new agent charged me 6% to lease the property, not 1 month's rent

37 Replies

so, i have been doing this for awhile. with multiple agents. i loved my previous agent, but she reduced her workload due to pregnancy. She referred me to a guy that listed a house 2 weeks ago.

We talked, i liked him, he listed the house. within a week i had 37 showings and rented within a few days. It was a great house, so that always has helped us.

It was a 3 yr lease, @ 1250 per month. He just sent the checks and i was charged 6% of the WHOLE 3 YEAR TERM - 6% on a 45k amount.

Yes, i didn't read the contract i signed. My fault. 

wtf did i do? advice... would be appreciated . after the fact

Do you pay a monthly fee or is it just the upfront fee? We pay our PM one month's rent up front plus 8% per month.

no pm.  I do everything else but list on mls.  my understanding was that all agents charge 2 months rent and it's either split between them or he takes it all.  I am fine with that.  I never I. a million years thought that they charge percentage fee for leases. I am so pissed at myself for not reading that stupid contract.  

he never mentioned it either.  I think that's unethical 

I think your agent is trying to pull a fast one on you. It's very well-known that leasing and sales commissions are much different. First months rent in Michigan is typical. Even when my property manager gets a tenant placed by someone else they split the first months rent with that outside agent.

@George P.

  he is charging you like a leasing agent would charge a commercial property owner to lease up a starbucks..

Originally posted by @George P. :

no pm.  I do everything else but list on mls.  my understanding was that all agents charge 2 months rent and it's either split between them or he takes it all.  I am fine with that.  I never I. a million years thought that they charge percentage fee for leases. I am so pissed at myself for not reading that stupid contract.  

he never mentioned it either.  I think that's unethical 

 Doing some quick math, it appears the rent for this unit is $1250/month.  Two months rent for placement would equal $2,500.  6% of $45,000 is $2,700.

It doesn't sound like he grossly overcharged you based on what you were already expecting to pay.  He just charged in a different manner.  If those numbers are true, I certainly wouldn't raise a ruckus over this.

-Randy

Don't know your market, but here in DFW, residential rental commission is half the first month's rent, which then gets split between landlord's agent and tenant's agent. (So a $1000/mo rental only generates $250/side - not very lucrative for the agent, but I don't use agents for my rentals anymore, anyway.) For a 3-year lease, I would probably pay more, but it would need to be discussed up front.

I'd have a conversation with the agent along the lines of, "I've been doing this for so long and have had such a good longstanding relationship with my previous agent that I don't typically read every line of the leasing agreement anymore.. But what you're charging me isn't the standard. If we're going to have a long-term relationship, we need to get this fixed."

I was just goIng to say the same thing @Randy e said...you paid only slightly more than you were expecting, so I'm not sure what the problem is.

randys math is spot on.  but I was expecting and have been paying 1 month's rent for the past 6 yrs.  in this case,  it would have been 1250. 

paying 2700 is above and beyond my wildest expectations. 

Why did you do a 3 year lease? Doesn't that benefit the renter more than you? Rent price is locked in and they can still leave anytime they want (breaking the lease, but are you going to chase them?)

So if the agent collects $2,700 and the tenants leave after 6 months, and the agent signs another 3 year lease, is that another $2,700?  If so what a great deal for the agent!

If you signed the listing agreement with the commission spelled out, it's on you.  Jay's right, he handled it like a commercial lease, which is probably appropriate on a 36 month term.  

Originally posted by @Dawn Anastasi :

So if the agent collects $2,700 and the tenants leave after 6 months, and the agent signs another 3 year lease, is that another $2,700?  If so what a great deal for the agent!

 I'd ask the agent for a rebate in this situation.  If he wants your future business and a stellar reputation, he should agree. 

I am realtor in Staten Island ny, I would charge 1 month rent. But in Manhattan it can up to 15% of the total lease

Originally posted by @Joseph Pugliese:

I am realtor in Staten Island ny, I would charge 1 month rent. But in Manhattan it can up to 15% of the total lease

 Joseph, would you charge the same for a 36 month lease?  Aren't you rendering greater value than signing a 12 month lease?  

Yes I would only charge 1 month  fee, that is the standard here in Staten Island NY.

I guess I just don't understand how am extra $200 is above your wildest expectations? You were expecting $2500 (2 months rent)..so what's the big deal of paying $2700?

Also if you had 37 showings in a few days, I'd say your rent must be well below market.  

Originally posted by @Russell Brazil :

I guess I just don't understand how am extra $200 is above your wildest expectations? You were expecting $2500 (2 months rent)..so what's the big deal of paying $2700?

Also if you had 37 showings in a few days, I'd say your rent must be well below market.  

 no, no and again, no.

his fee should be $1,250. not $2,700. thats a little more than $200. I was not expecting 2 month's rent to be withhold, just one.

my rent is not above market. in fact, i am getting $75 more than what the previous tenant was paying. my house is in the perfect location, amazing house and people think they can get in...until they see the requirements that i have listed to get in. that's why i had just 3 applications and rejected 2.

I just talked to him after he avoided 6-7 of our calls. I talked to him for 30 mins which is very unusual for me. Basically, he said what we expected - "I was not aware that you did not know i charge 6%. I always charge that and we go above and beyond to get the client the best deal. I have no control over them leaving after 4 months. I was not aware you didn't read the contract. I can't do the next 3 rentals for free because it means i would have to pay all the fees to the other parties. Sorry, the money has been already disbursed".

That's what i get for nor reading the 4 page contract since i have 2 rehabs going, demanding full time job, 2 kids, a wife that's insanely busy with her work and the guardian (she cares about her brother who cut her finances out) tenant calls in the middle of the month saying she is moving out in a week.  yes, expensive lesson, but it was bound to happen sooner or later.

I will talk to the broker and see if they can do anything. i doubt it, but it's worth a shot. in real estate, i always try to use every situation as a learning experience. besides the obvious (read the stupid paper you click on), i am trying to figure out what I will get out of this experience.

Originally posted by @Jon Klaus :
Originally posted by @Joseph Pugliese:

I am realtor in Staten Island ny, I would charge 1 month rent. But in Manhattan it can up to 15% of the total lease

 Joseph, would you charge the same for a 36 month lease?  Aren't you rendering greater value than signing a 12 month lease?  

How is a 3 year lease value for a landlord? Tenants can stop paying, leave etc at any time. The landlord can't raise rent and can only get them out through eviction due to the tenant violating terms in the lease. If you decide to sell in 2 years, your buyer will get a tenant which will limit who will buy. 

Where is the value?

In our area there are multiple methods of payment for agents handling rentals.  West of Boston in the Worcester area, the 2 agents generally split a month or so of rent, it varies. Boston area, the tenants agent is paid by the tenant much of the time.

When working with us (Real Estate Agents) assume there is NO standard and negotiate the best deal you can before signing the contract. I think the agent is being short sited in not negotiating a settlement to satisfy both sides of this. 

The fee seems pretty high.

You did agree to it though, You should read the contract. The Realtor should explain the charge though. I am not sure how you both got to the point of him being hired without either of you mentioning what the cost would be.

I agree with the above comments about a 36/mo. lease not being valuable to the landlord. For residential I would stick to a 12 month lease.

Holy hell. It is free to use a site like Rentlynx or Postlets, or Section 8..

I would only sign a 36 month lease with a strong tenant with guarantees.  Similar to commercial.  Large deposit, employer guarantee, etc. 

Originally posted by @George P. :

so, i have been doing this for awhile. with multiple agents. i loved my previous agent, but she reduced her workload due to pregnancy. She referred me to a guy that listed a house 2 weeks ago.

We talked, i liked him, he listed the house. within a week i had 37 showings and rented within a few days. It was a great house, so that always has helped us.

It was a 3 yr lease, @ 1250 per month. He just sent the checks and i was charged 6% of the WHOLE 3 YEAR TERM - 6% on a 45k amount.

Yes, i didn't read the contract i signed. My fault. 

wtf did i do? advice... would be appreciated . after the fact

 How was the contract written?  Was it clear that he would get 6% of the total that might be collected on any length of lease at $1250/month whether or not the $1250/month was ever collected?  Does it make that clear?  If not, courts will most likely find in your favor.  Ambiguous clauses are determined against the contract maker.

Another word used in court is "reasonable."  Was it "reasonable" that you would understand that you'd be charged 6% up front for a 3 year lease, based on a monthly income that may never happen?

Does this include managing the property, too, for the duration?  Or was this just to find a tenant?

I think you need to talk to a lawyer.  Don't just assume because the contract says he gets 6%, that that means he gets 6% up front based on fees to be collected over the next three years.

Just because something is written in a contract, does not make it enforceable.  Especially, if it's ambiguous.  

Originally posted by @Sue K. :
Originally posted by @George P.:

so, i have been doing this for awhile. with multiple agents. i loved my previous agent, but she reduced her workload due to pregnancy. She referred me to a guy that listed a house 2 weeks ago.

We talked, i liked him, he listed the house. within a week i had 37 showings and rented within a few days. It was a great house, so that always has helped us.

It was a 3 yr lease, @ 1250 per month. He just sent the checks and i was charged 6% of the WHOLE 3 YEAR TERM - 6% on a 45k amount.

Yes, i didn't read the contract i signed. My fault. 

wtf did i do? advice... would be appreciated . after the fact

 How was the contract written?  Was it clear that he would get 6% of the total that might be collected on any length of lease at $1250/month whether or not the $1250/month was ever collected?  Does it make that clear?  If not, courts will most likely find in your favor.  Ambiguous clauses are determined against the contract maker.

Another word used in court is "reasonable."  Was it "reasonable" that you would understand that you'd be charged 6% up front for a 3 year lease, based on a monthly income that may never happen?

Does this include managing the property, too, for the duration?  Or was this just to find a tenant?

I think you need to talk to a lawyer.  Don't just assume because the contract says he gets 6%, that that means he gets 6% up front based on fees to be collected over the next three years.

Just because something is written in a contract, does not make it enforceable.  Especially, if it's ambiguous.  

It's not ambiguous though. And the OP has already stated that he didn't bother reading the contract in the first place.

No court is going to invalidate a contract that wasn't read. The whole point of signing a contract is to say you've read the contract.

And considering it's under the section/paragraph labelled "fees", did he expect the person to work for free? Of course he didn't. It's perfectly reasonable to expect someone to sign a document where services are rendered to have read the bit where fees are mentioned.

Do you really think you could last more than 5 seconds in court telling a lawyer why you didn't bother reading about the fees in a contract?

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