Renting my home myself, but renter's agent wants commission

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Renting my home myself, but renter's agent wants commission

Jeremy Kaufman
Homeowner · Studio City, CA · Member since 2014 · 7 posts · 1 vote

For the first time, I am becoming a landlord.   I am leasing my Los Angeles home for 2.5 years.  I have it listed for $6,300/mo on Craigslist and Zillow.   

The agent of a prospective tenet is asking me for 4% commission.   Is it customary for an unrepresented landlord to have to pay a tenant's agent commission?  Is 4% customary? If I refuse to pay a commission, will it be impossible for me to find a renter? 

I'd appreciate any advice.  Thanks!

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Courtney M.
Investor · Los Angeles, CA · Member since 2016 · 42 posts · 10 votes
10y

Hey Jeremy. When I list my LA properties on Craigslist, I get ALL kinds of calls from people offering to bring me tenants if I pay them a commission. I always say no. I always rent it to other people within a week. If you want to hire someone, thats up to you, but if the prospective TENANT hired someone - you dont owe them anything.

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  • Courtney M.
    Investor · Los Angeles, CA · Member since 2016 · 42 posts · 10 votes
    10y

    Hey Jeremy. When I list my LA properties on Craigslist, I get ALL kinds of calls from people offering to bring me tenants if I pay them a commission. I always say no. I always rent it to other people within a week. If you want to hire someone, thats up to you, but if the prospective TENANT hired someone - you dont owe them anything.

    5Reply
  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y

    Agree with @Courtney M.  It's unsolicited and effectively being a parasite.  Leave the ad inplace and await another application.

    2Reply
  • Jonathan G.
    Investor · Marietta, GA · Member since 2015 · 382 posts · 258 votes
    10y
    Pay the approximately $250 commission. You would be losing almost that much every day (~210 per day for rent broken down in days) that the house goes unrented anyway so why would you even consider not taking advantage of the opportunity. If the renter presented checks out, great if not there's no commission to be paid anyway There's nothing to lose unless you have a long line of other qualified applicants or if you fail to do your due diligence on the presented renter. Never consider passing up dollars in an attempt to save pennies
    1Reply
  • Courtney M.
    Investor · Los Angeles, CA · Member since 2016 · 42 posts · 10 votes
    10y

    I'm going to have to disagree with Jonathan on the basis of California tenant law being an ENTIRELY different animal that Georgia. In LA - you are REALLY getting in bed with your tenants. You better REALLY like those people, because they inherit a lot more rights to your property than you do. It's lunacy. That said - I would be leery of any prospective tenant that hired a scammer to find them a house. 

    2Reply
  • Jeremy Kaufman
    OP
    Homeowner · Studio City, CA · Member since 2014 · 7 posts · 1 vote
    10y

    Jonathan, it's 4% of a year's rent.  So we are talking about a $3,000 commission. 

    Thanks all for the advice.

    1Reply
  • Karishma Rama
    Real Estate Agent · Atlanta, GA · Member since 2016 · 9 posts · 0 votes
    10y

    I'm not exactly sure about how the LA market works, however, I know that the agents on Atlanta renters MLS typically state the agent is entitled to a percentage of the first month's rent. Usually 20%. I don't know if that helps at all but it may be a new idea to throw into the mix.

    Karishma

    0Reply
  • Courtney M.
    Investor · Los Angeles, CA · Member since 2016 · 42 posts · 10 votes
    10y

    If you want to hire someone in LA. I really like therentalgirl.com - they take a commission (1 months rent last time I checked) but they do all the background and credit checks etc. I know tons of people who have used them and been really happy with their service. And they are working for YOU not the tenant. If I was going to pay someone to rent my place it would be someone who worked for ME.

    0Reply
  • Jonathan G.
    Investor · Marietta, GA · Member since 2015 · 382 posts · 258 votes
    10y
    $3000!!!! Never mind. Maybe with a clause stating payable after a hassle free year of paid tenancy. Thanks everyone else for the insight.
    1Reply
  • Jeremy Kaufman
    OP
    Homeowner · Studio City, CA · Member since 2014 · 7 posts · 1 vote
    10y

    Thanks for the recommendation.

    0Reply
  • Account Closed
    San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
    10y

    No.  Plus, landlords in CA are required to mitigate damages.  Which means, if your tenant breaks their lease, you have to try and find a new tenant asap, and can only collect rent until you find a new tenant using reasonable means.  And the courts generally figure it only takes 30 days to find a new tenant.

    So, if you pay this agent a percentage based on a 2.5 year lease that the tenant could break, and would only be liable for 30 days rent after they broke the lease - then, paying a commission based on even a year lease would potentially be a rip-off.  

    1Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    10y

    Jeremy, don't do it. They are just trying to take advantage of you and the situation. The only time you need to pay for assistance is if you are having a difficult time finding a renter. From what I know of the market, it is strong and you shouldn't have a problem as long as you are priced appropriately and the home is of good quality.

    I would warn you that the Republic of Kalifornia is TOUGH for a Landlord, particularly a new one. You better educate yourself quickly because one little mistake can ruin you. If you have no idea where to start, I highly recommend you buy the NOLO Landlord's Lawbook specifically for California. That will give you a solid foundation and then you can refine your knowledge from there.

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    3Reply
  • Jeremy Kaufman
    OP
    Homeowner · Studio City, CA · Member since 2014 · 7 posts · 1 vote
    10y

    Thanks for the warning Nathan.  I am getting up to speed, in no small part due to BP.  You have start somewhere. 

    The home is great, and I think appropriately priced based on comps.  LA has 2-3% vacancy rate. It's bananas. 

    We are only moving because my daughter is starting Kindergarten in the Fall, and we don't like our local school.  We are renting a house just a few blocks away. Once both kids are enrolled 2.5 years from now, the residency requirement for the school won't apply, and we will move back home. I figure this forces me to get some of the experience in real estate that I've always wanted.   It will test whether I want to be a landlord.   

    0Reply
  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    10y

    @Jeremy Kaufman Don't pay it without a contract, I've seen some people rent a room or house without an agent or agents fee.

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    10y

    I don't think that 4% gross rents is unreasonable for a rental agent fee. That is less than 50% of a months rent. It is possible the agent has a prospective tenant and can get it rented quickly for you. It is also possible it is a scam, so be careful. It wouldn't hurt to get more information from the agent and see if they are legitimate. If I could prove it was legitimate, I would just look at in practical matters. If I can rent it faster with the agent and get a tenant in sooner, the $3000 is only a half months rent. If it sits one month longer, you will lose twice the rental fee. If you think you can get someone in just as fast, say no thanks.

    2Reply
  • Paul Gupta
    Investor · Fremont, CA · Member since 2015 · 19 posts · 3 votes
    10y

    Not paying also incurs a cost (lost rent), its just a matter of assessing which is greater.  Say you are open, but keep looking as well.  The commission seems to be worth 2-3 weeks of rent in your case. See if your efforts bear fruit first.

    0Reply
  • Jacob Pereira
    Real Estate Agent · Austin, TX · Member since 2014 · 636 posts · 486 votes
    10y

    I think it's a pretty simple math problem; is your house priced attractively enough that you can find another tenant in a few weeks (14.4 days to be exact for this month)? If not, why wouldn't you do it? You can also make it a bit more complicated by factoring the tax obligations of writing off the fee, but at the end of the day, you're talking about very little of the total. If you have a ton of prospective tenants clamoring for the property, you might as well hold on to the $3k and approve one of them.

    As always, be careful that you aren't running up against any discrimination laws or could potentially be perceived to be.

    0Reply
  • Jeremy Kaufman
    OP
    Homeowner · Studio City, CA · Member since 2014 · 7 posts · 1 vote
    10y

    Math is good.  I have four others coming to look at the place.   Will hold until I see if any of those bite. Thank you to all!

    0Reply
  • Katie Rogers
    Santa Barbara, CA · Member since 2015 · 644 posts · 17 votes
    10y

    Seller's pay the the agent's commission (even though the funds come from the buyer, really it is the buyer paying) because the agent does the work of advertising and showing the property.  Renter's agent works for the renter, so the renter should pay the commission.  

    0Reply
  • Joe Moore
    Rental Property Investor · Los Angeles, CA · Member since 2010 · 804 posts · 230 votes
    10y

    I would make a prorated contract with him.  $250 monthly for a year, payable after the monthly rent rolls in.

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    I don't know why brokers and agents waste time with renters in CA. Unless they are renting something at like 15,000 to 20,000 a month and getting a percentage. Otherwise you are better off just working with buyers. The brokers go out to the same showings and work but make a much greater return on sold commission versus leasing commission.

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    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    10y

    If you are in a owners leasing market and know how to properly screen then you might do it yourself. Watch out for language that says you keep owing broker lease fee money if a lease is renewed down the road.

    In commercial on retail strip centers for my clients we are looking for any leftover leasing commissions, rent credits, lease extension fees, and remaining TI credits owed. If this stuff exists we make the seller pay for it before closing or give us the credits to clear it out.

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    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    10y

    Geeze.....you guys want this make this much more complicated, and more devious, than it is. You don't have to use an agent, or you can. An agent working with a renter is typically paid 1/2 mo. (or 5% of first year rents)rent, which is one half of the commission that a landlord listing their rental pays an agent, 1mo.s rent (or 10% of one years rents). This agent has a renter, is showing them properties that are listed and simply wants to know if you'd like him to show yours, if you're willing to pay the fee (1/2). And no, agents aren't managing your property, so payment of the commission isn't monthly as you receive, or dependent on you collecting. This is the same as a buyer's agent dealing with a FSBO for their client.

    0Reply
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