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How Do Realtors Get Paid For Rentals?

How Do Realtors Get Paid For Rentals? | Today I'm Home
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Last updated by

David Bolton

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January 29, 2021

Simply put, there is no universally accepted norm for how a realtor gets paid for rentals.

Different payment methods are normal in each local area. The amount/percentage paid by the tenant and landlord to the realtor and brokerage is based on the local competitive rate and real estate climate.

For example, the realtors in large cities like New York City and Los Angeles are paid much differently than in small towns around the country.

Realtors can get paid anywhere from 5% to 15% of the yearly rental rate, or a quarter, half, or whole month’s rent.

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How Does A Realtor Decide What To Charge For Rentals?

Percentage of the lease

Sometimes commission is determined by a percentage of the yearly lease amount.

If the agent charges 10% of the yearly lease, and the monthly rent is $2,800 making the yearly total $33,600, the agent will make a $3,360 commission.

The commission may be split between both the listing agent and the tenant’s agent. This would make the above scenario’s commission $1,680.

One Month’s Rent

Another common way agents decide how much to charge for commission is by simply charging a single month’s worth of rent. This requires less math than the above scenario.

The real estate agent would get the first month’s rent price because they found the tenant.

The brokerage would deduct the commission from the first month’s rent and pay the landlord other fees like the security deposit.

Buyer Pays A Fee

The norm in some cities is that the tenant will pay the realtor a percentage of the first month’s rent.

For example, in San Francisco, it is common for the fee to be half of the first month’s rent paid to the real estate agent upon signing the lease.

Who Pays The Realtor Fees For Rental Properties

It is very much dependent on which there is more of - renters searching for the perfect unit or landlords waiting for tenants.

More renters means that they pay the realtor fees, more landlords means that they pay the fees. If it is just about even, landlords and tenants may split the realtor fees evenly.

What Services Are Included In A Realtor’s Rental Commission?

The real estate agent is responsible for many of the behind the scene and visible tasks necessary to find the perfect unit and get a lease signed.

These services include:

  • Providing the client with realistic market rental rates
  • Researching available units that fall within the clients budget, wants, and needs
  • Scheduling showings with landlords
  • Attending the showings with their clients/potential tenants
  • Assisting the client with paperwork like applications and deposit checks
  • Confirming the clients credit scores, sources of income, and references
  • Negotiating rent amounts and/or rent terms
  • Write all lease documents and get them signed
  • Collect funds
  • Give the new tenant the keys on move-in day!

Do Realtors Get Paid A Lot For Rentals?

In big densely populated cities, real estate agents can make a significant amount of money from closing rental deals.

In cities like New York, Ontario, and Sydney rental properties are truly a hot commodity.

Renters will practically have to work with a realtor to find a suitable unit that they are happy with.

In smaller cities with more open rental units than renters searching, realtors will not make as much. Most real estate agents do not make their living dealing with rental properties.

They may still take the jobs so that once that renter decides that it is time to buy a property, they remember their positive experience with that realtor and become a repeat client.

These personal connections and relationships are important to realtors and their business.

In fact, building a network of connections and great relationships is so important to realtors, they will gladly find renters a unit at little or no cost.  

Sometimes, a realtor will charge around $200 dollars to find a renter. At the end of the process, that will cover the gas it took to drive around to the locations and a couple of hours or their time, if that.

Do Realtors Find Rental Properties For Free?

Some real estate agents recognize the advantage of working with tenants and will happily do the work for free.

In return, the agent hopes for a future return client when they are looking to buy a home or word of mouth referrals.

Again, this almost certainly only applies to real estate agents working in markets with more units than buyers.

How Can Renters Avoid Realtor Fees?

Oftentimes, if the real estate market has more available rental units than renters searching for a home, the landlord will be the one paying the realtor in exchange for finding the tenant.

However, tenets should always confirm that they will be charged nothing for the realtor’s service.

Openly communicate with potential realtors during your realtor hunt that you are not looking to pay commission.

In these kinds of lease transactions, after signing the agreement allowing the agent to represent the tenant, the realtor and tenant work together to find a property that checks off as many boxes on the tenants wants and needs list as possible.

The realtor will help guide the tenant around any pitfalls along the way and breeze through the application process and screening process.

The realtor will ensure that any units they show you will have a landlord willing to pay the realtor’s commission fees.

Do Renters Benefit From Hiring Realtors?

When Renters May Benefit from Hiring Realtors

Reasons a renter can benefit from hiring a real estate agent may include:

  • When a renter has a specific requirement (fit into budget, be located in a certain neighborhood/area, etc).
  • When a renter has a tight time frame.
  • When a renter is dealing with a renting market over-saturated with renters and not enough or not many high-quality sites.

In big cities, the vacancy rate can be near zero and the best units go fast- within days or hours.

Realtors would have the know-how to navigate through the tumultuous conditions to get the renter a unit that pleases them.

Sometimes relocating can be a good reason to use a realtor to find a space to rent, they will know more about the area and market than the future renter would. The realtor would also know about local laws. They would be able to tell renters when security deposits and evictions are illegal.

A good realtor also has connections and expertise, so they are more likely to know about unlisted properties and would be able to negotiate.

So, yes, there are many situations in which realtors can help renters! Given these factors, the fee paid to the realtor is worth the investment.

When Renters May Not Benefit from Hiring Realtors

If there are many units available for rent in an area, a renter might be better off putting in the time to research rental units online.

They can compare prices, amenities, locations, and deals themselves on sites like Zillow, HAR, Trulia, Rent, and other sites.

Landlords who have no problem getting applicants that want to rent their properties have no interest in paying realtor fees if they have other applicants without those fees.

The landlord also will not want to negotiate the rent price. In this case, they have to pay the realtor, or the realtor is doing this work for free!

How Can Tenants Find A Real Estate Agent That Deals With Rentals?

Using sites like realtor.com is a great place to start searching for realtors who serve the area you wish to find a unit in or near.

You can read their profile bio or call them and ask if they are interested in helping to find a rental property.

Tenants can also ask their network of family, friends, and coworkers to recommend them to a realtor that has earned their glowing reviews.

In either scenario, if the realtor you come in contact with does not handle rental properties, they are likely to know of a colleague who does!

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Sometimes life happens, and you need to get out of your house and mortgage payment quickly. Our partners have helped many families going through foreclosure, divorce, and more.

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How Do Realtors Get Paid For Rentals?

About THE AUTHOR

David Bolton

Hi! My name is David. The Today I'm Home team have spent years with home related projects and researching new ideas. Now we're bringing our knowledge to you, and continuing to share what we've learned as we continue to grow. Let us know if you've got any tips and tricks that would be great to share with the community!

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