The New York City housing market is notoriously competitive and overwhelming, especially for those new to NYC. With terms like "no-fee" and "broker's fee" popping up without explanation in many apartment listings—and some listings not mentioning a fee at all—it can be difficult to determine exactly how much it will cost to sign a lease on a new apartment.
A no-fee apartment means the renter does not pay a broker’s fee. A fee only exists when a broker is involved. A landlord or management company may pay the fee on the tenant’s behalf, in which case the apartment is advertised as no-fee. If you sign directly with a building owner, there is no fee.
It's counter-intuitive, but a "no-fee" listing doesn't necessarily mean that there is no broker fee—it just means that the tenant is not the person who pays it.
In New York City, any apartment that is not leased directly through a building's landlord or management will typically have a broker's fee associated with it, and that fee will be anywhere from 8 to 15 percent of a full year's lease, meaning the amount a tenant pays over the course of a year. (For example, a 15 percent fee on a $3,000/month apartment would be $3,000 x 12 months x 15%, or $5,400.) This is how brokers, or real estate agents, make a living from showing rental apartments, since prospective tenants don't have to pay anything to view an apartment.
However, sometimes, the building's owners will pay the broker's fee, and the apartment will be listed as a "no-fee apartment."
No Fee Vs. Fee in a Nutshell
A no-fee apartment means the renter does not pay a broker’s fee. A fee only exists when a broker is involved. A landlord or management company may pay the fee on the tenant’s behalf, in which case the apartment is advertised as no-fee. If you sign directly with a building owner, there is no fee.
What Does 'No-Fee' Mean?
It's counter-intuitive, but a "no-fee" listing doesn't necessarily mean that there is no broker fee—it just means that the tenant is not the person who pays it.
In New York City, any apartment that is not leased directly through a building's landlord or management will typically have a broker's fee associated with it, and that fee will be anywhere from 8 to 15 percent of a full year's lease, meaning the amount a tenant pays over the course of a year. (For example, a 15 percent fee on a $3,000/month apartment would be $3,000 x 12 months x 15%, or $5,400.) This is how brokers, or real estate agents, make a living from showing rental apartments, since prospective tenants don't have to pay anything to view an apartment.
However, sometimes, the building's owners will pay the broker's fee, and the apartment will be listed as a "no-fee apartment."
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There are two potential drawbacks to a no-fee listing like this:
- Most landlords will only pay a fee if they need help quickly finding a tenant, which some apartment hunters consider to be a warning sign in New York City's competitive rental market. Is there something wrong with the unit, the building, or the neighborhood?
- Landlords know that a "no-fee apartment" sounds attractive to prospective tenants, so they'll pay the fee—but to keep from losing money, they'll simply increase the cost of the monthly rent. For example, a landlord could rent out an apartment for $4,500 a month, with the tenant paying the broker's fee of 12 percent, or $6,480—or the landlord could pay that fee, divide it by 12, and add that amount to the monthly rent for a total of $5,040 per month. If the tenant renews their lease to stay beyond a year, they will end up paying more than if they had paid the fee themselves.
Apartment hunters should also be wary of unscrupulous brokers who use "no-fee" listings in bait-and-switch schemes. It's not uncommon for a realtor to advertise a too-good-to-be-true "no-fee apartment"—and then when the prospective tenant calls about a viewing, the broker reports that while that apartment has just been rented, there's a similar listing (at a higher cost, or with a broker's fee attached, or both) available.
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How to Find a No-Fee Apartment in NYC
Most apartment listing websites, including Street Easy, Padmapper, Naked Apartments, Craigslist, and others, allow users to filter for no-fee apartments. However, the single most reliable way to find a truly no-fee apartment is to communicate directly with the building's management, avoiding the intermediary of a broker altogether.
Written by Elijah Lewis