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Denise M. Ca…, Real Estate Pro in Bridgewater, NJ

To My Fellow Realtors: Why should the tenant pay the fee?

Asked by Denise M. Canell, Bridgewater, NJ Thu Aug 28, 2008

This is one of the things in our industry that just baffles me. When we list a home for sale, we are doing a job for the seller....getting the home sold. The seller pays our commission. It used to work the same way with rentals. Over the past 4-5 years, I am seeing more and more rental listings demanding a commission of one month rent to be paid for by the tenant. We are doing the same thing as we do for sellers.....finding the landlord someone to rent his property. Why then, should the tenant be held liable for our commission.

Fellow agents..........any thoughts on this?

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28
Denise: The thread seems to have moved into more productive intellectual territory. When the whole Real Estate fee structure was set up, a few brokers controlled a few agents. The States had to step in when unscrupulous brokers sold lots "under water." State control of agents on a one to one basis would be very difficult, so they basically rely on brokers to control agents, who cannot act independently. The various state commissions seem to respond only to consumer complaint. I rarely hear of real searching investigations, although I often hear of really scary rumors of the same.

When talking of professionals, CPAs, lawyers and engineers, for example, all have to have a college education or more. When the real estate licensure requirements were set up, high school educations were rare enough and the laws much simpler. Contrast a one page sales contract of yesteryear with Pennsylvania's 18-page document and further addenda of today.

I agree that fee for service would be much more equitable. Receiving an enormous amount of commission on a successful sale that took no time at all just penalizes that seller, in order for him/her to compensate Realtors for all the free service and unsuccessful attempts that we make. The really sad thing is that most consumers look at us as being very like Macy's, where the clerks get a salary and browsing is encouraged because there is always the potential for an impulse buy. Perhaps Realtors should carry sunscreen, beach togs and mittens in the winter to enhance our income.

The whole industry needs modernization and change, if you ask me. It will come, if at all, long after I'm gone. None of the powerful want it to change and those who do have more efficient ideas lack cohesion and staying power. By the time you get staying power through income, you become part of the powerful, an endless loop of stagnation continues!
2 votes Thank Flag Link Fri Aug 29, 2008
I have been saying this for years. How many agents out there have not been paid at all for a rental. The landlord signs a contract with a Realtor without paying a fee and the tenant is not legally bound to pay a fee if there is nothing in writing. I just went thru a situation in which our office listed an apartment in which the landlord rented it on their own. Because of our tenant pay fee agreement with the landlord, I had no recourse to receive our commission - none. Sure I mailed a commission bill to the landlord - but no response. I wouldn't if I were them. Who would.
This is just another case of the Realtor giving away their services because they are too afraid to upset the applecart. Just think of what we give away: CMA's, merchandising ideas, access to mtg brokers that give free pre-approvals, not charging the landlord, on and on.
We are the reason why the public thinks the way they do about the Realtor community. How does an agent justify the fee that they charge when most of what they do is for free even before there is a listing agreement signed.
It is our fault. We brought this upon ourselves.
You cannot put yourself in a professional category (I love when agents compare themselves with lawyers, CPA's, doctors, etc.) when you give-it-away and especially because you are on commission.. Other professionals all charge a fee for everything and anything.
What is the value of a CMA, staging, transactional management, a phone call? Should Realtors charge a retainer? It is boundless. The problem is no one will take the first step.
If you want to be a professional then you must get out of the salepersons mindset. I can tell you my time and efforts are not for free. It starts with the Realtor community even by the simple answer to the question:
"Are you free?" Never answer yes. You should always respond' "No, but I am available."
Anyway, back to the question at hand. Starting in the near future I am making the plunge and charging Landlords.
I will keep everyone abreast of where it goes while I am competing with those of you, who are and will contiue to give it away.
2 votes Thank Flag Link Fri Aug 29, 2008
Why not? If you are working for the tenant,or hired by a tenant, to find an apartment for them, why should they NOT pay you for your services? All fees are negotiable.
1 vote Thank Flag Link Sat Feb 13, 2010
Why? is the landlord whom first reached out to you to have HIS property rented, why do renters have to pay the price of the landlord's choice to use your services.
Flag Tue Feb 10, 2015
I do not think this is fair, as a renter I can find a rental alone. Is the landlord who is using and in need your services, not the renter.
Flag Tue Feb 10, 2015
Jeffrey, very good post. I completely agree with a la carte pricing. I also agree its a near impossible change since so many people believe they should get a bunch of stuff for free because they always have. I personally would be thrilled to see a la carte pricing come to real estate. Having a huge fee for one scenario while giving away most other services is just a poor model IMO.
1 vote Thank Flag Link Fri Aug 29, 2008
Hi Denise,

On the rare occaision that I show rental properties I make two piles,

1) owner pays commission
2) tenant pays commision

I let the client make the descision and what usually follows is we throw the tenant pays commission in the trash and go see pile #1

I believe that the landlord should pay the commision. Most people that are renting have that grimace on their faces when they have to come up with first months rent and 1.5 month security.

When I take a rental listing, when confronted with a landlord that wants the tenant to pay the commission I explain my 2 pile procedure and that usually ends the discussion.
1 vote Thank Flag Link Fri Aug 29, 2008
This is not fair! Im experiencing that same issue right now. Please tell me that is not the norm. The renter did not hire them and should not have to pay for the service. That is the owners expense.
0 votes Thank Flag Link Fri Apr 3, 2015
I agree, this baffles me too. When a person rents, they generally have to already pay a security deposit plus first month's rent. To help out my clients, I try searching for just "landlord pays commission" or a split between the two. It's a lot of money to pay in one lump sum, and I know because I've been in that position.

I will be listing my uncle's property for rent soon. I will urge him to make his property stand out and offer something to a potential tenant.
0 votes Thank Flag Link Sun Mar 9, 2014
As a tenant faces with paying a brokers fee of a months rent, I always struggle with the questions "for what?".

I bide my time and come through listings on my own, I email those listings that meet my criteria on my own, I set up times to view potential units on my own, and so far once I get to it, the brokers send someone on their behalf to show me the unit - this someone doesn't know anything about the unit and can't answer my questions - then, I negotiate the lease terms and rent on my own, the fill out the applications and pay application fees on my own. How can I not wonder - WHY am I paying a months rent to this brokerage company? For what? For a months rent, I'd like to see an itemized count of the value this broker brought me. I did all of the work myself, I found the listing and to me, it doesn't matter WHO posted it - landlord or broker - I led the inquiry, appointment, negotiation, and application process.

Now it isn't that I CANT pay or that the money is difficult for me to part with. I have good credit, good savings, and I make a decent living. The problem is that I wouldn't have gotten to this state just GIVING money away.

It's been my experience that it is clear the broker works on behalf of the landlord. Why should I pay someone else's fee. (Other than that's the way it works, and if you want to live in the greater New York metropolis, you'll bend over and take it in the you-know-what, like everyone else)

It's a lousy way to begin a landlord-tenant relationship, because once I finally do find a place that meets my criteria, and go through my process and fork over my months rent as a fee, I immediately resent the landlord for making me pay their fee.

I've been through the process of contacting the broker up front and saying hey, here's my criteria for a unit, can you find me something? Thinking.. If I'm gonna end up paying this fee I might as well make the broker work on my behalf. But all I've been presented with are listings that ignored my budget, pet needs, and overall criteria. So I assume the search myself.

Yeah tenant paying broker fee makes 0 sense. It's really called a "finders fee" and unless someone finds it for me, I should pay the fee to myself it seems.
0 votes Thank Flag Link Sun Mar 9, 2014
This is the most truthful statement I have heard from any broker. It is ridiculous that brokers assume someone is stupid enough to pay a fee to purchase something. They are working in the capacity of the seller!!!! Not the buyer!!!. Would you go to Best Buy knowing you saw a tv advertised in the paper that you liked. You drive your car to the store, waste your gas, time and overhead. You get to the store and an associate takes you to the aisle where the tv is. Should i pay the associate a 1/12th the cost of the tv for walking me over there? Would that make sense to you? Noone in their right mind would do that!!! The employee is paid by the person that has them trying to sell their tv! Basic economics. no one is asking to give away your services, but your looking for compensation from the wrong person. That's not how any industry works. The tennant has overhead as well searching for an apartment, so paying a premium on top makes absolutely no sense. i could go on for days with valid points
0 votes Thank Flag Link Tue Jan 28, 2014
Doesn't matter if it is 08, it is still happening now. My analogy is on point for most situations. Im glad you are in agreement that . The only situation i could understand this is if a tenant hires a broker and is willing to have them find something exclusive. However, in today's market people who look for apartments are doing all the research themselves mostly. Especially, because its become easy for a non-street smart layman to know how to search cragislist and get into contact directly with a person renting a home. Not to be condescending, but i made the analogy simple to prove the simplicity of this common situation: Best Buy (landlord) wants to sell/rent property (TV) for money. Best Buy associate (landlord's broker, not a wage paid as an associate, but is working in capacity for landlord) Buyer/shopper (tenant who saw the listing and made contact, was not brought to the product by his/her own broker). Apologize for the redundancy. Clarification made.
Flag Tue Jan 28, 2014
The question was asked in 2008. please do not go on and on.. although I agree the landlord should pay the commission, your analogy is totally off base and irrelevant to this situation. Believe it or not, the paying of commission is local trend, meaning what is customary in each area.
Flag Tue Jan 28, 2014
should real estate agent return her fee if the apartment was found to be unsafe

in new jersey
0 votes Thank Flag Link Tue Jul 2, 2013
No, the real estate agent performed her duty and found an apartment for the customer. The customer is the one who ultimately CHOSE the apartment.
Flag Wed Dec 17, 2014
No, the landlord should fix the unsafe issues
Flag Mon Jul 8, 2013
Erica: The short answer is competition! Regards,
0 votes Thank Flag Link Sat Feb 13, 2010
Denise: New Jersey's Largest Source of No Broker Fee Apartments!

http://www.rent-direct.com/New-Jersey-Apartments.html

I hope that will help answer this question. Regards,
0 votes Thank Flag Link Sat Feb 13, 2010
It is a local thing. I beieve in New York, tenants pay the agent for locating a rental. In Florida, it is typically the landlord payd the fee. I believe that every market tolerates and has customary practices.
0 votes Thank Flag Link Tue Sep 2, 2008
Dear William:
I am glad you agree with the fee for service concept however it will happen soon. Some small shops are doing it now with some success. The smarter corporations and the ones that are fearless of being the first will come around. It may take a baby step process but it will happen in my lifetime. I will make sure of it.
As far as comparing professional stature with a college degree is truly a misnomer. But the public perception will remain the same when the Realtor community makes that change. Continuing education requirements would help the perception, abondoning referral agents are a start, recruiting anyone and everyone is a big downfall, support and professional coaching, and of course the aforementioned give-aways.
And in all this we MUST understand what the public wants to succeed. They want professional representation, they want exposure of their homes to buyers, they want an agent that will get homes closed. However, they do not want to pay the price. This goes back to what our value is to them. But they should get choose what they want and need. We as realtors need to stop telling them what they need. It's not our money. Fee for Service is the most professional way to adhere to those needs.
0 votes Thank Flag Link Fri Aug 29, 2008
Having friends who moved all over the country, this is a very NY centric thing. The areas around NYC do this because really, they can. People have just started to expect it. I was able to negotiate mine from 1.5 months to 1 month when I rented a place back in 2000, but it was still annoying because security deposit was 2 months etc so it was a sizeable layout for someone barely out of college. I agree with Marc about the risks, but many renters are young and just moving out so getting that scratch together can be a challenge. When I was renting in '98 and '00 finding a job was trivial, so I was probably not much of a risk even without much saved, now, that's not the case.
0 votes Thank Flag Link Fri Aug 29, 2008
Backward but correct. The overall price level of real estate includes the commission. Raising the price above the market to cover the commission would result in double-charging since the market price already includes the commission.

-Marc
Web Reference: http://www.marcpaolella.com
0 votes Thank Flag Link Fri Aug 29, 2008
The following statement "In the end it is always paid by the tenant just as commissions are always paid by the buyer. (they are just included in the price the seller/landlord has to charge)"

I have not had a landlord that has raised the asking price of a property above market rate because they have to pay a commission. With rentals the owner pays the commission same as with home sales.
The homeowner pays the commission not the buyer. The line of thinking that the owner/landlord pays commission is just backward.
0 votes Thank Flag Link Fri Aug 29, 2008
From the landlord's perspective, the object in renting a house is not to find a tenant, but a qualified tenant. If 3.5 times the monthly rent is a showstopper, then that tenant is probably not that great a risk. I would prefer, as a landlord, a tenant for whom the upfront money does not present such a big problem.

-Marc
Web Reference: http://www.marcpaolella.com
0 votes Thank Flag Link Fri Aug 29, 2008
In NJ it isnt even consistant.. I see more tenants held responsible in North Jersey than central and south. I think it is more a marketing angle to show a lower price by placing some costs on the tenant. In the end it is always paid by the tenant just as commissions are always paid by the buyer. (they are just included in the price the seller/landlord has to charge) I have had listings both ways and always tell landlord they will get fewer showings when they make tenant pay fees.
0 votes Thank Flag Link Fri Aug 29, 2008
Denise: The reason is simple; the landlord feels that he/she can extract that much more from the lessee. If you are working as a lessee's broker, you are NOT representing the seller anyway, if you know what you are doing. Finally, some responses to this question bring in the security deposit and first month's rent payment. What this has to do with who pays the commission baffles me. It's strictly a non sequitur. The only possible relevance is that the landlord should realize that if the renter were paying the commission, there would be a greater cash flow demand up front. This can be a good thing, if the property can be rented with this much cash outlay burden, because it shows that the renter can come up with more cash assets to disburse. The negative side is that fewer renters will be able to do that and it may cause the landlord to wait an extra month or two to get any rental cash from the property. Rentals are, unless you do a ton of them, largely low yield for the agent, so worrying excessively about who pays you seems to be a fixation that is not needed.
0 votes Thank Flag Link Fri Aug 29, 2008
It also seems like we could be bordering on price fixing when it is understood 1.5 months and tenant pays. caution...!
0 votes Thank Flag Link Fri Aug 29, 2008
I think it should be split 50/50. Both parties are receiving the benefits of our service.

-Marc
Web Reference: http://www.marcpaolella.com
0 votes Thank Flag Link Fri Aug 29, 2008
Hi Denise, thanks for initiating this thread - I agree with you that the mountain of initial costs places a substantial burden on the tenant. At times, this burden stands in the way of the transaction. I guess the short answer for NJ is that the tenant is often asked to pay because the market will bear it. I advise my landlords to reflect on what is customary and to be in line with what others are doing to remain competitive and to be receptive to negotiation on this point if necessary to secure a good tenant.

Best,
Jeannie Feenick
Search and connect at http://www.feenick.com
Web Reference: http://www.feenick.com
0 votes Thank Flag Link Fri Aug 29, 2008
Hi Denise. I'm with you on this one...I think it completely absurd that landlords make the tenants pay the commission. When I take a rental listing, I let them know that they will get it rented usually within a week if they pay the full commission (we have a very hot rental market right now in East Brunswick) because all agents are willing to show it. If they want the tenant to pay the commission, they can expect less showings and less tenants willing to work with them. It also makes them appear a cheap landlord from the start which can cause tenants to be hesitant to deal with them. With all this said, I usually will not take a rental unless they agree to pay the full one months commission. (Also as a side-I do not show rentals that make the tenant pay me because I think it creates an awkward situtation.)
Web Reference: http://www.glennmason.com
0 votes Thank Flag Link Fri Aug 29, 2008
In Ocean County, the landlord pays the first month to the broker. It all depends on how the listing agreement is written.
0 votes Thank Flag Link Fri Aug 29, 2008
Thats illegal in Arkansas. Here you can't charge a deposit greater than 1 months rent. Glad I'm not lookin to rent!
0 votes Thank Flag Link Thu Aug 28, 2008
Hi Chris! It doesn't happen that way in the Garden State. The tenant needs 1.5 month's security deposit, the first month rent up front PLUS another payment equal to one month rent, to be split between the agents. That puts a very large burden on the tenant.
0 votes Thank Flag Link Thu Aug 28, 2008
In my market it is negotiated. Often since it falls into some sort of property management situation, the first month rent is all thats available. Sometimes my fee may be the first month rent. It may be half the first month and a percentage thereafter. I never actually collect a "fee" from the tenant, but deduct my payment from the amount remitted to the owner.
0 votes Thank Flag Link Thu Aug 28, 2008
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