Low Fee or No Fee Apartments in NYC - What’s The Catch?
Finding a rental apartment in Manhattan is like an Olympic sport – there are no stories written about Silver or Bronze medal winners. The Gold medal winners get the best prices, best spaces in the best neighborhoods. Coveted neighborhoods like Chelsea, West Village and the Lower East Side are now crawling with students, brokers and management companies all fighting hand-to-hand combat to win the best deals before they are stolen by another quicker, savvier or richer hunter.
One of the most confusing aspects of the Manhattan apartment rental game is the concept of so called no-fee or low-fee apartments. Like the elusive Yeti, there are known sightings reported of these hidden gems, but the information about what exactly they are is not clear and misinformation is rife. Here’s a very simple explanation for those brave souls about to embark on this challenging mission.
First, what does No-Fee and Low-Fee even mean? “No fee” refers to either apartments that are rented direct by the owner (like a condo building) or the owner’s management firm, or are apartments whose owner pays the broker’s fee as a part of the rental agreement.
What’s a Brokers Fee? Brokers resell existing apartment inventory and charge a “fee” for the transaction – which typically ranges from one month’s rent all the way up to 15% of a year’s rent.
To find a No-Fee or “by owner” apartment, you must be familiar with the area and literally go to the neighborhood on foot and walk from building to building to inquire if they are managed by a firm and offer apartments directly to the public.
You may get lucky and find exactly what you’re looking for. But it’s a tiresome process and takes real commitment. This approach works best on large apartment buildings that have rental offices on premises and are proactively looking for new tenants. These larger buildings typically have doormen who are physically on site and know the tenants, are aware of the availabilities and have direct access to the landlord. Scoring one of these sounds like a good deal, but beware – most of these apartments are likely baking in hidden costs into the rent to make up the difference. Also these larger buildings with door staff and amenities tend to be more expensive per square foot and in this sense you will in effect end up paying your “no fee” anyway.
Depending on the building, some doormen or attendants are required to ask that you contact a specific Exclusive Broker that handles that building (more on that later) in which case there will be a fee, but in some cases a lower fee (not all of the time, however).
Which brings us to the second most desirable term: “Low Fee” “Low Fee” apartments are usually apartments where the 12% fee has been reduced to 10% in some cases, which may not sound like a huge difference, but over the course of a tenants stay in a given apartment it adds up. These Exclusive Listing arrangements are typically made between experienced brokerage firms who have long-standing relationships and Landlords who own multiple buildings, or so-called exclusive rentals. These brokers have demonstrated a consistent ability to move inventory for these landlords and also source quality tenants and work to facilitate the apartment showings.
A lot of these buildings in Chelsea, West Village, East Village and Gramercy are smaller non-doorman walk up buildings; so giving the keys to multiple brokers is risky. Exclusive brokers have a trusted relationship with the landlord and hence can gain access and showcase the spaces efficiently.
Because there is no other broker competing, the Exclusive agents can afford to pass on a lower fee to the renter – therefore creating a more attractive transaction to the client, and allowing that broker to compete better in the crowded New York City rental arena.
There are number of benefits to the renter to find an Exclusive Broker:
1) Renters are able to get to the front of the line to acquire these apartments
2) Exclusive Buildings tend to be of higher quality
3) The rental process is greatly simplified and less complicated due to the direct-to-landlord relationship. This is a huge value
once one experiences the mind-numbing bureaucracy of the rental process.
4) The majority of Exclusive properties are less expensive than mass-market apartments. Hence Exclusives offer greater value.