How to Find a No Fee Apartment in New York City
Why would I have to pay a fee to find an apartment? This is one of the most common questions we hear from people whom have never lived in NYC, or one of the other cities where broker fees are commonplace. The information below will explain fee vs. no fee apartments, why not all no fee NYC apartments are created equal, and how you can get the best deal on a rental apartment in the New York metro area.
What is a Broker Fee, and How Much Is It?
One of the most common lures used in New York City real estate listings, one you'll see again and again in every type of media, is the promise of no fee apartments. In these cases, that simply means that you don't have to pay a broker's fee in order to sign a lease.
The practice of using a broker to find a rental apartment is not common in much of the United States, so it's not surprising if you've never heard of it. And the NYC market is one of the only places where it is customary for the tenant (not the landlord) to pay for the broker's services when you sign a lease.
Brokers in New York City (and the surrounding metro area) typically charge from 8.5% to 17% of the annual rent on your apartment at the time of the lease signing, so finding a no fee apartment can potentially save you thousands of dollars. Broker fees in Manhattan tend to be higher than in the outer-boroughs, and in New Jersey.
An "inexpensive" $1500 apartment in Manhattan typically has a fee of $2700 that the tenant must pay to the broker! No fee apartment listings are great, of course, but be careful: the term can mean two different things.
Watch Out for Hidden Costs with that "No Fee" Apartment
It sounds counter intuitive, but many no fee NYC apartments that you see advertised online or in the newspaper are actually obtained through a broker. Does this mean that these brokers, and their brokerage firm, with all of its overhead, have decided to work for free, out of some altruistic urge to help stressed-out apartment seekers? No, of course not.
Real estate brokers charge a fee for their services, which usually consists of finding, alerting you to, and showing you, apartments (they have the keys; they let you in the door), and then helping you with paperwork, and acting as a liaison between you and the apartment's owner. That's how they stay in business, by charging a fee for these services. That's fair, as you can't expect them to work for free.
Brokers will also offer "no-fee" apartments, but that just means that the building's owner is paying their fee, not you. If the owner is paying the fee, why should you care? Because the owner is probably adding it into your rent, or offering fewer concessions.
Often, you can get the a better deal on the same "no-fee" apartment when you talk to the owner directly, than when you go through a broker. The money the owner is not paying to the broker for your "no fee" apartment could instead be applied to an extra month of free rent, or a reduced rent, for you.
There are two exceptions to this:
When a brand new rental building opens, it is common for the landlord to hire a brokerage to run their leasing office. You may not realize it, but the on-site leasing agent is often actually a broker, not an employee of the building. This is fine, as it is part of the building's initial marketing costs to hire them. As long as you are going directly to the leasing office (and not letting another broker take you there), you will be getting the best deal.
When a company has two divisions: a property management arm, and a brokerage arm. If the company is managing the building for the owner, and not charging a fee, you will be getting the best deal. Just be careful if they try to show you other apartments... they may not be in buildings that they manage, and therefore you might not be getting the best deal. Always be sure to ask if they manage the property, or having the exclusive rights to lease it.
Beware the Bait-and-Switch
Most NYC brokers only make money when you actually sign a lease, thus it's certainly in their interest to find you an apartment as quickly as possible, so they can move on the next client.
This is both good news (the broker wants to find you a home as much as you want to find a home) and, potentially, bad news, because the same broker also is usually not interested in spending time showing you lots of apartments. Unlike sales brokers, many (but not all) rental brokers are not looking to build a long term client base with referrals. For them, it's a numbers game, so if you don't sign quickly, they move on to the next client. If you decide to use a broker, and you find one who sticks with you, listens to your concerns and seems to be truly trying to help, stick with them!
A common complaint about finding an apartment in NYC through a broker is the rampant use of bait-and-switch tactics. We've heard (and, in the past, experienced) more stories than we can count about apartment seekers showing up to see a place that sounds terrific, only to be told that it's "no longer available," and then subsequently shown far-less-terrific apartments "while we're here."
Many first-time New Yorkers, and even more experienced NYC apartment hunters, will sign a lease on a less-than-ideal apartment out of frustration, and desperation, simply because those are the only apartments they've seen.
Go Directly to the Owner and Avoid Paying a Fee
To get a truly no fee apartment, you have to cut out the middleman--the broker--entirely and work directly with the property manager or owner. This way, you pay no brokers fee AND the owner pays no brokers fee, giving you an apartment at the fair market price, with no extra costs, hidden or otherwise.
Fortunately, technology has made it easier than ever to find a NYC apartment without using a broker. More and more landlords are making that information available to the public via the internet, and they are seeing the benefit of dealing directly with the tenants and cutting out the middleman.
It should be noted, however, that not every apartment is available directly from the landlord. Some landlords, often smaller ones (especially an owner of just a couple of small buildings who has a full-time job and is a landlord on the side), give exclusive marketing rights to their units to their local broker, to avoid taking on the added task of marketing and showing the property. Another common situation is when the owner lives out of town (particularly condo rentals, which were bought as investments, or if the owner has retired and moved to, most often, Florida). In those cases, if you want the apartment, your only choice is to go through that broker. Occasionally the owner may pay for the broker's fee, but from their perspective, why should they when they know a tenant will? So, unless the market is soft and they're having trouble renting the unit, get ready to pay the fee.
Because the outer-boroughs of New York City (particularly Brooklyn, Queens and Staten Island) have quite a few of the smaller landlords mentioned above, you will often will find it harder to get a no fee apartment in those areas, than in Manhattan, or (parts of) the Bronx, which has a lot of large management companies who own large numbers of buildings. Still, you will find small landlord, particularly those who also live in their building, that are more involved in the rental process. So don't give up hope!
Where Do I Find No Fee Apartments?
Just about anywhere you find apartments listings, you'll find no fee apartments. Keep in mind, however, that the large national sites wont' tell you if the apartment is fee, or no fee, as their websites are not designed to include many of the intricacies of the NYC rental market. That said, most of the luxury buildings advertised on those sites are advertised by the landlords themselves.
There are a number of NYC-based real estate websites (including Urban Edge!) that either are dedicated to no fee apartments, or give you the option to search both fee and no fee apartments. Now... some websites (such as Urban Edge) don't allow just anyone to post a listing without being checked out first, to ensure they are not a broker masquerading as a landlord. The posters are vetted. However, some websites are basically a free for all where anyone can post with no one checking to see who is doing the posting. This happens a lot, particularly on sites such as Craigslist (where it is rampant). Often the broker will try to parse words, and say they are the landlord's representative (making it seem like they are an employee of the landlord), when that is not the case. They will post units in the landlord section, that they neither own, nor have exclusive rights to rent.
After awhile, through trial and error, you'll learn to "spot" and "sniff out" these ads. You'll recognize the red flags. It's frustrating, but in the end you'll have learned a lot. This is one of those cases where experience is the best weapon.