Think your NYC broker is working for you? Think again. You're not in Kansas anymore. Lord knows I've had more than my fair share of broker-induced real-estate headaches. It's a dirty business, and if you don't know how to look out for yourself, you're food for the piranhas.
"In New York City alone, there are 27,000 real estate agents," says a top broker. "Last year there were 12,598 contracts, right? That means a lot of real estate agents did not do deals."
NYC real estate brokers make money with turnover -- and a lot of money. They charge the renter one month's rent or 15 percent of the year's total rent. Make sure to negotiate the commission rate before you go out with them, because once you see that apartment that you just must have, the broker is fully aware that they have you over a barrel in terms of the commission -- and you can bet it'll be the full 15 percent.
Here are a few other things to keep in mind when working with a NYC real estate broker:
1. They don't want you to get a good deal.
They want you to rent or buy something -- and they want it to be at the highest price possible, because every $100/month more you pay in rent, is at least another $100 in commissions they're putting in their pocket. Therefore, they're not going to negotiate as hard as you could if you found out who the listing broker is and went directly to them.
2. You can bypass them.
If there is an apartment you really want, but it's labeled as "broker only," you may be able to get a better commission deal if you go directly to the listing broker. Brokers usually split the fee 7.5 percent to the listing broker and 7.5 percent to the broker (your broker) who brings the client in. This means that if you go directly to the listing broker, you may be able to negotiate that they take an 8.5 percent or 10 percent fee instead. Unsurprisingly, most brokers are fine with cutting the other broker out if it means more money for them.
3. Don't tell a broker your real price ceiling.
Start low and go higher if you need to. There are apartments that are virtually the same in a whole range of prices. That means that the apartment you just saw that was 1000 square feet with a doorman, open kitchen and bamboo floors for $6,500 is also renting in other similar buildings for $4,500. The reason you're seeing the $6,500 one is because you told your broker that you're looking for an apartment between $4,000 and $6,000. Here's a classic broker line: "It'd open up so many fantastic apartments that I know you'd love if you just go up in price a bit more."
...every $100/month more you pay in rent, is at least another $100 in commissions they're putting in their pocket.
4. There's always "another offer".
When a broker tells you that there's another offer that came in yesterday, 90 percent of the time they're lying to create a fake bidding war. Don't take the bait. Hold strong on your original offer.
5. Your broker is going behind your back.
Just because it's listed at $5,000 doesn't mean you can't offer $4,300. The biggest thing holding you back from getting a good price is your own broker. If you told your broker you'd be willing to pay $5,000, then guess what? They're going to tell the other broker that and there'll be no bargaining. Similarly, if your broker thinks you'll end up renting something at $5,000 in the next week, then it's worth it for him/her to try to do that, since it means an extra $700+ in commissions. Remember: the more you spend, the more the broker makes.
6. Expect lies and cons.
Sad, but true. The industry promotes dishonesty. It also promotes seeming like the nicest, sweetest person you've ever met. How else can brokers compete with the tens of thousands of other NYC brokers just like them? They're in sales. They want you to like them so you'll trust them. They know they're in competition with the twenty other brokers aggressively emailing and calling you once they heard you're apartment hunting.
7. You don't really need a broker.
They don't do anything except walk you into buildings and charge thousands for it. They don't help with the lease (that's what your lawyer is for), and they don't help you bargain (see point 5 above).
If you're a renter or a buyer, you can go directly to many buildings and skip the broker. There are hundreds of rental buildings in NYC that accept walk-ins and will show you the apartments. Often, they even give one or two months free! But if you go with a broker (using your real name), and the building is offering two months free, then suddenly the best you'll get is one month free and no broker fee -- or worse, no incentives at all.
So spend some time calling around and asking what they have available and if there are any incentives, like months free.
8. You can rent in lots of great buildings without a broker.
No-fee apartment buildings managed by large rental management companies are always better. You don't need a real estate broker to rent from them, so the "effective rent" (rent with fees added or renter incentives deducted) ends up being less expensive.
Unlike renting from the owner, it's highly unlikely that they'll jack your rent much beyond market value each year (...but remember to always check online reviews, as some management companies are more ethical than others). And unlike a private landlord, they can't legally kick you out before your lease ends when their son decides to go to NYU and they need the apartment for him (yes, that happens!)
With a big management company, issues that need fixing in your apartment are guaranteed to get fixed fairly quickly, and you can expect your rent to stay at market rate. Just make sure that your broker doesn't walk you in the front door of one of these buildings, because the second they do, you're on the hook for commission you could have avoided. (Sleazily, brokers often advertise for no-fee buildings without specifying the address, and then steal the building's "first-month-free" offer away, as commission, once they walk you in.)
Always make sure to check reviews of management companies (and click the light gray link at the bottom of Yelp reviews to view the "other reviews that are currently not recommended", as Yelp has a worrisome habit of filtering most of businesses authentic negative reviews -- the ones you should read first).
New York City is a great place to live. It's full of incredible restaurants, interesting people, gorgeous buildings and art, etc. It's also the most competitive city in the world. Make sure you do your research and stay sharp so your New York experience is a good one.
Want more tips? Check out Urbanette Magazine's NYC apartment hunting tips (they'll save you a lot of time and money!)