Promo: Here are the pros and cons of using an apartment broker to find your next apartment.
Meta: Are you in the market for a new apartment? Here's what you need to know about apartment brokers.
It can be a daunting task to find the ideal apartment, especially in a large city that has a thriving and competitive real estate market. One option you could pursue is to hire an apartment broker -- a professional that will do the bulk of the work of searching for an apartment on your behalf.
Like most decisions you can make when renting or buying a home, hiring an apartment broker has its pros and cons and isn't the right move for everyone. With that in mind, here's what you should know about apartment brokers and whether hiring one could make sense for your next move.
What is an apartment broker, and what do they do?
In a nutshell, an apartment broker is a type of real estate broker who acts as the middleman between prospective tenants and property owners or management companies of rental properties.
Think of an apartment broker as a similar concept to a real estate agent when buying a home. You'll tell your apartment broker what you're looking for -- number of bedrooms and bathrooms, ideal location, etc. -- and they'll show you apartments that meet your criteria.
Apartment brokers are most common in markets that are very large and desirable and that have lots of competition for available apartments. Specifically, the New York City and Boston markets are where apartment brokers (especially fee-based brokers) are most common.
Advantages to using an apartment broker in your next home search
While an apartment broker who is working for you certainly won't be free (more on that in the next section), they can bring quite a bit of value to the table. Here are some of the best reasons you might want to hire an apartment broker for your next home search.
- Time savings: Your time is valuable, and an apartment broker can save you hours of looking through rental listings, narrowing down your search, calling property managers to schedule showings, and more. An apartment broker's services can be especially valuable if you currently live far from the market you're planning to rent an apartment in.
- Knows the market: An apartment broker can be a particularly valuable asset to a renter who is new to an area and doesn't know where the best places to live are and what areas should generally be avoided when renting an apartment. An experienced broker can help narrow down your search area and point you towards a neighborhood and building that would be the best fit for you.
- Opens more doors: Many apartment brokers have excellent relationships with property managers and landlords and can effectively leverage those relationships for their clients. Therefore, an apartment broker can often get clients into apartment communities that would otherwise be in very high demand and that they would be unlikely to get without the broker's connections.
- Negotiating rent: Apartment brokers can often negotiate a lower monthly rent, or even a reduced security deposit on your behalf. As you'll see in the next section, apartment brokers are often not cheap, but if they can save you money on rent it can certainly help justify the expense.
Drawbacks to using an apartment broker
Just like with using a real estate agent to buy or sell a home, the biggest potential drawback of using an apartment broker is the cost, or broker fees. These professionals don't work for free, and the cost is significant. In fact, the standard apartment broker's fee is as much as 15% of the first year's rent in New York City, the rental market where apartment brokers are most common. Fees vary, and some charge a fee equal to one month's rent instead of basing it on a full year, but the 15% structure is more common, especially in desirable and competitive markets.
In short, this means that if you find an apartment for $3,000 per month, you'll end up paying as much as a $5,400 fee to the broker who helped you find it -- that is a big expense.
Fee vs. no-fee apartment brokers
Let's be perfectly clear. All apartment brokers get paid a fee for their services. However, the matter of who is paying the broker fee varies.
Specifically, there are two main types of apartment brokers: fee and no-fee. Apartment brokers who charge broker fees to renters generally do so because they add value to the process. They might help you get into an apartment in a highly desirable building that would otherwise be very difficult to get in. Most apartment brokers are in the "fee" category.
On the other hand, no-fee brokers don't collect a fee directly from the renter but are paid by the apartment's owner or property management company. No-fee brokers help landlords fill up their apartments. Think of a no-fee broker like a listing agent when selling a home -- their job is primarily to look out for the property owner's best interests.
In fact, under recent guidance from the New York Department of State, landlords are required to pay a broker's fee themselves if the broker is acting on behalf of the landlord. So broker fees can only be paid by the tenant if they were hired by a prospective renter to represent their interests.
In a nutshell, brokers that charge fees work to help you get an apartment that's in high demand and would otherwise be difficult to rent on your own. No-fee brokers primarily work for the landlord and help them fill their apartments.
The Millionacres bottom line on apartment brokers
In a competitive or unfamiliar real estate market, an apartment broker can certainly add value to your home search. They can help reduce the competition you'll face for the best apartments, help point you towards the right neighborhood for you, and can even help negotiate a lower rent than you'd be able to get on your own.
However, these services come at a price, and it's often pretty steep. You can certainly find an apartment without a broker, but you're likely to spend far more time on the process, and you might find yourself struggling to get into an apartment in the most desirable locations. In the end, you'll have to weigh the costs and benefits in order to decide if hiring an apartment broker is the best move for you.
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