The Broker’s Point of View

This article will focus upon looking at you and the potential buyer from the broker’s point of view. So many articles are written by commercial real estate and how to approach it but is also important to know what it looks like from the other side of the table. The broker has as much riding on the process many times as the investor does.

Let’s start by looking at a listing from a listing broker. When the listing broker brings a buyer to the table and recommends the seller moving forward with that particular buyer, it is because of the recommendation of the broker many times that a seller move forward. If the buyer backs out, the seller is not necessarily unhappy with the buyer but rather with the listing broker because of the recommendation given. It is important for the broker to know what the buyer is like because it is the broker’s reputation that is on the line.

Any time you come to the table as a buyer, the broker is going to do due diligence on you to make sure that you can close the deal. That ultimately is the main key and can be more important than price. The broker is going to check on your past dealings and that you followed through on deals in the past. The broker will then rank potential buyers and will often recommend that the sellers sell to the buyer at the top of his or her list. This is very important for any buyer to know so that you can set yourself up very well. If you worked hard to develop a reputation and the listing broker called around to people you worked with in the past and you come highly recommended, your name will move higher on the listing brokers’ ranking list. That broker will recommend to the seller that you be the one who buys the property because you will follow through.

If you have no brokers you worked with in the past and had not been in commercial real estate very long, you may want to go into a commercial brokerage with a check and a list of your net worth. Showing net worth and proof of funds is very important because you can show the broker that you are able to close. Most instances of buyers failing to go through on the deal occur due to lack of money. If you show the broker that you have the money, you have removed a major obstacle from them recommending you to their seller.

The broker is going to pay attention to see what your reputation is like. Getting the deal closed is important because the broker’s paycheck comes out of the closing. A broker will do what is necessary to make sure to protect his or her feet. Make sure that your brokers are well taken care of and you’ll be happy in the end.

Hopefully this article on the broker’s point of view gives you a better sense of what you can do to say yourself up right in the eyes of the broker. The broker’s reputation is on the line until the transaction is closed so he or she will make sure to set themselves up right in the eyes of the seller.

The Differences Between Fee Apartments and No Fee Apartments

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.

Apartment Hunting – What to Look for and How to Search