How much would you pay a broker for a $1,100-a-month apartment if you knew the rent wouldn’t be jacked up year after year?
A broker in Queens was offering apartment hunters the deal of a lifetime: a one-bedroom, rent-stabilized unit in Flushing, well below market rate for the area. The only catch was a $15,000 broker fee to secure the unit. Under rent stabilization, modest annual increases are set by a city panel, shielding tenants from dramatic hikes.
That was the predicament facing 27-year-old Christian Garbutt while he was searching for an apartment last month, he told Gothamist. The apartment seemed great, but he couldn’t afford the fee — nor did he want to pay it.
But the $15,000 broker fee levied by Miguel Silva, a broker with the New York City branch of the real estate company Keller Williams, was too high for even his employers. In response to questions from Gothamist, they said they are returning some of the money to the tenant who landed the apartment.
Broker fees are standard procedure in the city’s highly competitive real estate market, even when tenants find the units online and do most of the work themselves. Typical rates range from a month’s rent to a higher percentage of the yearly total.
But as affordable housing dwindles, broker’s fees are rising along with rents, making moves more difficult and dependent on upfront cash, in a sector where laws and regulations remain cloudy.
Last month, Gov. Kathy Hochul criticized “excessive” fees when she announced a $260,000 penalty against a brokerage firm found to be demanding $20,000 from prospective tenants trying to secure a rent-stabilized apartment, a rare rebuke of the practice.
The New York Department of State, which licenses brokers, said in an email that it determines that fees are too high when they exceed “industry norms and standards” and do not relate to actual services.
The rules are murky, and no laws explicitly cap broker’s fees or define the difference between reasonable costs and extortion — similar to a once-common arrangement known as “key money.”
Garbutt said he was looking for an apartment in Queens when he came across a place in Flushing priced at $1,450 a month and advertised as a “newly renovated rent-stabilized” one-bedroom on the listings website StreetEasy. He said he toured the unit and “fell in love with it,” but soon found out there was a catch: The broker was asking for an $8,000 fee.
Garbutt said he decided to pass on the place because the upfront cost would have wiped out his savings. He said he found another one-bedroom in the same building — this one listed online at $1,100 a month — and again texted the broker.
According to text messages reviewed by Gothamist, the broker warned “the fee is also high. It’s much higher than the other one.” He wanted $15,000.
Garbutt said he was “shocked” by the figure and could not afford it. He said he stopped responding, even after the broker offered to negotiate the fee and updated the listing to $1,800 a month.
“That’s insane,” Garbutt said of the fee. “That’s totally not fair. Normal New Yorkers, a lot of people, don’t have that type of money saved up.”
He said he’s still looking for a place.
Silva, the broker, did not respond to requests for comment.
Keller Williams said it would return any money over 15% of the annual rent to the tenant who got the apartment.
“Although there are no standard or typical or legal caps on broker fees, Keller Williams NYC adheres to real property law and its guidance in the commission fees that are charged to reasonably relate to legitimate services provided to renters by our agents and firm,” said Richard Amato, an operating principal at the firm.
Here’s what you need to know about broker’s fees and what to do if you think you’re being overcharged.
What are the upfront costs for renting an apartment?
Renting an apartment in New York City is hard. The broker’s fee, a uniquely New York inconvenience that has spread to a few other places, can make it even harder.
Along with the first month’s rent, security deposit and moving expenses, apartment hunters in the five boroughs typically have to fork over even more money to a middleman — a broker — usually hired by a landlord to list and show apartments.
Brokers typically charge a one-time fee of around 8% to 15% of the annual rent, or roughly $5,400 on a $3,000-a-month apartment.
In most cases, there is no way of getting around it, said Allia Mohamed, CEO of listings and landlord review website openigloo.
“It’s not really fair, but if you want to get that specific apartment you have to be prepared to pay up,” Mohamed said.
What is a broker anyway?
A real estate broker is a person who facilitates the sale or rental of a property, typically for a fee.
Real estate brokers in the Empire State are regulated by the New York Department of State, which grants them a license if they meet the requirements and pass an exam.
Normally, people hire brokers to survey the market and find prospective options to buy or rent a place.
But in New York City, it’s more common for landlords to hire the brokers to list the apartments on StreetEasy, Trulia and other platforms that charge a fee, and arrange visits with applicants. It’s then left to tenants to pay their commission.
How much is too much?
There’s a limit to what’s considered reasonable, according to industry regulators and lawmakers. Even many brokers agree that some fees are truly exorbitant. But where brokers cross the line isn’t clearly spelled out.
Regulators from the Department of State didn’t respond to a question about what they consider the industry standard for New York City broker fees. Industry groups generally agree that 15% of the annual rent is the norm.
Yet brokers know that someone with disposable income may be willing to pony up for a rent-stabilized apartment, since they could save money down the road. That’s the argument Garbutt said his broker made.
“He said it’s a lot of money, but you’re going to see it in the long run,” Garbutt recalled.
Still, that arrangement locks out the vast majority of New Yorkers who can only dream of paying that kind of fee.
The median household income in New York City is around $76,600, according to the U.S. Census Bureau. Median rents are about $4,100 in Manhattan and $2,500 in Queens, according to the latest StreetEasy review of listings. And most New Yorkers are considered rent-burdened, as they pay more than 30% of their income on rent, city housing data shows.
For a $3,000-a-month apartment, that means you would need $11,400 upfront to cover the security deposit, first month of rent and 15% broker’s fee.
If you suspect you’re being overcharged, you can file a complaint with the Department of State.
So is anyone doing anything about these fees?
Past efforts to limit the fees have all failed.
The Real Estate Board of New York, or REBNY, successfully sued to end a brief cap on broker’s fees for tenants, based on an interpretation of state rent laws enacted in 2019.
A City Council bill limiting broker’s fees to one month’s rent also died in 2019 amid opposition from the real estate industry.
The latest attempt? A City Council bill that would require whoever hired the broker — such as the landlord, property manager or tenant — to cover the cost.
“I don’t think anyone should be forced to pay a fee to someone who they never hired,” said Councilmember Chi Ossé of Brooklyn, who introduced the measure. “It’s kind of replicating how we do transactions in every other industry within the city.”
REBNY and other critics of the bill say it will lead to higher rents on non-rent-stabilized apartments because landlords will spread the cost across the monthly rent payments for as long as the tenant lives there, instead of a one-time fee. Owners of rent-stabilized units would have to eat the cost.
“This bill would make the process of renting an apartment more costly and challenging for New Yorkers while negatively impacting the livelihood of hardworking agents,” said REBNY spokesperson Christopher Santarelli.
Veteran broker Sam Moritz agreed.
“The tenant paying the broker fee is what it is,” he said. “If you eliminate the tenant-paid broker fee for apartments, rents are going to increase.”
Nikki Thomas, a broker and real estate agent for the Corcoran Group, declined to take a position on the legislation but said nixing the fee could be good business for property owners.
Thomas said she often encourages landlords to pay her commission and then add the price to the rent, since people get alienated by “junk fees.”
“I usually tell them to adjust the rent to factor that in, because I know people psychologically don’t like additional upfront costs,” she said. “You’re starting off with a happier tenant.”
So what are you paying for exactly?
Convenience — usually for the landlord — said Mohamed, the openigloo executive.
The brokers advertise the apartments, arrange showings and put together applications for the property owner, she said.
“When the landlord is hiring the broker, they’re the ones benefiting from the headache the broker is taking off their shoulders,” Mohamed said. “They definitely put in a ton of work in helping the landlord sift through applicants and prepare that space.”
Moritz, the longtime broker, said the services are especially important when the landlord lives outside the city or has a busy schedule that prevents them from continuously showing the apartment.
“They want to hire a professional, someone who does this full time and closes deals efficiently and professionally,” he said.
The brokers also have to cover some costs. Posting the apartment on StreetEasy costs $7 a day, or more than $200 a month, for example.
Moritz said he charges tenants the equivalent of one month’s rent so that he can get apartments leased up as quickly as possible. He said he figures he needs to earn about $6,500 a month to cover his own rent and expenses in Bushwick, which equates to at least three or four broker fees a month, he said.
He criticized brokers who charge exorbitant fees and said they are taking advantage of tenants and owners.
“I think that is a little greedy because this is the landlord’s asset,” Moritz said. “I personally think that if a landlord gives me a listing, then I am working for the landlord.”
Plenty of tenants also end up hiring brokers to help them find an apartment, especially if they have disposable income, a busy schedule or are moving to New York City from somewhere else.
“A broker can accomplish in a few days what might take someone several weeks,” Thomas of the Corcoran Group said. “Like so many things, you can do it on your own, but is it actually worth it?”