Renters pay an entire month's rent to brokers and agents to find an apartment in Boston, but few are given a good explanation about why.
Anyone looking for an apartment in Boston deserves to understand exactly why they have to shell out thousands of dollars (in the form of a brokerage fee) just to find a place to live.
Image Source: Huffington Post
The one-sentence summary.
In a sentence, the high fee is the product of an overly complicated rental market that's full of inefficiencies and in a demand-heavy market like Boston, the obligation to cover the cost of these inefficiences falls on the party with the least leverage — in our case the renter.
I'll attempt to answer the following questions to help renters understand why the fee exists and where it goes:
- Why is it so hard to find "by owner" listings in Boston?
- Why do rental agents and brokers exist in Boston?
- How does the fee work and why is the fee so high?
- How can renters get the most bang for their apartment search buck in Boston?
I'll emphasize that even though this presentation will attempt to explain why agents exist in Boston and why the whole process is such a mess, I absolutely do not excuse crappy behavior that has become commonplace for many agents in Boston.
Building off of that sentiment, I’ll also try to touch upon the “right” agent can actually earn the one-month fee in Boston (or at least do as much as possible to earn it).
Since there's a lot involved in answering this question, I made a slideshow to walk you through all the steps:
Don't have time to run through the presentation? That's cool!
Here's the high-level overview of what rental agents do.
CitiHabitats, a top rental brokerage in New York City, put together this graphic about the apartment search process with a rental agent. It can definitely feel like all agents do is "open a door", but when you get a great agent who truly wants to partner with you (I know, it's rate), the process looks more like this:
Just what is a broker fee, how does it work and why is it necessary?
It's actually really hard to answer in a sentence! Bottom line, it's a fee for apartment search services, but who exactly it goes to and why it's so much is a longer story. Here's the high-level rundown, after which I'll dive into why
- Landlords and property owners need renters to live in their apartments (and pay the rent).
- But, they don't have the time [or don't want] to advertise their apartments, find new renters + make sure they're legit (credit score, references, etc.).
- So, landlords go to a broker (who runs a "brokerage"), who promises to find, vet and place renters into the landlord's apartment (for free). That's how brokerages get their "listings."
- Almost every broker employs real estate agents to help them out, ensuring they can keep that promise to their landlords (so the broker can keep his or her listings).
- Real estate agents do all the work of finding renters (usually through Craigslist), showing them apartments, and helping them apply — in exchange for a cut of the broker's fee that they charge to renters for apartment search services rendered.
But why? Couldn't landlords just show their apartments themselves? Lots of businesses (including one I started a few years back) have looked into creating tools/technologies for landlords to manage their own "turnover" process — essentially when the current renter leaves and a new one replaces him or her. One giant hurdle is that in Boston, landlords can always get a licensed real estate professional (broker and/or agent) to find renters, do showings and fill out all the paperwork — FOR FREE. It's a hard sell to convince a landlord that they should do a lot more work for no additional benefit.
Why don't landlords pay the broker fee?
Sometimes they do, but in a market like Boston where there are so many people looking for apartments, most landlords aren't starved for applicants. They can simply send their apartment details to a bunch of brokerages and an agent will eventually find them a new tenant. As long as that tenant checks out and can pay the rent, that's all that really matters for a landlord.
Landlords who have had trouble renting their apartment and are missing out on crucial rent checks are usually willing to cover part or all of the fee to sweeten the pot for renters in the market. A small percentage of landlords in the market also advertise their property themselves, usually because they don't want to deal with brokers and agents. Legally, a landlord can't charge a fee to a new tenant (unless they're a licensed real estate salesperson), which is why apartments advertised by the owner are almost always "no fee" apartments.
How much is a broker fee in Boston?
Almost ubiquitously, a broker fee is equal to one month's rent for the apartment you choose to lease. As I mention in the slideshow (above), there's no apparent reason why there hasn't been any price competition among brokerages in Boston.
Who gets the money?
There are two scenarios.
Scenario #2 is fairly common in Boston, so the agent you work with (who does the lion's share of the work in the transaction) often only gets a quarter of what you pay — kind of crazy isn't it?
How do you get the most bang for your buck?
Find a good agent. How? First and foremost, look for agents with training certifications like a Residential Relocation Specialist certification. All Jumpshell agents are go through our Mentorship Program, which qualifies them to receive their RRS certification.
Another method is to use Yelp to find real estate brokerages with offices in the neighborhoods you're interested in. Brokerages tend to have a lot of "private" listings (i.e. listings that other brokerages don't have access to) in the areas around their offices (makes getting to + from showings easier for them). When you're looking on Yelp, don't pay attention to the star rating for the brokerage; instead, look at the comments for positive mentions of specific agents. Then call the office and request to speak with that agent.