why does boston need rental agents and brokers?
TRANSCRIPT
by Raleigh Werner, co-founder of Jumpshell
Why do rental agents and brokers exist in Boston?
And why is the apartment search process such a mess?
Renters deserve to know exactly what they’re getting into when they look for an apartment in Boston. I’m tired of people using “that’s the way it is” to explain to renters why they have to use agents and pay a month’s rent fee. That’s not a good enough justification.
A lot of the blame for negative experiences in Boston’s rental market falls to real estate agents and brokers. This presentation will attempt to explain why agents exist in Boston, why they actually do provide a lot of value to the market and why the whole process is such a mess — but this presentation in no way excuses crappy behavior that has become commonplace for many agents in Boston.
I’ll also try to touch upon how the “right” agent — someone who has access to apartments that actually meets a renter’s needs and truly cares about customer service — can actually earn the one-month fee in Boston (or at least do as much as possible to earn it).
Why did I make this presentation?
Raleigh Werner,co-founder of Jumpshell
So let’s answer the big question: why do brokers and agents exist in Boston?
Bottom line, brokers offer a hugely valuable service to property owners by finding and vetting renters for their apartments.
Brokers
Brokers turn a property owner’s apartment rental process from this...
Brokers give property owners a “qualified” renter for their apartment for virtually no work.
...and often for no cost.
Compare that to a process where property owners handle ads, showings, applications and leases on their own.
A lot of property owners have other jobs and simply don’t have the time to handle all that work, so they need a broker to help them out.
That’s why “by-owner” apartments are so hard to find.
● There just aren’t many property owners trying to find renters on their own.
● There’s intense competition from renters for “by-owner” apartments, since they come without a fee.
So that’s why brokers and agents exist in markets like Boston.
Note: Brokers hire agents to help them with the work, in exchange for half of the fee.
It’s their job, so they get paid. But, who pays them? (we all know)
So...what do brokers and agents get out of it?
Simply put, if there are more renters (demand) than apartments (supply), the renter pays.
That’s why renters pay the fee in Boston.
Note: In “balanced” markets, often the cost is split between both parties.
It all depends on supply + demand the market.
The agent who works with the renter. This agent works for the listing broker and is the renter’s point person in the process. The listing agent posts apartment ads, schedules showings and processes applications.
...and here’s how the fee breaks down.
The broker who maintains the relationship with the owner of the apartment — he or she “owns” the listing.
Essentially, the listing broker gets half of the fee for maintaining the relationship with the property owner.
50% 50%
Listing Broker Listing Agent
It’s called the “broker’s fee” because...
The fee goes to the broker, who “owns” the listing for the apartment a renter leases. The broker then splits the fee with the agent.
The best answer is...
You’re probably thinking something like:
“Ugh, fine. So renters have to pay the broker’s fee. But why is it always an entire month’s rent?”
I don’t know.
For some reason, no broker has really tried to compete on price.
There are definitely costs associated with being a broker or an agent, but there’s no economic formula that says that each transaction inherently costs a month’s rent.
I’m happy to dive into this particular subject in more detail one-on-one — feel free to ping me at [email protected]!
Now let’s move on to the next question...
Why is the apartment search process such a mess?
Here’s what the apartment search process looks like with brokers and agents .
Spoiler alert: the actual rental market is not as simple.
So how can the actual process be even more complex?
Co-brokes! (who broke what?)
What the heck is a “co-broke”?
If you’re a broker who’s promised to find a renter for a property owner, you have a financial responsibility to that property owner.
When brokers can’t deliver, they “lose the listing” and their reputation gets a knock.
So...
Often, brokers in Boston enlist the help of other brokers to ensure that they can get an apartment rented.
This is called a “co-broke.”
So...what does THAT process look like?
Get your barf bag ready.
Now that’s a process.
Let’s revisit the broker’s fee in the context of a co-broke.
This may help to clarify why the fee is so high, since a lot of rental “deals” are co-brokes.
The agent who works on behalf of the broker. The listing agent works with the renter’s agent on scheduling showings and processing applications.
Listing Broker Listing Agent Renter’s Agent Renter’s Broker
In a co-broke, the agent that you work with only gets 25% of the fee.
The broker who maintains the relationship with the owner of the apartment a renter leases — he or she “owns” the listing.
The broker for whom the renter’s agent works.
The agent with whom the renter works to find the apartment, set up the showing, fill out a rental application and finalize the lease paperwork. Essentially, this agent posted the ad the renter responded to.
25% 25% 25% 25%
This is an example of why the “It’s crazy that agents get paid a month’s rent just to open a door” argument isn’t really valid.
Even if their job was as simple as opening a door, they only get 25% of the fee in a co-broke.
This is not to argue that the amount of the fee is justified. I think it’s exorbitant, but I will argue that it’s not the agent or broker’s fault that they have to charge what they do.
I blame the insane inefficiency of the market.
But why is the market so inefficient?
Part of the answer lies in this little factoid...
doesn’t regulate who can post apartment ads or what is posted.
Result? Unscrupulous agents. Fake + duplicate ads.
Renters spend countless hours browsing listings and reaching out to agents, but rarely connect with an agent who has what they’re looking for or provides decent
customer service.
...and 70% of renters use Craigslist to find their agent.
Raleigh...make it stop.
Alright, I’ll stop there.
But, I want to leave on a positive note by telling you how to get the most bang for your buck in the Boston apartment search process.
Focus on finding the “right” agent.
● An agent who has access to apartments that you’ll actually be interested in. Remember that agents work for brokers who maintain relationships with property owners. That means each broker has a unique list of apartments that no other broker has — renters are best served by an agent who works for a broker whose apartments fit their specific needs.
● An agent who cares about customer service. Believe it or not, there are agents in Boston who truly care about delivering a positive experience to their clients. They’re responsive, professional, courteous and thorough. Don’t just settle for an agent with the right apartments; find an agent who will care about you.
I’ll close with a super-brief summary...
● The apartment rental market is out-of-its-mind complicated.
● As such, agents and brokers provide a vital service to renters and property owners by connecting people to property.
● The renter’s fee is often split between four different parties.
● Craigslist can actually make it harder to find a suitable apartment.
● In Boston, finding the right agent is the best way to get an easy, enjoyable apartment search experience that truly meets your needs.
THAT’S IT.
Email me if you have questions!
Oh yeah, and what’s Jumpshell?
Jumpshell connects renters with the right agent.
Find out more at www.jumpshell.com.