In Chicago, unlike New York and some other cities, rental services are typically paid by the property rather than by the renter. That fact might lead renters to believe, mistakenly, that they can safely ignore their agent’s compensation.
Assume you’re working with a rental service to find a one-bedroom apartment for up to $2,400 a month. How much is your agent being paid by the property?
Some buildings don’t cooperate with rental services and an agent earns nothing by introducing a renter to those buildings, which are often highly desirable and offer competitive rents. What are the odds that a renter will learn about or be given an honest take on those buildings by a rental broker?
I’ve just looked at the broker compensation policies on available one-bedrooms at four buildings that do work with brokers. One is paying a flat fee of $1,000 to brokers. Another is paying half a month’s rent, a third is paying a full month’s rent, and the fourth is paying 125% of a month’s rent.
The gross commission that the rental agent splits with the firm he works at ranges from $1,000 to $3,000 on a $2,400 a month one-bedroom. The percentage of the commission that goes to the agent varies widely from firm to firm and from agent to agent within the same firm. On a 50/50 split the agent’s compensation would range from $500 to $1,500. That’s a huge spread for rental agents who are often earning only a marginal living.
The rental brokers bray loud and often that their services are “free” to renters. Could that be because they don’t want renters to think about how their compensation can affect which buildings they show and what they have to say about them?
If you’re working with a broker, ask what each building you visit is paying. Rental service commissions are negotiable, and you should negotiate a rebate of a part of the commission on higher-paying buildings.
If you want to ensure that you’re seeing every building and getting objective information, look to YoChicago’s at-a-glance lists and reviews, and work directly with the buildings. You don’t need a broker to find the best apartment deals in Chicago and you all to often won’t find them if you work with a broker.