While a comparison of Craigslist listings over (rather than point in) time would be more compelling, a plugged-in reader with a rental unit in soma echos The Bay Citizen’s report that brokers seem to be gaining share in San Francisco’s rental market.

“The trend has gone to broker representation,” said a local real estate firm associate who analyzes the San Francisco rental market on a weekly basis but was not authorized to speak publicly. Interviews with several other brokers and real estate experts confirmed the shift. In a slow home sales market, managing apartment rentals has provided agents with an expanded revenue stream — and they forge relationships with prospective home buyers.

But with broker fees typically 6 percent of a year’s rent, why would property owners start paying middlemen? After all, San Francisco is one of the most expensive rental markets in the nation, and demand for housing is considered steady.

Experts say the shift has to do with new buildings, the recession and the city’s pro-tenant environment.

We’ll say it’s a function of more single-unit landlords without economies of scale or experience in a down market. Or as another reader notes, perhaps brokers are simply more likely to spam post multiple ads on Craigslist.
Brokers’ Entrance Into Market Bodes Ill for Renters [SocketSite]

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Comments from “Plugged-In” Readers

  1. Posted by stucco-sux

    It is largely a factor of two things: 1) out of town ownership of many more condo’s and small apartment buildings. 2) an impossibly treacherous and complex compliance challenge keeping up with the ever expanding scope and complexity of rental laws in this town. Its no longer a simple game of renting an apartment, as the rules for how a lease can passively pass from an original renter to subleased tenants, family members and roommates, etc.

  2. Posted by scurvy

    The term you’re looking for is “accidental landlord.”

  3. Posted by A.T.

    There have always been rental brokers in SF, and the landlord pays the fee, so who cares? That’s not going to change, particularly in a slow market like today, but it likely will never change in SF — rental brokers are steadily losing market share even in Manhattan as free alternatives like craigslist enable landlords to connect directly with prospective tenants and cut out the middleman. 3 of the 4 places I rented in SF before I bought were through agencies. It is probably true that with more accidental landlords out there these days, many turn to brokers to handle their rental.
    The Bay Citizen’s methodology, counting craigslist ads for one day, is worthless. Lots of “brokers” simply repeat ads — at no cost — in the hopes of claiming a sort of “finder’s fee” from the owner. And the anonymous real estate agent they quote (there is some fine journalism for you — couldn’t find someone to quote on the record?) as saying, “The trend has gone to broker representation” — take that with a massive grain of salt as it comes from someone trying hard to convince the public of his point so he can skim additional commissions off the process.

  4. Posted by J

    Recessions are not a good time to be a middleman.
    I wouldn’t even choose to use a broker to buy or sell a house, much less rent one.
    Accidental Landlords indeed.

  5. Posted by hangemhi

    AT I’ll agree that you’ve got to take this with a massive grain of salt since there really isn’t any investiation going on in this investigative journalism. That said, I’ve been monitoring rentals lately and it does seem like an unusual number of brokers. And frankly, it seems like a really simple explanation to me – in the past one craigslist ad got 30 prospective renters throwing money at your and bringing their credit reports without being asked. Today some rentals are being listed for months at a time. So an easy task isn’t so easy any more.
    That said – as in sales of homes – if they just lower the rent they can have 30 people show up in a day – but owners try hiring someone to get the old rent even at the cost of 6%.
    And related to all the arguments over sales commissions – it’s far easier to negotiate commissions in a hot market when anything sells in a day. Rentals don’t negotiate – they just don’t use Brokers nearly as much in a hot rental market

  6. Posted by A.T.

    hangemhi, that makes sense. The rental market is pretty tough, and turning to brokers to try to feed a tenant your way, hopefully a higher-paying tenant, would make good business sense. I have a friend with three rentals (3- and 4-unit buildings) and they’ve had two of their 10 units vacant for a year now. They know they could rent them in a day if they lowered the rent to market, but they don’t want to be stuck with rent-controlled tenants at the lower basis, perhaps for decades. I don’t think they’ve tried using brokers to bring someone in, but paying a one-time commission seems to make more sense than giving up a year’s rent. Not sure if brokers can get blood from a stone, however.

  7. Posted by R

    I looked into using a broker when trying to rent our unit.. But she very honestly said that over 90% of all listings were through Craigslist. The only thing she brought to the table was the ability to show the apartment and negotiate and whatnot.. All for 6%. She basically told me not to hire her. So I didn’t. And rented our unit through CL quickly and easily. And have great tenants.

  8. Posted by wh

    I’ve been a single-unit landlord in SF for the past three years and paid a broker 6% to get my unit leased. I got a good rent, had no downtime, and they showed the unit. They will get more people viewing the unit and are simply put, better salesmen. That said, I have been on the apartment hunt for the last month and now believe that I could have avoided paying the 6% by 1. Lowering the rent $100, and 2. Holding open houses vs. setting up individual appointments. I can’t stress point 2 enough. It is a major pain in the butt for the landlord to do individual appointments and when prospective renters see that there are multiple people at the open house it creates a competitive, herd mentality. That said, I may still be too lazy to rent my unit and the 6% may be worth the time saved.

  9. Posted by Alexei

    The fear landlords have over avoiding being stuck with a rent-controlled tenant over decades got me thinking– some enterprising insurance company should offer rent-control insurance for landlords, which pays out the rent increases that would have happened, based on historical percentage increase in the area, if the tenant remains more than, say, 15 years.

  10. Posted by Rillion

    Time to bring back Rentech but for landlords now?

  11. Posted by EH

    If Craigslist is the barometer here, I think there’s a stronger case that small landlords are well sorted with tenants and large landlords and management companies have a lot of excess inventory, which they spam all over Craigslist in the form of overdesigned and overposted (and routinely flagged) ads.

  12. Posted by a

    Can anyone recommend a good broker? I have a nice one bedroom in Mission Bay that may need to be rented out at some point. Thanks.

  13. Posted by hangemhi

    how about not recommending two – combs who spends 90% of his ads talking about himself and offers next to no info on the apartment. and Paul H who posts on here all the time and does the same thing but with MASSIVE images that are bigger than most computer screens.
    “wh” gave good advice – i’d add that you should use the 4 images craigslist lets you use, you should include the address so renters know which building they are looking at, and then be as specific as possible. one reason to include the address too is if someone is searching via padmapper – it won’t show up if you don’t use the craigslist address area properly.

  14. Posted by J

    does the same thing but with MASSIVE images that are bigger than most computer screens.
    Even worse, most of them are of himself!
    i’d add that you should use the 4 images craigslist lets you use, you should include the address so renters know which building they are looking at, and then be as specific as possible
    Yeah, 4 mini photos are the BARE MINIMUM! You should really upload better photos to photobucket and link those in with html tags.

  15. Posted by EH

    i’d add that you should use the 4 images craigslist lets you use, you should include the address so renters know which building they are looking at, and then be as specific as possible.
    I volunteer with Craigslist to help people with flagged off ads, and this is good advice: just write a normal ad. So many brokers conduct themselves as obviously-failed RE agents. Big wonder, looking at their output.
    Congenital assclowns like Combs and PaulH likely just repost all day long without concerning themselves in the least why their ads might be getting flagged off. As long as they don’t suffer any repercussions for abusing the site, they won’t change. They’ll probably tell you that everybody else does it.

  16. Posted by Denis

    I’ve used brokers off and on… When I first moved to the city (pre-craigslist), scheduling appointments was a nightmare and the quality of rental stock here is so poor that it was a constant challenge to find something decent. In the end, I contracted through a now defunct brokerage firm who could drive me around and show me multiple listings back to back. As a former landlord, I grew so sick of meeting people through craigslist (90% of whom were late, didn’t show, or backed out at the last minute) that I just called one of the better known agencies who literally brought me the perfect tenants the next day (20ish, single women). So, I can understand the appeal of using agents. If I were looking for an apartment though, ideally I would circumvent agents, but they definitely serve a purpose.

  17. Posted by Bob

    The writer of the Bay Citizen report has a blog that explains what led him to do the story and how he constructed his investigation.
    It sounds like several brokers broke the rules of Craigslist and hounded him when he posted an ad for a rental, and this got his attention. One thing led to another, yada, yada, yada…
    http://www.baycitizen.org/blogs/staff/brokers-taking-over-sfs-apartment-1/

  18. Posted by Scooter

    I have been looking regularly at apartments on the north side of town for the last year, but not actually renting anything while I figure out where my next job will be. I have a saved Craig’s List search for Pacific Heights, Cow Hollow, Russian Hill, and NB/TH, for 2beds between $3500-$5200.
    Within those search parameters, probably half the listings are broker-listed. But, what is interesting is about 95% of the *appealing* listings are through brokers. By appealing, I mean well written lists of amenities, good use of photos, updated apartments etc. They do tend to be more expensive, but of all the ones I’ve looked at, the brokers have also been the easiest to deal with, both with scheduling viewings, realistic discussions of strengths/weaknesses of a particular property and openness about the level of offer the landlord would be willing to take (and it’s a LOT lower than $100 below listed rent). The negotiation room may be because in that price range it’s pretty much all condos, so there is no rent control fear, but I have yet to look at a place that has ultimately rented for more than 85% of the asking price.
    The ‘worst’ offenders, from a posting frequency/overpriced crap standpoint in those neighborhoods are J. Wavro and Mazal55, though Mazal seems to have no inventory any more (he was horrible about a year ago).
    I am intrigued at the actual statistics are over time, though. I’m going to start a spreadsheet and I’ll report back in a few weeks with the real split on the north side of town.

  19. Posted by A.T.

    Thanks for the post, Bob. What this guy’s blog confirms is that he is a lousy journalist! A ton of desperate brokers respond to his craigslist ad, and even more flood craigslist with ads. So he “confirms” his story by looking only at craigslist! The only real story here is that craigslist has been taken over by broker spam and craigslist is not doing anything about it.

  20. Posted by Paul Hwang

    Don’t hate me, because I’m beautiful.

  21. Posted by Paul Hwang

    hangemhi / J,
    Thank you for the feedback. I must point out a few errors in your post:
    1) We do try to post as much information as possible in the ad including several photos and a floorplan. [Removed by Editor]
    2) We post large high quality images so that the viewers can see what the unit looks like.
    3) For clients who we have represented in a transaction (buy / sell) we normally do not charge a tenant procurement fee.
    4) I am unaware of what an “assclown” is, but must admit I haven’t been to the circus in quite a long time.
    5) It is unfortunate that I must appear in the ad, there are much better things to look at.
    I know how you feel regarding the spamming of craigslist. Many of my clients have felt the same way. They’ve found that in the end it was worth it once they’ve gotten a nice place to live in or had there place rented out for a fair price.

  22. Posted by nanon

    Ask price vs actual– Curious now that most of craigslist and apartment listings are dominated by a handful of brokers. A few people kind of “control” the appearance of the market with the ask prices. Does anyone have any anecdotes or way of looking at how much places are actually renting for? I’ve definitely seen places listed for months and I only have a couple of data points from friends about how much room there is, so I’m curious if the ask prices are generally met or are x% under or over.
    This is also somewhat relevant in looking at rent vs buy if one were just to pull listings of ask prices from cl.

  23. Posted by mikey woodz

    Classic day on SS, when someones gets called an assclown! and the funnier part is he responds by saying he doesnt know what it means!

  24. Posted by anon

    craigslist has been taken over by broker spam and craigslist is not doing anything about it.

    Craigslist has been taken over by all sorts of crap spam from all walks of life and professions. It sucks now.

  25. Posted by Sid

    I’ll speak to my recent experience. I am a broker but have not been doing rentals professionally. I manage 10 family owned units and have also helped friends and freinds of friends. Recently rented out 2 units. One in Laurel Heights, very nice new 2/2 for 3950. Had 2 applicants and rented the place in 2 weeks for 100% of asking rent. Other one was a Lone Mountain / USF studio. One week, 3 applicants. 100% of asking rent, $1075 (place was 280 sq ft). I think like in anything else, location and condition of the unit is vitally important. With SF being what it is, professionalism, honesty and marketing skill (at the showing) also play a large role. I have also helped friends look for places and it is amazing at the type of landlords (and tenants) out there. Clueless and rude are too often descriptive words for the above.

  26. Posted by Paul Hwang

    Hey Sid,
    You forgot, plain crazy and very nice also.
    Really property management is about dealing with complaints (mostly valid, sometimes not) and how you deal with them.

  27. Posted by FormerAptBroker

    There are a lot of “rental brokers” in SF but a huge number of the ads are just posted by “property managers” (who by law in CA need to be “real estate brokers”).
    The “property managers” usually charge a percentage of the rent collected and don’t charge an extra fee to rent the unit. As a kid that grew up in the Bay Area I am seeing more and more rental buildings turned over to professional managers since the kids my age (47) that are taking over the management of a lot of SF buildings and their parents get older (or die) don’t want to deal with renting apartments like their parents and grandparents did…

  28. Posted by EH

    There are a lot of “rental brokers” in SF but a huge number of the ads are just posted by “property managers” (who by law in CA need to be “real estate brokers”).
    So in other words they’re incompetent RE agents looking for income in a down market. I don’t think it’s a coincidence that the overrun is happening now vs. 5 years ago.

  29. Posted by Live Smart

    The bottom line with real estate agents/property managment companies renting out apartments is that the rents will only increase, not decrease. Everyone in the food chain will want a cut of the action so the more middlemen you have, the pricier the end product.

  30. Posted by J

    the more middlemen you have, the pricier the end product.
    Hah! Then Amway is not such a bad business model afterwards…
    Once again, I must point out that the demand part of supply and demand matters

  31. Posted by A.T.

    ^ Yeah, this is a common misunderstanding. The cost of the rental unit is sunk. As for the rent it will fetch, it makes no difference what the marketing (or “middleman”) costs are. If a landlord could jack up the rent by adding middlemen who each take a cut, he/she would also simply jack up the rent in the absence of those added middlemen. The rent is determined by what the market will pay (the “demand”) not by the cost. However, in the long run (the very long run when housing is concerned) an inability to recoup costs will drive rational landlords out of the market.

  32. Posted by EBGuy

    I wonder if Joe Montana used a broker to lease his two bedroom at the Millenium. It appears he does property development (entitling/rezoning) so maybe he knows a thing or two about the buy versus rent decision…

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