponsored by licensed brokers.
So next time you write that fee check or sign the lease on your ‘no fee’ apartment, remember that your salesperson/broker isn’t walking away with as much money as you may think.