To Fee or not to Fee… that is the question.
Bohemia Blog by Agent Matthew Warner Kiernan
Recently I’ve been amazed to learn how just many people assume “no-fee apt” means you can’t use a real estate agent. So, I thought this would be a good time to do take an in-depth look at the FEE VS. NO-FEE debate!
Can I use my real estate agent for a no-fee apt?
YES, of course! Not only can you work with a real estate agent to find a no-fee home, but it actually helps – you want someone you know and trust who can help evaluate whether a no-fee apt makes sense for you, personally and financially. Always remember to ask your agent at your showing appointment if they have no-fee (or low-fee) apartments to show. It’s always great to compare these to ones with the standard fees, so you can be better informed!
What does it actually mean?
It simply means we invoice the landlord for the fee, once you rented that particular apartment. You may hear agents often refer to them as an “OP” or “owner pay” unit.
A common theory is that no-fee apartments “must have something wrong with them”… is this true?
There are MANY reasons an apartment could be going no-fee. For example, landlords often agree to pay the brokers fee directly when they need to rent a particular unit immediately, and want a “one-up” on other similar apartments on the market!
Another reason is if the apt has been on the market too long, and the landlord wants it to get more calls… being advertised “no-fee” is a quick way to incentivize more customers!
What are some factors why an apartment stays on the market longer than expected?
The time of year: 3-4 bedrooms, for example, are very popular in the spring and summer, when TONS of students are renting before the fall semester. But in the winter months, the demand for these is much less and may turn into no-fee listings.
There is something less than ideal about the apt! Let’s be honest - A 5th-floor walk-up with no amenities will not rent as fast as a 2nd-floor unit with great amenities (dishwasher, laundry, etc). Suppose both these units are available at the same time, which unit do you think will rent quickly and which unit will be advertised “no fee?” You guessed it. ;-)
Are no-fee apartments always a better deal?
This is the BIGGEST misconception I see with my clients.
Because landlords are paying the moving costs upfront here, they often build that cost into the rent. Remember, for the owner, at the end of the day, this is a business! He needs to make sure he earns his money back.
Generally, no-fee units are $100-$300 MORE per month than comparable ones, where you are paying the broker.
IF you’re in the market for a place for a year, then a no-fee may be the way to go, as it saves you from the large up-front cost. But for clients looking to find the perfect place to stay in for years to come, they can actually benefit from paying the broker's fee!
LET’S DO THE MATH ON THAT!
* Client #1: Moves into a NO FEE 1-Bedroom for $1,900.
Broker fee: $0
1st year rent = $22,800
2 years of rent = $45,600
3 years of rent = $68,400
* Client #2: Moves into the SAME 1-Bedroom for $1,700 and pays the Broker Fee
Broker Fee: $3,000
1st year rent: $20,400 (+ fee) = $23,400
2 years rent = $43,800
3 years rent = $64,200
*** As you can see, by the end of year 2, the mover who paid the brokers has saved $1,800 – and by the end of year 3, has saved $4,200!
Talk to your agent about your needs when looking for your new home. Depending on your plans, whether long or short term, he/she can absolutely show you options and point you in the right direction!
Check out more of Bohemia Realty Group’s Matt Kiernan!