Residential real estate brokers in New York City have been experiencing reductions in their incomes as landlords pay OP commissions and as rental levels decrease. Many rental home brokers also lower their own commission rates when representing landlords who do not pay OP commissions to be able to attract buyers and tenants.
OP, which means owner-paid, is a term that has evolved in the rental real estate market generally due to the economic downturn. As the number of jobless individuals increased in New York, the number of prospective of tenants decreased. Landlords who want to attract more tenants then offered to pay OPs to real estate brokers as added incentives to tenants.
According to Uptown Partners’ co-founder Lewis Futterman, tenants are attracted to OP properties because they would save at least one month’s rent. But if OPs are good to tenants, OPs are not always good for the real estate brokers. Because of the bad times, landlords do not pay the standard commission rate of 15 percent.
Marc Lewis, head of Century 21 New York Metro, says that most landlords do not use commission rate to pay real estate brokers. They just pay the one-month rent equivalent, which is only about eight percent of the 12-month rent. As the residential market is slowed down by the foreclosure crisis, real estate brokers have no choice but to accept what the landlords can offer.
Whether residential real estate brokers are compensated by commission rates or by the monthly rental, their incomes have significantly dropped. The foreclosure-laden housing market has decreased rental rates in the city. Based on Real Estate Group New York’s data, the average rent for all types of apartments has declined. An apartment renting at nearly $3,000 in December 2007 has become available at $2,728. A studio renting at $2,748 in December 2007 is being offered at $2,495.
Another thing differentiating broker incomes is the higher commission rate offered by developers to buyers’ real estate brokers. While they add perks to the already higher commission rate for buyer’s brokers, they do not offer anything extra to rental brokers.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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