Why Renters Should Never Pay Broker Fees

Renters should NEVER pay broker fees. Not only is it a waste of money, but it creates an abusive relationship where they are beholden to the landlord’s whims. Here’s why.

Let’s say a tenant (foolishly) pays a broker fee of 15% of annual rent. On renewal, landlord asks for 10% rent increase. The tenant, despite the 15% being a sunk cost, may emotionally feel invested to continue with the relationship despite it being a bad deal because he/she already paid a high setup fee.

If tenant pays a broker fee, landlords have less incentive to negotiate since their turnover cost is lower. They likely get a portion of that fee in form of kickback, which helps offset their vacancy cost between tenants. So landlords will care less about keeping the tenant happy, since turnover results in another kickback to help soften the vacancy cost.

The tenant who paid a broker fee before may pay one again (or think they will). So they’ll accept a 10% rent increase because they think they have to shell out an extra 15% of rent if they move.

Now let’s say tenants refuse to pay broker fees. All those negatives are now shifted from the tenant to the landlord.

Tenants no longer feel emotional attachment from having paid a high setup fee.

Tenants have lower friction to move (since they didn’t pay a setup fee before or and likely won’t after).

Landlords on the other hand, now have lower leverage because the above increases tenant willingness to move AND increases the cost to landlord if the tenant moves (has to pay full vacancy costs + acquisition cost). Landlords are thus far more likely to bend over backwards to satisfy the tenant.

TLDR; never ever pay broker fees as a tenant. Ever.

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