Pros and cons of searching for an apartment without a broker
With the economy sluggish, New Yorkers are pinching pennies in ways they've never had to before.
One trend that's picked up since the downturn hit the city is apartment hunting without using a broker, experts say.
"There are more and more people that are willing to do different amounts of work during the process in order to save some money," said Doug Perlson, co-founder and chief executive of RealDirect.com, a website that bridges the gap between hunters and sellers.
Commission for brokers involved in a sale usually hovers near 6% of the closing cost. Rental brokers typically get anywhere from a month's rent to 15% of a year's rent.
Saving money is the major reason why apartment-hunters, particularly renters, avoid using a broker.
When it comes to buyers, brokers' commissions are generally paid by the owner of the property that's for sale, according to Perlson.
"On the rental side, by not using a broker, you're going to save money," Perlson said. "If you can find a direct, no-fee apartment, you're going to be able to save money, typically."
While everyone wants to save money, there are downsides to avoiding a broker.
Perlson said landlords sometimes charge extra for rent as compensation for doing a broker's work on their own.
Additionally, experts said brokers usually get to show their clients the nicer apartments, often before they're are even listed on the market.
"In many cases, apartments are being rented prior to even hitting the market, and brokers are the ones that are able to engage those types of deals due to the relationships that they have with the landlords," said Gordon Golub, executive vice president and rentals director at CitiHabitats.
Gary Malin, the company's president, added that roughly 5% of sellers enter the market without a broker.
"If you look for no-fee apartments, you're going to be eliminating more than half of the apartments that are currently on the market," he said.
"While I think it would be ideal to find an apartment without a fee at all, the reality is that you're going to be looking at apartments that have fees as well as [those] that don't."
In short, avoiding a broker is more cost effective for renters, but those who opt for that approach risk missing out on some good digs.
Kelleigh Welch, 24, moved to the city from Massachusetts this summer for a job and found herself facing a speedy apartment hunt.
To save money, she didn't use a broker and found a room in an already occupied apartment. But she said that using a broker could be the safer bet.
"I don't have enough money to pay 15% of the yearly rent ... that's a lot of money for just [renting] an apartment to live in," Welch said. "
On one side you have the money issue, but on the other side you want to make sure you have a good place, and having a broker kind of makes sure you have a reliable source," she added.
Brokers also ward off scammers, she said.
Elana Estrin, 24, found her Upper West Side apartment on Craigslist about four months ago. She recently moved here from Texas.
"Most people told me, 'Whatever you do, don't go for a broker. It's going to cost you more and you can find [a place] just as easily without a broker," she said.
"I figured if I could find one on my own and save that fee then that would be great."
Estrin found her apartment after a week of searching, but said she would have used a broker if the hunt was more of a struggle.
When Phil Sarin, a New York resident for a year and a half, was looking to buy an apartment, he decided against using a broker because he didn't think he needed one.
"Basically, we figured that [we] should do the work in finding a place pretty much ourselves," he said.
When it came down to negotiating, he turned to RealDirect.com to handle the technicalities of the sale, and ended up with a Park Slope condo that he expects to move into sometime this month.
"We wanted to be a little more self-serving in the beginning of a process and then get help from real people when we needed help from them," he said.
"What I've noticed is that people my age or younger, they tend to be as self-serving as they possibly can," Sarin added.