July 12, 2024
Last Updated
Navigating the rental market alone can be overwhelming. If you’re a landlord seeking tenants for your rental properties, you might consider working with a rental agent to help you advertise, find great tenants, and close the deal. Many landlords benefit from working with professional realtors.
However, many also shy away from working with realtors due to the prospect of paying rental agent fees. These fees are not insignificant and can often be a percentage of your rental property’s annual income. Is it really worth that much to work with a rental agent?
Read on for help with making that decision. Our comprehensive guide will cover what you can expect to pay in rental agent fees and who foots the bill when a lease is successfully signed. We’ll also look at what services you can expect to receive and the benefits for landlords from working with a realtor.
Table Of Contents On Rental Agent Fees
Realtor fees for finding tenants can be high, but you should expect comprehensive and quality service from your rental agent in return. Discover more below.
- How Much Is The Realtor Fee For Rental Properties?
- Who Pays The Realtor Fee?
- What Services Can Landlords Expect From A Realtor?
- Benefits For Landlords Of Working With A Rental Agent
- FAQs
- Should You Work With A Rental Agent?
How Much Is The Realtor Fee For Rental Properties?
Commission standards may differ across states and among various real estate brokerages. According to Realtor.com, there are no federal or state statutes that establish fixed commission rates, indicating that commissions may be open to negotiation. The “going rate” depends on market forces and will depend on where you live. For example, you can expect to pay more in competitive San Francisco than in cities with a more flexible rental market, such as Pittsburg, Nashville, or St Louis.
That said, most realtors calculate the fees for their rental services in three ways:
A Percentage Of The Lease
First, the realtor might calculate their fee as a percentage of the lease they close based on the annual rent. So, if the lease is $24,000 for the year and the realtor commission is 10%, their fee would be $2,400.
If both the landlord and the tenant use a realtor, the landlord’s broker usually sets the fee percentage, and the total will be split between the two real estate agents.
One Month’s Rent
Another typical fee structure is simply the equivalent of one month’s rent. The agency will often collect the first month’s rent and security deposit as part of their work to close the lease, and they can deduct their fee from those funds before passing the rest on to the landlord.
Flat Fee
Realtors who work with landlords or companies that have multiple properties and are often looking for new tenants might offer a flat fee per new tenant. While, again, it depends on where you live, you might expect to pay a fee of $50-$75 every time the realtor finds a new tenant for a unit.
Who Pays The Realtor Fee?
In most cases, you can expect the landlord to pay the realtor fee as the commission for finding suitable tenants.
However, there are also situations in which tenants can choose to pay a realtor. If they are looking for a rental property in a high-demand area like San Francisco, decent properties are often snatched up before renters even get to see them. In these cases, tenants may work with a realtor to help them find a suitable home.
When both the landlord and the tenant are working with realtors, the two realtors may have to split the agreed fee for closing the lease. But this is not always the case. It could be that the landlord has agreed to pay their realtor one month’s rent to secure a new tenant, while the tenant has already agreed to pay their realtor a flat fee to help them find a property in a competitive market.
For example, read this Hellgate story about a real estate broker charging $10,000 to help people find rent-regulated apartments in New York City.
What Services Can Landlords Expect From A Realtor?
For landlords who decide to work with a realtor to find tenants for their properties, what services can they expect? Most realtors offer fairly comprehensive services to earn their commission and can find suitable tenants more quickly, thanks to their extensive contacts.
As a landlord, you can expect the realtor to:
Market The Property
The realtor should be responsible for marketing the property to prospective tenants. This includes ensuring the property is included on relevant listing sites and creating other advertising material, for example, via targeted social media campaigns.
Provide Market Insight
The realtor should also be able to provide the landlord with market insight, such as reasonable rents for the type of property available in the area and what improvements or modifications could help the landlord attract higher rents.
Manage Viewings
The realtor should manage communications with potential tenants inquiring about the property and organize viewings when appropriate. They should attend those showings and follow up with tenants regarding questions and applications.
Manage Applications
The realtor should manage the application process, including gathering the essential information from potential tenants and conducting tenant screenings and other background checks to ensure they’re a good fit for the property. Realtors should also verify applicants’ employment and income and check references.
Legal Paperwork
The realtor should help with the legal paperwork, collect the initial rent and security deposit, and hand over the keys. They may also talk to the new tenant through important information, such as how to pay their rent and how to contact the landlord.
What About Tenants?
If the tenant decides to work with a rental agent to find a new place to live, what services can they expect from their realtor?
The tenant can expect the realtor to discuss their needs and budget and advise them on what they can realistically expect to find in the area. The rental agent will then research available properties that meet the tenant’s needs and schedule showings.
The realtor should attend showings with their client to ensure the properties are as described and identify any red flags. If the tenant decides to go ahead with an application, the realtor should also manage that process on their behalf.
Tenants generally benefit from working with realtors in highly competitive markets where it’s challenging for renters to find what they want because supply is limited and good places get snatched up quickly. Realtors can also be extremely helpful when looking for specific, hard-to-find properties, such as rent-controlled units. While this might cost more upfront due to the realtor fee, the tenant can save in the long run if they intend to stay in the property.
People who are relocating can also benefit from working with a realtor, as the realtor can be their representative “on the ground” in their new city while the tenant is still in their current location.
Benefits For Landlords Of Working With A Rental Agent
It might seem that realtors do things that landlords can do themselves regarding advertising properties, organizing showings, and managing the application process. So, what are the benefits for landlords of working with a realtor to find tenants rather than trying to do it all themselves?
Experience And Cost Savings
If you have just one or a small number of rental properties, doing things like marketing and tenant screening may be things you do only once a year. Therefore, you might have limited experience or limited systems in place to complete these activities affordably and effectively.
Full-time realtors will be completing these tasks daily so they will know precisely what they are doing and the best way to approach things, and they may have subscriptions with relevant services that make completing tasks more affordable.
Time-Saving
If you have multiple properties and are often seeking new tenants, you might be working full-time as your own property manager. But if you treat your rental portfolio as passive income, working with a realtor lets you delegate tasks and save time.
Market Knowledge And Network
Realtors will have extensive knowledge of their local market and can provide landlords with market insights that can give them an edge in finding the best rentals and the most suitable tenants.
Realtors’ professional networks should mean they have access to referrals, which can help them quickly identify appropriate tenants looking in the area.
Legal Compliance
Realtors should be up-to-date with local, state, and federal regulations, which means they can ensure leases comply with local laws, even if they have changed recently.
Fiduciary Duty
Realtors are legally considered to have a fiduciary duty to their clients, which means they are obligated to work in their client’s best interest (and not prioritize their financial gain from the transaction).
Read more about how rental agencies can help landlords succeed here.
FAQs
The following answers some of the most frequently asked landlord questions about rental agent fees.
What are rental agent fees?
Real estate agents or brokers charge rental agent fees for services related to renting properties, either for landlords looking to lease out their properties or for tenants searching for a rental home or apartment.
How much do rental agents charge?
Fees can differ by region and the services provided. For landlords, the fee is typically equivalent to a month’s rent or a certain percentage of the annual lease amount. For tenants, in markets where they’re responsible for the realtor fees, it can be up to one month’s rent or between 10% and 15% of a year’s rent, but this can vary.
Are rental agent fees negotiable?
Yes, fees are negotiable. While an agent may have a standard fee they quote, you can discuss and negotiate a different rate based on your specific circumstances.
What should I look for in a rental agent agreement concerning fees?
Always check for clarity on the exact fee or percentage, when the fee is due, any circumstances under which the fee might be reduced or refunded (like if you break a lease or if a lease isn’t finalized), and any other costs or charges.
Should You Work With A Rental Agent?
Whether you should work with a rental agent to find tenants for your property depends on your situation. If you are in a hot market where landlords can expect dozens of suitable applications within days of posting their property, you may feel like you don’t need an agent’s help. But they can help you screen all those applications you receive and find the best tenants.
However, if your properties are located in a renter’s market with plenty of options, working with a realtor can help ensure your property doesn’t sit there vacant and not making income. The realtor can ensure the right people see your property and optimize your chances of closing a lease quickly.
There are many benefits to working with a rental agent, but the ultimate decision depends on your specific circumstances.
Whether you are working with a rental agent or finding tenants on your own, it’s important to screen tenants properly to ensure they are a good fit for your property both in terms of their income and rental history. RentPrep’s tenant screening and rental background check services can help. Learn more here.
RentPrep does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal, or accounting advisors.