Real Estate Agents Grab for Rental Listings as Sales Stagnate

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I've lived in three apartments in San Francisco over the past decade. For each one, my landlord has always been a "mom and pop" team, an older married couple who bought the house or building as income property or kept it after they moved elsewhere, and decided to handle the renting and tenant management duties themselves. Now brokers and agents have taken control of much of the city's apartment rental market, and the same thing is happening in many American cities since home sales have slowed down.

I've had a good relationship with all of my landlords -- one woke up at 2 a.m. after my frantic call and rushed over to fix a gushing sink pipe; another stopped by with homemade chicken soup when I had the flu. But that type of renter-landlord relationship is quickly becoming a thing of the past.
It's a new turn for a city known for rent control protection and strong tenants' rights. And it's a concept that could be more expensive and less friendly to renters. Bay Citizen real estate columnist Scott James looked at Craigslist on June 19 and saw that of the 591 housing rental listings in San Francisco, 315 of them, or 53 percent, were clearly identified as represented by brokers or agents. Brokers had a virtual lock on some neighborhoods -- they controlled 72 percent of listings in North Beach and 82 percent in the South of Market area. Both areas are popular for young people who want to live near their downtown jobs, and both have far more apartments than houses. James interviewed other brokers and real estate experts in the area who all confirmed the shift to broker representation.

In New York City, this is nothing new. Brokers have had a lock on the tight rental market there for decades, and it's not unusual for them to charge renters hefty fees of 6 to 15 percent of an entire year's rent. San Francisco landlords still pay the brokers their fees, and leasing agents here are not as powerful as in NYC, but that probably will change, and renters will have to adjust.

So is this just the way things work in two cities noted for their high rents, or will the trend spread nationwide? When I called Gail S. Phillips, executive director of the National Association of Residential Property Managers, she said that I was the second journalist that day to call with that question. She had just gotten a story request from the Chicago Tribune, asking why the rise in property management in that city. "We are seeing a shift in more metropolitan areas," Phillips told me. "It could be the economy. With properties not selling, people want to rent them but don't want to shoulder all the management tasks."

Agents are also affected by a slow home-sales market: Looking to make up lost revenue, they're getting into managing apartment rentals. The fringe benefit: Making relationships with prospective homebuyers. In bigger cities, the new housing being built is condos and apartments, and the owners are not mom-and-pop landlords but corporations and business investors who outsource the management duties.

But are those duties really worth paying 6 percent-and-up in fees? Tony Drost, a property manager in Boise, Idaho, says yes. "Being a landlord has gotten a lot more complicated," he told me. "Too many have gotten burned by smiling tenants holding cash, and they look at a professional property manager to protect them."

He says property managers are better able to run background checks and screen for suitable tenants, know fair housing laws and how to follow them, advertise the property in all the right venues, and they actually save the owners time and money by taking the load off their shoulders. And as incoming president of the National Association of Residential Property Managers, Drost says property owners are replying on professional managers more than ever.

What does that mean for you renters? Possibly higher rents (landlords have to come up with the money to pay management fees somewhere) and likely a higher risk of having to defend your rights as a tenant. Ted Gullickson, director of the San Francisco Tenants Union, says property managers are more aggressive at enforcing lease provisions. When it comes to long-term tenants in rent-controlled apartments, they're actively searching for lease violations. He tells me that a third of the complaints he gets are from renters dealing with property management companies.

If the apartment you want is managed by an agent or broker, Gullickson recommends that you have a second pair of eyes (preferably a real estate attorney's pair) look over the contract. "It's not uncommon these days for tenants to receive 25- to 30-page rental agreements," he says. "In general, it favors the lease -- favors the landlord. And some agreements are full of stuff that's not enforceable, but it's put in there anyway in the hopes that the tenant might believe it is. So it's very important to understand the agreement."

On the upside, you can still negotiate with a property manager before you sign, and get some concessions. "Property management has spawned a printing industry of rental agreements, and it may not have been personally drafted up, so there may be 'no this' or 'no that' clauses that the owner doesn't care about," Gullickson says. "So if there's a 'no pets' clause and you have one or want one, ask how flexible it is. Can you get a cat in the future? Do fish count? What about a small dog?" Also try bargaining on amenities. A building manager might give you a free health club membership, new carpeting, fresh paint and wallpaper, if you simply ask about them.

While professionally run buildings may be less willing to negotiate discounts on the monthly rent, there are some rent-reducing options you can ask about to save money. If you want to stay put for a few years, try negotiating a longer lease term for two or three years. You might not get a lower rent price, but you could save money by locking in at your current rate.

At smaller apartment complexes or a stand-alone rental, offer to perform routine maintenance work, like mowing the lawn, vaccuming the hallways, or tending the building exteriors, in exchange for a price cut.
Think of things you can do that saves the landlord time, money and headaches. You probably won't get chicken soup when you're sick, but as long as you have a lease that protects you from eviction and extra fees, that's saying something as corporate middlemen take over as landlords from Mom and Pop.


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