The Differences Between Fee Apartments and No Fee Apartments

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Fee vs. No Fee Explanation

For starters one must understand that the overwhelming majority of apartments that are available at any given time in Manhattan are FEE apartments. What this means is that if you use a broker to find your new apartment, the broker must be compensated for their work. They must charge their client a fee; this fee is normally 15% of one year's rent (for a $2,500 apartment a 15% Fee would be $4,500). In most markets in the country, this fee does not exist, instead agents are paid by the apartment owner to find a qualified tenant; New York City is an anomaly in this sense.

Being a broker, I know that, yes, there are clients for whom it makes sense to pay a fee (due to time constraints, among other things), as well as agents who have worked diligently and responsibly for their clients and deserve a 15% fee. That being said, while working as a broker, I have often found apartments for my clients in 10 minuets for which they end up applying and renting. For this I am paid a 15% fee, totaling in the thousands of dollars. Is it fair to charge a client a rate of $3,000 an hour, if the end result is the client has a new apartment with which they are happy? That is for you to decide

There are two ways to go about avoiding paying a fee.

One way is for you, the potential tenant, to rent an apartment directly through an owner. The other is if an owner offers brokers an OP (owner payment) for an apartment, thereby compensating the broker so they do not need to charge the tenant.

An OP is normally equal to one months rent, or 8.33 % of a year's rent. Again, the reason an OP can mean no fee to the tenant is because the broker is being compensated for their work by the owner, not by you.

The owner offering an OP to the broker allows the broker to advertise the apartment as "No Fee" but in reality the tenant doesn't necessarily get a better deal. The owner, losing a month of rent to the broker will increase the rent during the other months to compensate this loss.

To explain this better I will use 2 apartments for rent as an example. Apartment A and apartment B are in the same building with the same size, same view, same amenities. The difference, apartment A is being advertised as a no fee apartment for $2,000 because the owner is paying an OP. While apartment B is being advertised as a fee apartment for $1,835. Over a 12 month lease both apartments will cost you $22,000 - no matter which you choose once factoring in the fee you have to pay a broker on apartment B.

With that said, the general public will be more interested in Apartment A because they do not have to pay the fee themselves.

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Ben Bolanos has 1 articles online

http://www.urbansherpany.com

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The Differences Between Fee Apartments and No Fee Apartments

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This article was published on 2010/04/01