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Q: I recently attended an open house for a rental in Park Slope, Brooklyn, where the broker let applicants know in advance, via email and in person, that he would be accepting best and final offers on rent and commission. This was no luxury apartment; the building wasn’t new, nor did it have any amenities. I offered the listed price: $6,000 a month, with a 15 percent commission. He responded that he had already received offers for $6,800 and that I would have to offer more to be considered. How should renters respond to these tactics?
A: An apartment is worth as much as a person is willing to pay for it. In this rental market, with a dearth of listings and intense demand, many prospective renters seem willing to pay quite a bit. In May, 18 percent of all New York City rental listings ended up in bidding wars, according to a Douglas Elliman report — a trend affecting apartments from the bottom of the market to the top. Long lines for open houses are commonplace. TikTok is full of videos posted by battle-weary apartment hunters lamenting their lot.
In New York, bidding wars are legal for market-rate apartments. However, landlords cannot accept multiple months’ of rent up front. Broker fees are unregulated, too, and are now the responsibility of the tenant, after a respite earlier in the pandemic when landlords picked up the fee. While a fee of 15 percent of the annual rent has become an industry standard, there is nothing preventing a broker from demanding more. Keyan Sanai, a salesperson for Douglas Elliman, said he had heard of brokers fetching commissions of 18 or 20 percent. “Right now, brokers have too much power,” he said.
To find an apartment in this market, first decide on your maximum budget. Then look at apartments below that number; there is a good chance you might need to pad your offer to the landlord, the broker or both. How much will you need to offer? Unfortunately, there is no magic number. Brokers are reporting apartments renting for a few hundred dollars to a few thousand over the asking rent. The answer will depend on how desperate the other bidders have become.
Show up prepared to make an offer. Have all your paperwork in order, including your pay stubs, bank statements, proof of employment and letters of recommendation. If you will be using a guarantor, make sure you have that person’s financial information ready, too. And show up early.
“It’s first come first served,” said Nicole Hechter, an associate broker with Corcoran. “Put your best foot forward. There will be a bidding war. It will go up in price.”
Whatever rent you agree to pay, remember that your future rent increases will be based on that price, so be cognizant of your current and long-term budget before you sign the lease.
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