The term “no-fee broker” is used all the time in New York City real estate lingo, but don’t let it fool you. It’s actually a bit of a contradiction. A broker always collects a fee when helping a renter find an apartment. The question is just a matter of who pays the broker ‘s fee — you or the landlord?
In almost every other city in the country, it’s common practice that the landlord will pay the broker’s fee. New York City, however, is an outlier in that renters are often responsible for paying the broker’s fee.
Why Do Renters in New York City Have to Pay the Broker’s Fee?
Historically, the dynamics of the New York City rental market favor the landlord since it’s Economics 101: Supply and demand. There are many more renters than available inventory – especially for desirable apartments. Therefore, landlords will often pass the broker’s fee onto the renter instead of covering it themselves. Faced with so few options, many renters are willing to foot the bill.
But, Landlords Sometimes Do Pay the Fee – Even in New York City
If the landlord plans to pay the fee, the apartment will be advertised as “no-fee.” This may sound like music to the ears of renters who find it frustrating to shell out thousands of dollars in broker’s fees just for an agent to open the door to an apartment they found on Naked Apartments or StreetEasy. But, not so fast. Often, no-fee apartments can be more expensive for a couple of reasons:
- They are in high-rise buildings with lots of amenities. Think doorman, pool, gym, etc.
- Landlords bake the broker’s fee into the cost of monthly rent. This could also be a warning sign that the apartment is languishing and the landlord is desperate to get it rented.
The Value of No-Fee Apartments
If a no-fee apartments are typically more expensive than apartments with fees or suggest that something is amiss with the property, then why bother? No-fee apartments are good for renters who are short on cash. Since broker’s fees require renters to lay out thousands of dollars upfront, it puts a heavy financial burden on renters who don’t have a lot of savings. Think of a no-fee as stretching out the broker’s fee over monthly payments.