More often than not, the quest for the perfect New York City apartment involves a real estate broker, and not every renter or buyer among us thinks favorably on that line of work (the high fees certainly don’t help matters). To get to the bottom of those fees and other quirks of the New York City real estate market, we queried CEO of Rubicon Property Jason Haber, a seasoned real estate broker and entrepreneur based in New York City, on the ins and outs of the city’s real estate. He gave us a down-and-dirty tour of everything real estate, from why you need a broker in the first place to how much the average broker makes.
Do you really need a broker to rent an apartment in New York?
Yeah, obviously. Although it depends on the kind of apartment you want … there are a lot of rental websites where you can go and look at what the options are, and technically you don’t need a broker. You might be able to get by without one, but you may find at the end of the day that you are happy that you had one. If a broker can get you pricing you want, they have performed a service and deserve [their] fee.
Why is it so expensive to rent an apartment through a broker?
The only other people I know who go out and work in 106 degree temperatures, or 6 degree temperatures, like we do, are postal workers. Except they get Sundays off. We don’t. It’s not easy. I understand why it is painful to write that check. … But if you look at a $2,000 apartment, the fee on that is $3,600, which I know seems like a lot, but it doesn’t all go to the broker. It gets divided between the two brokers, and then the house takes a cut on each side. At the end of the day, the broker is making about $900 or so, depending on what their split is.
What do you think about firms who are trying to undercut their competition by cutting their commission?
It didn’t work so well for ValuJet in the airline industry — if you reduce your fees, how are you going to attract quality people, service and clients? If they can get a higher fee at a different shop …
When is it appropriate to negotiate the fee percentage down?
You have to do it early. You just say “Look, I know you work hard … but I am not paying more than, say 10 percent.” If at the end you say, “hey, I’m not paying your fee,” that is not appropriate. Some [agents] will say “I am worth every penny, and I won’t work for less.”
I know some brokerages won’t even let their agents take a smaller fee. How do you do that at Rubicon?
I leave it up to the agent.
How far down can it really go?
Honestly, I don’t think I’ve seen anything under 7 percent.
Do legitimate brokers use Craigslist? If so, why?
Yeah, I mean, you have to be careful. Craigslist is the Wild West. There is so much garbage on there. A lot of what’s on Craigslist is open listings [where no broker has the exclusive]. The dead giveaway [that the listing is open] is there is no address. And that’s because with the address [the renter] can look up the managing agent and then guess what? You don’t have to pay a fee. And these brokers probably don’t know much about the listing. [But] so many people use this site; you have to use it for a lot of your rentals. We have read studies about what are the right times to post on Craigslist … there are three windows of time [during the day] when people are most likely to be on it. That has influenced how we use Craigslist. And when we use it, we include the address.
What’s the most common mistake of newbie renters/buyers in the city?
A lack of urgency. “I’m back in town next week and we’ll see it again.” They aren’t used to markets that have a vacancy rate of under 2 percent.
Which neighborhood is actually the best buy in Manhattan?
Well, the Upper East Side east of Second Avenue is unbelievably cheap compared to the rest of the market.
Is that to buy and to rent?
Yes, there is value there to buy or to rent. The reason is that it’s a hike [to the subway].
What area is the most overpriced?
I want to say Tribeca, but there is good reason for it, because there is such tight inventory.
What area is overhyped?
My guess is probably neighborhoods in Brooklyn that … are great places to live, but Brooklyn can only have [so many] “next neighborhoods.” I’m not sure it’s sustainable.
What is the next hot neighborhood and why?
I actually am very curious to see what happens with Manhattan Valley. I think you are seeing [gentrification] push north. There is a new condo project there right now, 1 Morningside, where they are getting over $1,200 a square foot, and I think it’s a sign of things changing there. I think it’s also underrated.
What is the worst neighborhood to live in and why?
Right now I think it’s west of Penn Station in the 30s. There is just nothing there. However, in a couple years it might be a very cool spot. But right now it’s a rough proposition.
Would you ever rent an apartment you knew had bed bugs?
Eh, only if I was sure the problem had been appropriately dealt with. They have the bedbug disclosure form, so you would have to notify [the tenant]. Maybe you would bring someone in to ascertain that they’re gone.
What’s the smallest apartment you’ve ever shown?
This studio apartment that honestly I think was about 8′ by 12′. And the [prospective buyer] came into the apartment and was like “I want to blow out this wall here,” and “I want the kitchen to wrap all the way over to here.” And I looked at her like she was a mental patient. Then, it turned out she was – she had a mental breakdown, didn’t end up buying the apartment and had to be committed. That was my first month in the business.
I’ve seen some townhouses that are 25 feet wide and … are about 12,000 square feet.
How much do you think your average broker makes a year?
My guess is between $40,000 and $50,000. It’s lower than everyone thinks. There are 8,000, 9,000 agents [in the city]. And you only hear about what the top 100 [brokers] do. But what about the other 7,850?
And do they also have to pay for their own insurance out of that, since they are generally independent contractors?
Yeah! That [figure] is gross. Maybe they should work at the Post Office.
If money was no object, what NYC neighborhood would you live in and why?
I would live in the Upper West Side, where I live now, although I would probably live on Central Park West.
Would you live at 15 Central Park West, home of Denzel Washington, Lloyd Blankfein and Sting?
I would prefer to live further north, but I wouldn’t say no to it!
What is one thing you wish the general public knew about brokers? Now’s your chance …
They have a bad rap — there are lot of bad actors, but there are a lot of bad actors in any industry. I know that real estate brokers generally fall just north of used car salesmen in polls … but most are really good people who work really hard.
Is NYC rent just too damn high?
The rent is too damn high. Jimmy McMillan was right. But we take for granted being New Yorkers; it’s the dream. I grew up on Long Island and people dream, they say “one day I am going to live in New York.” And we don’t have enough housing stock here. So the rent is too damn high, but we’re all paying.
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