Residential real estate brokerage compensation

8 Replies | Houston, Texas

I want to rent my property and this broker wants to charge me 100% of one months rent and a 4% fee of all rents paid under the lease of the property. This is not a real estate management company, just a brokerage. So I'll have to get someone else to manage the day to day operations of the property. I just wanted to know if both of these broker fees are usual?

@Karl Anthony kick this bird to curb!  They're wanting to charge you a 1-month tenant placement fee (normal) AND a 4% ongoing fee FOR NO MANAGEMENT.  That's not okay and that's not a commensurate structure in light of the fact that they don't manage properties . . .

. . . In my opinion :) 

@Karl Anthony The one months rent fee is a standard fee unless you negotiate something directly with the brokerage. Now the additional 4% fee is a very unusual fee and in my opinion unnecessary, ESPECIALLY if they arent even managing it. I am sure you can find other brokerages that will market your property just as well without the additional fee. Best of luck!  

@Karl Anthony

RUN!!! This sounds like a broker who wants to take advantage of you if all he is doing is getting the property rented. Standard is one month's rent so your agent and the tenant's agent split. However, have you considered using Zillow. We have had great success and Zillow exposure is just as good as if agent listed on MLS.

Best of luck 

One month compensation is normal, the 4% off the top not so much unless they are a Property Management company, which typically charge 5-10% of gross monthly. If all they are doing is placement/finding a tenant then pass. Worst case just use Zillow and list the rental.

Sounds like a commerical type of broker.

Find a residential broker/agent and max you'll pay is one month of rent.

Be sure to do your own applicant screening though!

We've never understood why owners would allow an agent to screen/place a prospective tenant!

What accountability do agents have on a prospect they approve?

Who manages an agent approved/placed tenant if they are needy?

Who has to chase an agent approved/placed tenant for nonpayment of rent?

Who has to manage the eviction process if an agent approved/placed tenant doesn't pay?

We've seen too many crappy tenants approved/placed by agents that have little to no experience on screening prospective tenants.

Also, most agents will use a lease provided by their real estate board. It’s decent and meets all the state & local statutes but, is usually just barely adequate. You should control the lease, so it should be a lease of your choosing.

Recommend reading our series about “How to Screen Applicants like a Pro”:

https://www.biggerpockets.com/member-blogs/3094/93296-how-to-screen-applicants-like-a-pro-part-1-verifying-credit-reports