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When should you pay a finder's fee for an apartment?

Published: Oct 14, 2009

In some urban markets, such as Manhattan, you'll need to work with a real estate agent to find a rental home or apartment. These agents charge a non-refundable fee for helping you to secure an apartment or house rental, and that fee is usually one to two months worth of rent or 10% of the annual rent. If you were paying, say, $2000 per month in rent, then paying a $2400 (10%) to $4000 (two months rent) in non-refundable fees for the place can be a jarring, costly expense on top of the deposit, the first months rent, and other moving expenses. Any time you enlist the services of a rental agent or broker, ask upfront how their fee structure works or if it varies by building.

The benefit to working with agents when seeking a rental is that you can generally take occupancy of your rental very quickly once you locate one you qualify to rent. Agents also typically have a very clear sense of what rental inventory is and isn't available in the safest or most-desired neighborhoods. Agents can also take you to multiple buildings in one afternoon, saving you the need to make multiple appointments with multiple landlords and management companies. They also know about each of the buildings they're showing you and can speak about their pros and cons with more objectivity than the buildings landlord or manager who has a motivation to "sell" their property. Also, fees are one-time, so if you know you plan to spend a long time in your rental before moving again, then a fee can pencil out over time. For instance, if you paid a $2000 fee for a unit you wind up renting for five years, that fee winds up costing $400 per year—or $32.50 per month. That's not a terrible premium if you wound up renting a place in a popular, safe area.

Yes, fees are expensive, and they're a high price to pay for convenience. That said, fees aren't always necessary in markets where they're commonly found. To avoid a fee, you may be able to sublet from a friend and eventually take over their lease without using a broker as a middleman—that is, if your friend includes you on the lease and discusses your potential eventual lease takeover with the landlord. Or, you can visit neighborhoods that interest you and call management companies (generally phone numbers are posted on signs outside buildings, or concierges and doormen know who to call) of potential buildings and developments to find out if you can rent a place without working through a broker. Lastly, if you're relocating for work and your employer is paying moving expenses, the employer may be willing to pay for some or all of your fee—or it may be a tax-deductible moving expense, depending on how you pay for and declare work-related moving expenses.

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