Sticker shock, broker fees and other obstacles that give international renters in NYC a rude awakening
The most astonishing aspects of the New York City real estate scene to international renters are financial.
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More than a few industries call New York City a major hub for business. Major financial institutions, publishers, designers, as well as developers of content, real estate, and the latest software all have their headquarters here. Which means that thousands of people, from students to seasoned professionals, come to New York to work—and live. New York City real estate is confounding enough for U.S. citizens; for people not from here, encountering its pricey and peculiar ways can be quite the rude awakening.
Adam Franklin, an agent at Citi Habitats, who hails from Australia, tries to prepare his clients in advance for what they will experience here in NYC.
“Space and light are the two main things everyone comments on when I show them the first apartment.” (The lack of them, of course.) “It generally takes them a day or two to understand. They always think the first and second apartments I show them are anomalies.”
Another adjustment? What qualifies as 'acceptable condition' in New York City. “Some landlords don’t keep up their buildings as well as others,” says Franklin. “[Clients] will ask, ‘This is going to be all cleaned up when I move in, right?’ and I have to explain, 'No, no. This is it.’”
Aleksandra Scepanovic, managing director of Ideal Properties Group, moved to New York from Eastern Europe almost 20 years ago. She was surprised by the prices, and the at-times slippery vocabulary of the NYC real estate business. Her clients respond the same way today. (She recalls going to see a no-fee, “one bedroom” apartment in the East Village renting for $1,750 in 1999 that was in fact, a room with two closets on either end that had been converted to a bathroom and a kitchenette.)
Her international clients are also surprised by the premium prices that old New York housing stock, such as prewar townhouses and brownstones, command. “If you move into a townhouse on the Upper West Side, you don’t have a live-in super, or a gym. The location is the amenity,” she says. (Some also tend to expect, a washer/dryer and sometimes even a dishwasher. No can do, at least not always.)
It’s likely not a surprise, though, that the most astonishing aspects of the New York City real estate scene to international renters, are financial, starting with the asking price and paying a broker’s fee—the later of which is often paid by landlords in places outside the U.S.
“Working with many foreign nationals trying the New York lifestyle for the first time has revealed the two main surprises they encounter—sticker shock and brokerage fees. Some clients believe they can negotiate the rent by as much as 50 percent, as in their experience, asking prices are just a general starting point. Or, they are more than happy to pay top dollar for the stunning rental, but the brokerage fee, not so much,” says Dolly Hertz, a broker with Engel & Voelkers NYC. “I am always clear with rental clients at the first meeting, that in NYC, rental fees are tenant-paid.”
The requirements for renting an apartment, including having an income 40 to 50 times the monthly rent, and a credit history in the U.S., also come as a shock to international renters. (Many don’t even understand the concept of a credit history.)
“The biggest surprise for international renters is the difficulty of getting an apartment, be it foreign-employed persons relocating to NYC, international students, and foreign persons with significant cash assets or marketable securities,” says Jeffrey L. Geller, vice chairman and chief operating officer of Insurent, an institutional guarantor of residential leases, which easily and quickly assists all three types of international renters by allowing them to qualify at any of the more than Insurent participating buildings (and a Brick Underground sponsor).
The Insurent Guaranty fee for international students is 98.4 percent of one months for the 12-14 month lease with guaranty fees for foreign employed persons and foreign persons with significant cash assets/marketable securities approximating 95 percent to 110 percent of one month for the 12-14 month lease. Prequalification occurs within 30 minutes and the guaranty is normally issued within 24 hours.
Of course, there are ways around some of these requirements if you can find a landlord or management company that’s amenable, but those methods aren’t cheap either.
“The biggest shock for expats is that oftentimes they will have to pay the year upfront in order to secure an apartment,” says Rachel Bakhchi, an agent at Siderow Residential Group. “Between the restrictions, the costs, and also the broker fees, most Europeans are often surprised and turned off by the application process.” And that, of course, is not surprising.
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