Oliver, a New Apartment-Finding App, Cuts Out the Middlemen(techcrunch.com)
techcrunch.com
Oliver, a New Apartment-Finding App, Cuts Out the Middlemen
http://techcrunch.com/2015/07/28/oliver-a-new-apartment-finding-app-cuts-out-the-middlemen/
59 comments
> The broker has shown so many crappy places that they will help the renter see that this is a fair, market value, deal.
Huh, I guess that's why the value-adding broker decided to show my wife and I an apartment that was well over $1k over our budget, in a five-floor walk-up when we told him that due to my wife's knee injury, a walkup of more than 2 floors was a completely and total deal-breaker for us.
Not to sound combative, but I wonder how many potential tenants abandoned your broker by yelling at him on the 4th floor, from the 2nd floor, that we're literally physically incapable of seeing the out-of-budget apartment he was trying to show us, and then walking away.
Huh, I guess that's why the value-adding broker decided to show my wife and I an apartment that was well over $1k over our budget, in a five-floor walk-up when we told him that due to my wife's knee injury, a walkup of more than 2 floors was a completely and total deal-breaker for us.
Not to sound combative, but I wonder how many potential tenants abandoned your broker by yelling at him on the 4th floor, from the 2nd floor, that we're literally physically incapable of seeing the out-of-budget apartment he was trying to show us, and then walking away.
Well that sounds like a bad broker. Why did you go see that apartment anyway? I would just ask "what are we going to see" before going there.
It was a bad broker. But I've only met a single good one, compared to a dozen bad ones.
We bothered trying to go up the stairs because we'd already spent 30 minutes getting to Harlem, and apparently it had a terrace. Classic sunken cost fallacy, compared with greed. Who doesn't want a terrace?
We bothered trying to go up the stairs because we'd already spent 30 minutes getting to Harlem, and apparently it had a terrace. Classic sunken cost fallacy, compared with greed. Who doesn't want a terrace?
[deleted]
> as a landlord I want to use an exclusive broker
How beneficial is the "exclusive" part? If it's a doorman building so the doorman can hold the keys and give them to any broker who shows up, and you list it so any broker can show it, is that a lot worse for you?
How beneficial is the "exclusive" part? If it's a doorman building so the doorman can hold the keys and give them to any broker who shows up, and you list it so any broker can show it, is that a lot worse for you?
As a landlord I want 1) to rent out my place at the best price the quickest to the best tenant 2) to deal with the least amount of people possible. So I give my place to 1 broker only and let them handle that. Since I am also a renter the broker cuts me a deal on the broker fee when I rent, basically making it free when possible. That's another advantage of being a landlord.
Usually fees in NYC are 15%. The exclusive broker is going to make 7.5% no matter what. If another broker gets in, they might make 7.5%. If you're dealing with an exclusive broker you might be able to get a better deal, maybe 12% instead of 15%, they are more flexible on the price.
If you want an intro to my broker, I am dblock at dblock dot org ;)
Usually fees in NYC are 15%. The exclusive broker is going to make 7.5% no matter what. If another broker gets in, they might make 7.5%. If you're dealing with an exclusive broker you might be able to get a better deal, maybe 12% instead of 15%, they are more flexible on the price.
If you want an intro to my broker, I am dblock at dblock dot org ;)
There is a nice opportunity if you can cut out rental brokers and apartment locators, but you really only see these types of brokers in a few markets: Boston, Chicago, Miami, NY, and some locators throughout the southern US.
People who live in these cities feel like the problem of rental brokers is worse than it actually is.
The big opportunity is to disrupt buy/sell-side brokers. Many, many companies have tried, and yet in 2004 when Zillow, Trulia, Redfin, etc. were getting off the ground, about 90% of people in the US used a broker to sell their home. In 2014, it was still 90%.
The internet has unchanged the position and power of brokers in the US for a variety of reasons - but a big one that all startups miss is the pain of getting accurate data.
In the last decade, the startups that have become ~$1b companies in real estate all support or augment brokers (Zillow, Trulia, Redfin, Costar, Loopnet, etc.) and companies that aim for massive disruption go out of business in a couple years.
Sometimes during a gold rush, you are better off selling pick axes to miners.
People who live in these cities feel like the problem of rental brokers is worse than it actually is.
The big opportunity is to disrupt buy/sell-side brokers. Many, many companies have tried, and yet in 2004 when Zillow, Trulia, Redfin, etc. were getting off the ground, about 90% of people in the US used a broker to sell their home. In 2014, it was still 90%.
The internet has unchanged the position and power of brokers in the US for a variety of reasons - but a big one that all startups miss is the pain of getting accurate data.
In the last decade, the startups that have become ~$1b companies in real estate all support or augment brokers (Zillow, Trulia, Redfin, Costar, Loopnet, etc.) and companies that aim for massive disruption go out of business in a couple years.
Sometimes during a gold rush, you are better off selling pick axes to miners.
This is what openhomes.co is doing, starting with Madison, WI
I can't stand brokers, especially in NYC. I hope this app wins, however this article reads like a press release.
Also, founders, please please please stop using the Uber for X nonsense. This app doesn't deliver an apartment to your door and collect payment in a frictionless process. Find new metaphors. If the VCs can't understand your product without calling it the <unicorn_name> for <your_vertical>, then find some VCs that are smarter or figure out what you are actually selling and how to explain it clearly. This product could simply be: "an app that eliminates the real estate broker." Uber for rentals is just dumb. Did the founders graduate from TechStars yesterday and that was how they were coached to talk to the media? Über didn't call themselves the Y for X and Facebook didn't call themselves MySpace for X. That use of other companies to explain your business is just lazy. Still PR rant aside, I hope this app succeeds. I'd love for the majority of residential broker-bottom-feeders to join the buggy whip makers in the unemployment line.
Also, founders, please please please stop using the Uber for X nonsense. This app doesn't deliver an apartment to your door and collect payment in a frictionless process. Find new metaphors. If the VCs can't understand your product without calling it the <unicorn_name> for <your_vertical>, then find some VCs that are smarter or figure out what you are actually selling and how to explain it clearly. This product could simply be: "an app that eliminates the real estate broker." Uber for rentals is just dumb. Did the founders graduate from TechStars yesterday and that was how they were coached to talk to the media? Über didn't call themselves the Y for X and Facebook didn't call themselves MySpace for X. That use of other companies to explain your business is just lazy. Still PR rant aside, I hope this app succeeds. I'd love for the majority of residential broker-bottom-feeders to join the buggy whip makers in the unemployment line.
I don't know why people keep doing this startup every two months. Every two months somebody tries it and then discovers why it doesn't work.
For almost all the smaller buildings in New York (non-professionally managed), which is where you see these middlemen brokers:
* The brokers are given an exclusive by the landlords because the landlords are not professionals and often not in New York City. They don't want to do any work, they want the brokers to do the work of listing the apartment, showing the apartment, and checking the qualifications of the tenant.
* The landlord has to give the broker an exclusive otherwise the broker won't do the work, because the broker needs to get paid.
* Although the broker fee (normally 15% of first year rent) seems expensive and even extortionate to the typical fresh college grad renting their first apartment, the brokers as a whole are not making very much money, because they have to do an awful lot of work to get the exclusives (marketing themselves to landlords, so to speak) and an awful lot of work to coordinate keys, show apartments, etc. It is easy to see this because there is massive turnover in the broker business and almost all of the rental brokers you see in New York charging "extortionate" fees are, for the most part, broke.
* Which is why they seem so slimy: they're kinda desperate.
* A ton of apartments in New York are still under some form of rent control, especially the cheap ones in small buildings that kids want. That means that the maximum rent is set by law. So even if a tenant MIGHT be willing to pay a higher rent if they didn't have to pay the brokerage fee, they can't. The landlord of a $1800 rent stabilized apartment is going to get $1800/month whether they use a broker or not. So for this landlord, the broker is paid for by the tenant, and might as well be free. Considering how much work they do, and how much they charge, zero, it's a great deal for the landlord.
So every time one of these fresh-eyed college grads shows up in New York, decides that the rental brokers are making bank and need to be disintermediated, and writes an App that will Connect the Landlord Directly to the Tenant, no landlords sign up for it. The bottom line is that the brokerage function is not ripe for disruption because, slimy as it seems, there's just not that much money being made.
For almost all the smaller buildings in New York (non-professionally managed), which is where you see these middlemen brokers:
* The brokers are given an exclusive by the landlords because the landlords are not professionals and often not in New York City. They don't want to do any work, they want the brokers to do the work of listing the apartment, showing the apartment, and checking the qualifications of the tenant.
* The landlord has to give the broker an exclusive otherwise the broker won't do the work, because the broker needs to get paid.
* Although the broker fee (normally 15% of first year rent) seems expensive and even extortionate to the typical fresh college grad renting their first apartment, the brokers as a whole are not making very much money, because they have to do an awful lot of work to get the exclusives (marketing themselves to landlords, so to speak) and an awful lot of work to coordinate keys, show apartments, etc. It is easy to see this because there is massive turnover in the broker business and almost all of the rental brokers you see in New York charging "extortionate" fees are, for the most part, broke.
* Which is why they seem so slimy: they're kinda desperate.
* A ton of apartments in New York are still under some form of rent control, especially the cheap ones in small buildings that kids want. That means that the maximum rent is set by law. So even if a tenant MIGHT be willing to pay a higher rent if they didn't have to pay the brokerage fee, they can't. The landlord of a $1800 rent stabilized apartment is going to get $1800/month whether they use a broker or not. So for this landlord, the broker is paid for by the tenant, and might as well be free. Considering how much work they do, and how much they charge, zero, it's a great deal for the landlord.
So every time one of these fresh-eyed college grads shows up in New York, decides that the rental brokers are making bank and need to be disintermediated, and writes an App that will Connect the Landlord Directly to the Tenant, no landlords sign up for it. The bottom line is that the brokerage function is not ripe for disruption because, slimy as it seems, there's just not that much money being made.
Great points -- once upon a time my co-founder came up with an interesting theory that the rental brokerage industry is a NET LOSS for the brokers, and the only reason it works is attrition.
More formally, if you assign a reasonable hourly wage for a real estate agent, say $25 an hour, then the sum of all agents working each year plus their business expenses exceeds the sum of all commissions collected each year! The lost time is wasted on unqualified tenants, competing over the few qualified tenants, negative ROI marketing (featuring on NYTimes.com or posting bad photos), etc.
If you believe in the net loss theory, then all the startups that always pitch "broker services a la carte" are doomed to fail. That is, brokers offer some bundle of services and a startup tries to unbundle and charge a fair price per line item. That thinking treats brokers as commodities when we can see clearly that great brokers earn 10x a mediocre broker, suggesting there is probably some skill.
More formally, if you assign a reasonable hourly wage for a real estate agent, say $25 an hour, then the sum of all agents working each year plus their business expenses exceeds the sum of all commissions collected each year! The lost time is wasted on unqualified tenants, competing over the few qualified tenants, negative ROI marketing (featuring on NYTimes.com or posting bad photos), etc.
If you believe in the net loss theory, then all the startups that always pitch "broker services a la carte" are doomed to fail. That is, brokers offer some bundle of services and a startup tries to unbundle and charge a fair price per line item. That thinking treats brokers as commodities when we can see clearly that great brokers earn 10x a mediocre broker, suggesting there is probably some skill.
You see apartment-finding startups all the time here in NYC. The problem to finding a good apartment isn't that there isn't a good interface, it's that a lot of the listings are given exclusively to brokers, and even if you find the apartment yourself, your still paying the broker fee.
I'm just one example, but I sublet from an individual owner in a co-op (in the Village). For giving the unit to a broker (for free, since the broker usually collects on the renter, not the landlord), he didn't have to fly up here from Miami and show the unit, figure out how to run a credit check, schedule my interview with the co-op, have me fill out a pile of forms, etc. Instead, he simply received a copy of the contract, signed and returned.
Point being: NYC has a ~1% vacancy rate, so there's little incentive for things to change on the sell side. Anything that requires a landlord to change their behavior is a tough sell.
I'm just one example, but I sublet from an individual owner in a co-op (in the Village). For giving the unit to a broker (for free, since the broker usually collects on the renter, not the landlord), he didn't have to fly up here from Miami and show the unit, figure out how to run a credit check, schedule my interview with the co-op, have me fill out a pile of forms, etc. Instead, he simply received a copy of the contract, signed and returned.
Point being: NYC has a ~1% vacancy rate, so there's little incentive for things to change on the sell side. Anything that requires a landlord to change their behavior is a tough sell.
It's not free. A would be tenant will compare prices inclusive of broker's fees, so he could probably charge a slightly higher rent without a broker.
Tenants never do this, amazingly.
A slightly higher rent is washed away in 1 month of not having the place rented out, it's definitely not worth any risk of not being able to rent a place out for a higher rent, so you charge what the market takes right now in a rush.
A slightly higher rent is washed away in 1 month of not having the place rented out, it's definitely not worth any risk of not being able to rent a place out for a higher rent, so you charge what the market takes right now in a rush.
It's New York, they can charge basically whatever they want and somebody will still rent it. If they can't afford the rent, they'll turn it into an Air BnB.
This... really isn't true. Very expensive markets are still markets - you are, for example, very unlikely to find a taker for a studio 5th-floor walkup on the Lower East Side for $5k.
NYC rents are pretty nutty, but it is still a market, and pricing pressure is still very aggressive in this market. The volume that exists in the market, and the similarities and substitutability of apartments (one walkup is largely like another) all serve to apply more pricing pressure.
NYC rents are pretty nutty, but it is still a market, and pricing pressure is still very aggressive in this market. The volume that exists in the market, and the similarities and substitutability of apartments (one walkup is largely like another) all serve to apply more pricing pressure.
I'm one of the guys who started RentHop and was pleasantly surprised to get a mention in the OP article, hehe.
When we started RentHop over 6 years ago, we had the same idea. Open table style scheduling for showings, and that brokers were worthless middlemen that should have gone extinct at least a decade ago.
One of the best pieces advice we got during Y Combinator was Paul Graham telling us to go out to NYC and be brokers for a few weeks, if only to confirm a broker adds no value and figure out the easiest parts to automate away. After personally showing apartments nonstop for a month (and losing a lot of weight), we quickly discovered the great brokers are adding lots of value and we completely pivoted the model (the short answer is great rental brokers earn 10x a mediocre broker, so there must be SOME skill involved... in sales the dispersion is 100x or higher).
Of course, that was 7 years back and maybe enough has changed: landlords do more of their own marketing now, smart phones and on-demand apps are even more pervasive, brokerage firms are in more turmoil than before, agents are more tech savvy, etc. Urban Compass tried to pull it off 2 years ago, but they decided to go for the bigger sales market.
I wish Oliver luck, they are technically competitors, but I've always wanted to see online scheduling work for real estate and to date no one has cracked it sufficiently well.
When we started RentHop over 6 years ago, we had the same idea. Open table style scheduling for showings, and that brokers were worthless middlemen that should have gone extinct at least a decade ago.
One of the best pieces advice we got during Y Combinator was Paul Graham telling us to go out to NYC and be brokers for a few weeks, if only to confirm a broker adds no value and figure out the easiest parts to automate away. After personally showing apartments nonstop for a month (and losing a lot of weight), we quickly discovered the great brokers are adding lots of value and we completely pivoted the model (the short answer is great rental brokers earn 10x a mediocre broker, so there must be SOME skill involved... in sales the dispersion is 100x or higher).
Of course, that was 7 years back and maybe enough has changed: landlords do more of their own marketing now, smart phones and on-demand apps are even more pervasive, brokerage firms are in more turmoil than before, agents are more tech savvy, etc. Urban Compass tried to pull it off 2 years ago, but they decided to go for the bigger sales market.
I wish Oliver luck, they are technically competitors, but I've always wanted to see online scheduling work for real estate and to date no one has cracked it sufficiently well.
So what's their revenue model, if it's not being the new middleman?
The old middlemen make incredible amounts of money for approximately nothing, as far as I can tell as someone who has rented in/around NYC for 10 years, but never actually paid a broker.
I'd love having new middlemen that do about that same nothing for 20% of the price.
I'd love having new middlemen that do about that same nothing for 20% of the price.
I have used brokers here in Manhattan and find their services well worth the 15% cost. The occupancy rate is around 99%. Apartments come on the market and leave the market very, very quickly. I am very happy to pay someone to keep their eyes out for me and weed out the ones that sound good but aren't. I also had someone to go before the condo board on my behalf and explain why I would be a great tenant.
Do people who use a broker ever regret it? Or do the objections stem from other less competitive markets where such a thing would not be as beneficial?
Do people who use a broker ever regret it? Or do the objections stem from other less competitive markets where such a thing would not be as beneficial?
I used a broker for my last 3 NYC apartments (luckily the first two were new developments so only the most recent one did I pay myself).
I can't exactly say I regret it because the alternative was settling for a much worse apartment, but I absolutely despise brokers and the current system.
My biggest problem is that whether you take your time and have a broker show you 30 apartments over the course of a month, or whether you find the place on Craigslist and the broker literally opens the door and does nothing else, you pay the same fee of 10 - 15% the annual rent. I've been in the latter category and it's infuriating, you're paying literally thousands of dollars per hour. Why can't you pay this person a reasonable hourly rate for their time?
Another problem though, even if they did charge hourly rates I'm sure those would be unnecessarily high anyway, just because for whatever reason these people need certifications and a certain number of hours training so it takes an investment to become a broker. That's also insane to me, for renting in NYC to someone who's lived in the city for a while, a broker's "knowledge" has absolutely zero value (buying/selling a house might be a little different, but even then I'm skeptical). The only advice a broker has ever given me is trying to convince me that a terrible apartment, which they had obviously been trying and failing to rent for a while, was worth considering.
I'm glad you had a good experience. But the system is completely insane!
I can't exactly say I regret it because the alternative was settling for a much worse apartment, but I absolutely despise brokers and the current system.
My biggest problem is that whether you take your time and have a broker show you 30 apartments over the course of a month, or whether you find the place on Craigslist and the broker literally opens the door and does nothing else, you pay the same fee of 10 - 15% the annual rent. I've been in the latter category and it's infuriating, you're paying literally thousands of dollars per hour. Why can't you pay this person a reasonable hourly rate for their time?
Another problem though, even if they did charge hourly rates I'm sure those would be unnecessarily high anyway, just because for whatever reason these people need certifications and a certain number of hours training so it takes an investment to become a broker. That's also insane to me, for renting in NYC to someone who's lived in the city for a while, a broker's "knowledge" has absolutely zero value (buying/selling a house might be a little different, but even then I'm skeptical). The only advice a broker has ever given me is trying to convince me that a terrible apartment, which they had obviously been trying and failing to rent for a while, was worth considering.
I'm glad you had a good experience. But the system is completely insane!
I've used a broker without feeling like it was worth the money. My roommate and I came across our current apartment on craigslist, checked it out, decided we liked it (even with the broker's fee on top of the rent), and then signed the lease. The broker did show us the apartment and do a bit of coordination with the landlord, but it's not like he was showing us lots of apartments or coordinating with a coop board. Our landlord runs a shop right below the apartment, so it's not an issue of someone living far away or anything. I understand how it makes it easier for the landlord and can be beneficial for the tenant (I've had beneficial experiences myself), but I don't think the broker added a lot of value in this particular process.
Edit: this was in Boston, which tends to have a pretty competitive rental market, and brokers are pretty standard. I had a more positive broker experience when I went with a broker who showed me around to a variety of apartments rather than using one because they had an exclusive on a particular apartment that was interesting.
Edit: this was in Boston, which tends to have a pretty competitive rental market, and brokers are pretty standard. I had a more positive broker experience when I went with a broker who showed me around to a variety of apartments rather than using one because they had an exclusive on a particular apartment that was interesting.
The NYC middlemen do a lot: They bribe doormen and janitors, they screen for "undesirables" that owners don't want in the building, they make you wait long times....
Apartment hunting in NYC is one of the sleaziest businesses out there. The brokers make bankers look clean. I applaud any effort to cut them out of the system.
Apartment hunting in NYC is one of the sleaziest businesses out there. The brokers make bankers look clean. I applaud any effort to cut them out of the system.
Even if they are the new middle man, they should be able to have a successful business model on much lower commissions than an individual broker.
Presumably they get a small fee from the landlord when someone signs a lease. Whereas most rental agents are paid by the tenant (although in some cases they will get a bonus from the landlord; in cases where the tenant goes directly to the landlord, that bonus might take the form of a rent concession, such as the first month free).
most rental agents are paid by the tenant? i've hunted for and lived in many apartments, in both US and Canada, not once have I been the one who made any direct payments to the real estate agent for such services rendered. it's almost always the landlord who pays.
In tight markets like New York City the fee is very often paid by the tenant. It's relatively unique to New York, San Francisco, and a few other very dense places with high occupancy rates.
In other markets with more available inventory and less renters, the fee is usually paid by the landlord. I have been on both sides of this equation in different markets and paid both ways and in each case found the service worthwhile.
In other markets with more available inventory and less renters, the fee is usually paid by the landlord. I have been on both sides of this equation in different markets and paid both ways and in each case found the service worthwhile.
I live in Boston, and while I have some familiarity with rental markets in a couple of other spots in the US, I can only really speak about Boston. Here, it's much more common for the tenant to pay the broker fee than the landlord when one is used. There are no-fee apartments, but they're often being shown directly by the landlord without a broker.
Occasionally the landlord pays the fee (for example, sometimes a former tenant will agree to pay a full or half fee in exchange for breaking out of the lease or a landlord will pay during the slow season), but it's a minority. Among my friends, it's certainly more common to end up paying a broker fee than to have the landlord pay it (personally I've had it happen to me both ways.)
Occasionally the landlord pays the fee (for example, sometimes a former tenant will agree to pay a full or half fee in exchange for breaking out of the lease or a landlord will pay during the slow season), but it's a minority. Among my friends, it's certainly more common to end up paying a broker fee than to have the landlord pay it (personally I've had it happen to me both ways.)
As much as anti-broker vitriol is popular here on HN, whether you agree with it or not, brokers do provide a service. Whether or not that service is valuable to you is entirely another question.
When I moved to NYC I ended up using a broker. We saw like 12 apartments in 2 afternoons. I liked one and had it by the end of the week. As it happened, before it was generally advertised and while it was still being renovated.
This was a HUGE time saving. And this right here is the key thing. How much is your time worth?
I've lived in other cities where apartment hunting is typically direct (either to the owner or, more commonly, to the owner's management company). In certain areas and at certain times an apartment showing might have 50 people show up, 20 of whom put in an application.
This is an incredible waste of everybody's time. Companies need to vet more applications (or just arbitrarily pick some to scrutinize, discarding the rest). Apartment hunters need to go to more viewings and fill out more applications.
A good broker should be able to find you an apartment relatively quickly and, as it happens in NYC at least, for a good price. If not, they're not doing their job.
There are also buildings in NYC that are all rental and fit the model of complexes in other cities where there is a management company that manages all of them. You can simply inquire as to availability (or even find it on a website).
The problem in NYC at least is that there's a lot of pokey apartments that don't fit this model (mine was in a walkup of ~15 apartments over 5 floors).
I got a good deal on my apartment and amortized over the time I was there, had I paid for the broker (I didn't), it would've been a good deal.
Many services exist that allow you to trade your money for your time. Brokers are one of them.
When I moved to NYC I ended up using a broker. We saw like 12 apartments in 2 afternoons. I liked one and had it by the end of the week. As it happened, before it was generally advertised and while it was still being renovated.
This was a HUGE time saving. And this right here is the key thing. How much is your time worth?
I've lived in other cities where apartment hunting is typically direct (either to the owner or, more commonly, to the owner's management company). In certain areas and at certain times an apartment showing might have 50 people show up, 20 of whom put in an application.
This is an incredible waste of everybody's time. Companies need to vet more applications (or just arbitrarily pick some to scrutinize, discarding the rest). Apartment hunters need to go to more viewings and fill out more applications.
A good broker should be able to find you an apartment relatively quickly and, as it happens in NYC at least, for a good price. If not, they're not doing their job.
There are also buildings in NYC that are all rental and fit the model of complexes in other cities where there is a management company that manages all of them. You can simply inquire as to availability (or even find it on a website).
The problem in NYC at least is that there's a lot of pokey apartments that don't fit this model (mine was in a walkup of ~15 apartments over 5 floors).
I got a good deal on my apartment and amortized over the time I was there, had I paid for the broker (I didn't), it would've been a good deal.
Many services exist that allow you to trade your money for your time. Brokers are one of them.
When I moved to NYC I ended up using a broker. We saw like 10 apartments in an afternoon. I ended up liking one and had it by the end of the week. As it happened, before it was generally advertised and while it was still being renovated.
It turned out, the broker was working for the apartment owner, not for me. Once I had signed paperwork, I discovered that the renovations were done: the apartment was going to be as I had seen it, not as it was promised to me by the broker. No stainless steel appliances, no reflooring in the kitchen. I had read the lease carefully and thought of this possibility, but I thought, like you, that the broker was working for me.
As is, the incentives don't encourage brokers to work for renters: their only incentive is to place as many people in as little time as possible. Next time I shop for an apartment I'll do so with a real estate lawyer on call. If you have to have a lawyer to make sure someone provides service properly, maybe they aren't really providing you a service.
It turned out, the broker was working for the apartment owner, not for me. Once I had signed paperwork, I discovered that the renovations were done: the apartment was going to be as I had seen it, not as it was promised to me by the broker. No stainless steel appliances, no reflooring in the kitchen. I had read the lease carefully and thought of this possibility, but I thought, like you, that the broker was working for me.
As is, the incentives don't encourage brokers to work for renters: their only incentive is to place as many people in as little time as possible. Next time I shop for an apartment I'll do so with a real estate lawyer on call. If you have to have a lawyer to make sure someone provides service properly, maybe they aren't really providing you a service.
"provide a service", or "hoard what you are looking for"?
Having done both, I saw very little value added when I went through a broker.
Anecdotally, when I moved to Cambridge many years ago, I managed to see a good number of rooms in one day, so I don't really see any time saving, except for the broker organizing it for you a bit.
Having done both, I saw very little value added when I went through a broker.
Anecdotally, when I moved to Cambridge many years ago, I managed to see a good number of rooms in one day, so I don't really see any time saving, except for the broker organizing it for you a bit.
The problem I have with brokers and realtors is that they should charge either a flat hourly rate or a transaction rate. Lawyers, consultants, and software developers virtually all work on that model.
But brokers and realtors have conditioned the public into believing that a 3% or 10% commission on the transaction is "reasonable". Which is certainly not when you are buying a million dollar property or renting for $5k/month. Also, when realtors are making more in commissions than doctors are in salary, you can be sure the market is distorted, and ripe for innovation.
But brokers and realtors have conditioned the public into believing that a 3% or 10% commission on the transaction is "reasonable". Which is certainly not when you are buying a million dollar property or renting for $5k/month. Also, when realtors are making more in commissions than doctors are in salary, you can be sure the market is distorted, and ripe for innovation.
I've moved 5 times in Chicago in the last 5 years, and each time I tried a broker but it was a miserable experience. I ended up finding a place on craigslist each time.
I'm looking to move to NYC soon and I all I see are $1500 broker fees the tenant has to pay. Its pretty insane.
I'm looking to move to NYC soon and I all I see are $1500 broker fees the tenant has to pay. Its pretty insane.
With 1-bedrooms averaging above 3k/mo, you're looking at a broker's fee of $4500. Even if you get a cheap studio at 2k/mo, the fee is 3k.
Yeah, actually I was looking in Jersey City and they were $1500, $4500 is insane to me. I'm from the NY tri-state area but I never bothered trying to live in NYC.
Perhaps it could be helpful for the international audience to explain what a 'broker' is.
Here in Aus at least, we deal with Real Estate Agents, who act as a middleman between the owner of the property and the tenant. They handle pretty much everything (inspections, repairs, collecting rent, marketing etc) so the owner just receives money (for a commission of course).
Is this the same in the US? Where would a broker fit into all of this.
Here in Aus at least, we deal with Real Estate Agents, who act as a middleman between the owner of the property and the tenant. They handle pretty much everything (inspections, repairs, collecting rent, marketing etc) so the owner just receives money (for a commission of course).
Is this the same in the US? Where would a broker fit into all of this.
In NYC there are brokers, property managers, supers and landlords.
Landlords own the building. They may do everything themselves but often they hire the other three to help them out.
Supers (short for superintendents) often live in the building and are responsible for repairs and general upkeep of the property.
Property managers deal with the tenants: marketing, hiring brokers, approving/rejecting tenants, getting the paperwork signed, accepting rent.
Brokers are like job recruiters: they have access to more listings than you do as an individual and sometimes have exclusive agreements with individual properties. Their involvement ends once the rental agreement is signed.
In NYC most apartments are only available by going through a broker and the broker usually charges 1.5 months rent* (15% of the annual rent, though often this can be negotiated to 12%). This fee is owed even if you found the apartment listing yourself and all the broker did was spend 10 minutes showing you the place before you rented it!
*Edit: to clarify, the tenant is the one who pays this fee
Landlords own the building. They may do everything themselves but often they hire the other three to help them out.
Supers (short for superintendents) often live in the building and are responsible for repairs and general upkeep of the property.
Property managers deal with the tenants: marketing, hiring brokers, approving/rejecting tenants, getting the paperwork signed, accepting rent.
Brokers are like job recruiters: they have access to more listings than you do as an individual and sometimes have exclusive agreements with individual properties. Their involvement ends once the rental agreement is signed.
In NYC most apartments are only available by going through a broker and the broker usually charges 1.5 months rent* (15% of the annual rent, though often this can be negotiated to 12%). This fee is owed even if you found the apartment listing yourself and all the broker did was spend 10 minutes showing you the place before you rented it!
*Edit: to clarify, the tenant is the one who pays this fee
Yeah another Aussie struggling to understand what a broker is in this context.
I think they literally just look through rental listings for you then tell you which one you should look at, then you go to the Real Estate Agent as usual to rent it? Seems a bit ridiculous if so.
I think they literally just look through rental listings for you then tell you which one you should look at, then you go to the Real Estate Agent as usual to rent it? Seems a bit ridiculous if so.
My wife is a rental agent at a very large Manhattan brokerage. It's quite a bit more complex here in New York than you imply.
Yes, there are databases, and yes she looks through them. But good units get snatched up so fast that by the time someone has taken photos and written it up in the database and syndicated it out to all the firms, it's already gone.
The people who benefit most are those working with very difficult constraints. Imagine you are searching for a Studio apartment and can only afford $1,500 a month but the average rent in the area you are seeking is $2,200. Somewhere, there might be a $1,500 listing but it's going to go fast. If you have a broker you might have a shred of chance of 1.) even knowing about it 2.) getting access to the apartment the minute it's vacant 3.) getting a cash deposit submitted and 4.) passing all the landlord's test -- multitudinous because for every one person who barely has the credit to afford $1,500, there's 5 who can afford twice that standing in line behind them.
Landlords are also king here because of how skewed the market is and therefore will do little to no work as part of the process. Getting photos, getting keys and access, it's an absurd runaround, hugely time consuming and barely worth the 15% (of annual rent), only half of which the agent receives.
Yes, there are databases, and yes she looks through them. But good units get snatched up so fast that by the time someone has taken photos and written it up in the database and syndicated it out to all the firms, it's already gone.
The people who benefit most are those working with very difficult constraints. Imagine you are searching for a Studio apartment and can only afford $1,500 a month but the average rent in the area you are seeking is $2,200. Somewhere, there might be a $1,500 listing but it's going to go fast. If you have a broker you might have a shred of chance of 1.) even knowing about it 2.) getting access to the apartment the minute it's vacant 3.) getting a cash deposit submitted and 4.) passing all the landlord's test -- multitudinous because for every one person who barely has the credit to afford $1,500, there's 5 who can afford twice that standing in line behind them.
Landlords are also king here because of how skewed the market is and therefore will do little to no work as part of the process. Getting photos, getting keys and access, it's an absurd runaround, hugely time consuming and barely worth the 15% (of annual rent), only half of which the agent receives.
Yes, and they charge you 8-15% for this service in NYC.
No, they also have exclusives - so you can't rent the apartment without going through them first.
Everyone has tried an iteration of this idea in NYC -- I even tried one back in 2008 that was very similar. It's an extremely difficult market to crack since landlords have very little incentive with vacancy rates so low and a working relationship with brokers that at times goes back decades.
When Urban Compass launched in 2013 I thought they'd have the best chances not because the idea was any different, but because they were able to raise an $8 million seed and the founder had already sold businesses to Google and Twitter (they've raised $73 million so far). I just took a look at them now and it seems they're focusing more heavily on home sales as I'd guess the data platform can make more money in that market. They still do rentals, but definitely not exclusively.
When Urban Compass launched in 2013 I thought they'd have the best chances not because the idea was any different, but because they were able to raise an $8 million seed and the founder had already sold businesses to Google and Twitter (they've raised $73 million so far). I just took a look at them now and it seems they're focusing more heavily on home sales as I'd guess the data platform can make more money in that market. They still do rentals, but definitely not exclusively.
Pet peeve: replacing a flesh and blood broker with a web site is not "cutting out the middleman". It may be a cheaper middle man; it may even be a better middle man, but it's still taking a cut off the top.
@gatsby great data Many, many companies have tried, and yet in 2004 when Zillow, Trulia, Redfin, etc. Were getting off the ground, about 90% of people in the US used a broker to sell their home. In 2014, it was still 90%.
I assume problem is it is such a big ticket so sellers don't want take the risk - same reason we still use ibankers for M&A and IPO?
Right. This is part of it. Real estate is still the largest purchase most people make in their lifetime, and there are tons of things to deal with: inspections, title companies, escrow accounts, taxes, etc.
I'm overgeneralizing, but if you're selling a home and you're not wealthy, you are terrified to make a mistake that could wipe out a big chunk of your net worth if you screw up the sale, so you use a broker. If you're wealthy, you don't care about the 6% fee, and luxury brokers have already sold you on the value proposition of extra marketing and hand-holding from the days when you weren't as well off and buying your first home.
I'm overgeneralizing, but if you're selling a home and you're not wealthy, you are terrified to make a mistake that could wipe out a big chunk of your net worth if you screw up the sale, so you use a broker. If you're wealthy, you don't care about the 6% fee, and luxury brokers have already sold you on the value proposition of extra marketing and hand-holding from the days when you weren't as well off and buying your first home.
FWIW, this is rentals, not sales. Slightly different. But still, Redfin long ago gave up on eliminating the middleman, and is now content to try to be a better middleman.
Well, I guess this is inevitable, and it will be good for renters. It will be bad for people who have long used brokerage to support themselves while they do other activities that are important to them. Women who are the primary caregiver of a child. Artists and musicians. Entrepreneurs.
Tough industry to stand out in:
https://angel.co/rental-housing
So is track and field, but records are still broken every year.
A brief aside from the discussion on NYC the rental market: I'm kind of surprised that it's only available as an app, and only on iOS.
I used craigslist for years in Silicon Valley. It either put me in contact directly with the landlord, or the on-site property management.
Meet the new middleman, same as the old middleman?
(Assuming, of course, that they're not planning on publishing their data for the public good.)
(Assuming, of course, that they're not planning on publishing their data for the public good.)
Trulia and Zillow both have Looking for Rent options. I wonder why would landlords go and try the other thing? Cheaper fees?
Is it this broker usually the property mgr. to begin with?
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I can call my broker, leave the keys with the doorman (or the broker) and worry about nothing. I never have to be there to show the place (the broker is paid to do that) and I get a more qualified renter because the broker will spend time selecting them (which I otherwise have to do). The broker has shown so many crappy places that they will help the renter see that this is a fair, market value, deal. The best part, the renter pays for everything! And because they are able to shell out two months worth of rent for the broker's fee and deposit I get someone financially more sound and likely less crazy.
Oh and one of our places is a Coop, good luck filling out a 80 page form and going through the coop board interview without a broker! That's a full time job, all the same paperwork as if you're buying a place. My current couple of renters had to supply 12 (twelve) letters of personal reference, 6 each!
Another problem is that the renters "know" about the broker's fee but don't really consider it as part of the rental "price". Psychologically they don't add up those numbers, divide by 12 and say this is my rent. Apartment prices don't vary at all whether you are using a broker or not, at least not in my experience.