5 ms·

Airbnb could disrupt the broker business model

34 points by acmeyer9 11y ago

spikels 11y ago
Rented in 7 cities on 2 continents - never used a broker. I know they exist but are they that common. Don't people mostly uses Craiglist along with a few other online resources? Don't disagree the process could be greatly improved...
- acmeyer9 11y ago
  What cities? In most I have lived in, brokers dominate (NYC, Boston, Washington, DC). Even going onto something like Craigslist, most posts there are just brokers posting. Maybe it's less prevalent than I have experienced in other cities?
- pavel_lishin 11y ago
  In New York, 95% of those Craigslist ads are coming from the brokers themselves. 75% of the apartments pictured in the post, you'll never even see - I can't even begin to guess how many ever existed in the first place.
- long 11y ago
  Apparently in London it is very common to use an agent; people said that Craigslist was not really used. Maybe agents are more common in Europe? Which continents did you rent on?
  - TillE 11y ago
    In Germany it's quite rare to find middlemen between a renter and whoever owns the building/apartment. The exceptions would be for luxury apartments and short-term rentals.
- nemo44x 11y ago
  It depends on where you live. In NYC it is hard to find a place without a broker in many neighborhoods. I found an apartment on Craigslist a few years ago and was surprised I was able to get it. Often, Craigslist is full of broker spam disguised as a landlord listing an apartment or the apartment is simply taken up by someone right away. The other option is to find a building managed by a larger company. They almost always have "0 fee rentals". However, they often cost more too since they tend to have many facilities. Honestly, many landlords like the broker system because brokers weed out bad renters by referencing their credit and arranging all the paper work and the landlord doesn't really have to do anything. The tenant pays all the fees and as this article pointed out, the landlord may in fact receive kickbacks. At least in the NYC area, I don't expect brokers to go away any time soon. NYC is a beast upon itself in the housing world for renting and buying. I would love to see brokers go away, however. I have a suspicion they largely drive up rent prices as they can create an artificially small market and because they rely on inefficient methods, tenants are really only able to visit a small subset of places and brokers can get them to bid against each other. This creates an artificially small market that is largely in the landlords favor. They also will usually not show you places unless you are ready to move in by the end of the month which creates time pressure and panic in renters which, as you guessed, artificially drives up rent.
pavel_lishin 11y ago
> No matter where you live in the US it seems that if you are looking for a new place to live, you have to go through a broker. I lived in Dallas and Austin for many years, and have never even heard of a broker being used to rent a personal apartment. On the flip side, we've had about a 50/50 experience of needing brokers in New York in the past six years.
- acmeyer9 11y ago
  Interesting, yea I've lived in both Boston and NYC and it was almost impossible to find a place without a broker.
- santaclaus 11y ago
  NYC is the only city I've lived in where I went through a broker. Cities where I haven't needed a broker: San Jose, Denver, and Portland, among others.
- mooreds 11y ago
  Yeah. I'm in the Denver/Boulder market, and have never heard of anyone needing a broker (had a friend use one once, but she didn't get a ton of value out of it). In fact, a company I used to work with tried to do a broker model (concierge renting) and it never went anywhere. SF/NYC/other coastal cities may be a different world, but rental brokers in my neck of the woods are just not used in my experience.
- hbosch 11y ago
  I want to add my own experience here: I moved to Seattle from NYC, and to NYC from Savannah, GA. In Savannah, finding an apartment was as easy as driving by a house and checking it out. Craigslist was the de facto method, though. Never any misrepresentation, or other real estate trickery going on. As a student of the local private art & design school, my enrollment there was as good of credit as I ever needed. Often a jobless student could walk into an apartment with the landlord and sign the paper right there, without any background checks or financial statements. I thought this was reality. In NYC the fact that brokers required bank statements, tax returns, credit check, background check, pay stubs, plus all of that and more from a co-signer (if needed) was downright disrespectful and degrading. Not to mention paying a broker 2 months worth of rent meant they never tried to get you a deal. Don't even think of using Craigslist in NYC. Now I live in an apartment in Seattle. It's on the west side of Queen Anne hill, with a view of Elliot Bay. We found it on Craigslist. The price was so good we knew it was a scam and almost wrote it off entirely, based on our experience in NYC. Turned out it was exactly as pictured, and even better. We've lived in it for just over 3 years now and have no desire to move. If brokers are the standard way of purchasing in major cities, then that is a real shame. I find them to be pure slime, absolutely the worst people to be dealing with. Anything that disrupts their industry is a good thing.
xfour 11y ago
The reason this is kind-of a terrible idea unless you're AirBNB is the fee structure is setup in a way where a high amount of the transaction would be going to them. https://www.airbnb.com/help/article/104/what-are-guest-service-fees https://www.airbnb.com/help/article/104/what-are-guest-servi... So if my napkin match is correct, we have 3% Booking fee and 6% low end guest service fee, you're looking at a 10% off the top of the transaction which in the end, doesn't really need any middle-man in there. It's common for the first month's rent to be guaranteed via cashier's check or equivalent, then usually you are building a trust relationship yourself. I suppose in cases of short term renting, there isn't time for this trust to be built, so the value-add is the security the service provides. Perhaps that really is worth 10%?
- acmeyer9 11y ago
  I suppose, but I have personally found you can actually get higher rents through Airbnb. This might change as it becomes more popular, more clientele, etc. but we've made more on Airbnb as landlords (including fees) then we did just doing it all ourselves. Don't forget all the marketing, time spent with potential renters, background checks, etc you have to do on your own.
  - acmeyer9 11y ago
    And in the case of renters, they usually have to pay a broker's fee (if used) which is typically 1 month up front. So 8% right there plus if you factor in time value of money could be more.
- pavel_lishin 11y ago
  > you're looking at a 10% off the top of the transaction Brokers in NYC routinely try to charge two months' rent, which is a whopping 16% of the rent. I've had them try to tell me, with a straight face, that it's only 6-10%. They always look surprised when I ask them what two twelfths is. I think that some of them literally don't know what the actual percentage is.
rch 11y ago
It probably won't be AirBnB that does it, but brokers should definitely be contributing to a rainy day fund.
- nemo44x 11y ago
  Probably eventually but as the author notes there is a large pile of bodies where enterprising companies trying to reform the broker model used to stand. It's hard and landlords are mostly not interested in changing a system that has worked in their favor for years with people they have personal relationships with. Brokers have keys to the apartments too. This is not easily disrupted.
empath75 11y ago
I think brokers will just start managing listings on airbnb directly for owners. About half the time I've used airbnb, the person I was dealing with didn't actually own the property, they just managed a bunch of them for people.
- acmeyer9 11y ago
  This has happened but managing a property is different job than being a broker, not quite apples to apples. We'll have to see if it becomes more and more popular to do that if it increases the prices over time.
pinkrooftop 11y ago
Competition in this space is sorely needed in LA. There is westsiderentals.com and they're the only reliable place for rental listings (Craigslist is very miss with a little hit).
pedalpete 11y ago
I too have never heard of a broker in North America for rentals, but having lived in Chile and Australia, brokers run the markets there, and are universally hated for being lazy and not worth the money they take.
- 6t6t6 11y ago
  Don't come to Japan then. Not only they are lazy and not worth the money, but also the tenant has to pay them an extra month of fee every two years, when the contract is renewed. And if that's not enough, in Japan there's no law that regulates the rental contracts so, every time that someone wants to rent a flat, he has sign a bunch of abusive clauses. In any case, being a broker must be a good business because Tokyo is full of them.
reustle 11y ago
I've been using AirBnB to find some of my longer term rentals (1-2 months) while traveling and I'm forced to look elsewhere because of the fees. A $50 fee on a $400/mo place is not small change when you're trying to watch your spending closely. Plus, that extra $50 will get you a slightly nicer place in most areas.

34 points by acmeyer9 11y ago

Rented in 7 cities on 2 continents - never used a broker. I know they exist but are they that common. Don't people mostly uses Craiglist along with a few other online resources? Don't disagree the process could be greatly improved...

acmeyer9 11y ago
What cities? In most I have lived in, brokers dominate (NYC, Boston, Washington, DC). Even going onto something like Craigslist, most posts there are just brokers posting. Maybe it's less prevalent than I have experienced in other cities?
pavel_lishin 11y ago
In New York, 95% of those Craigslist ads are coming from the brokers themselves. 75% of the apartments pictured in the post, you'll never even see - I can't even begin to guess how many ever existed in the first place.
long 11y ago
Apparently in London it is very common to use an agent; people said that Craigslist was not really used. Maybe agents are more common in Europe? Which continents did you rent on?
- TillE 11y ago
  In Germany it's quite rare to find middlemen between a renter and whoever owns the building/apartment. The exceptions would be for luxury apartments and short-term rentals.
nemo44x 11y ago
It depends on where you live. In NYC it is hard to find a place without a broker in many neighborhoods. I found an apartment on Craigslist a few years ago and was surprised I was able to get it. Often, Craigslist is full of broker spam disguised as a landlord listing an apartment or the apartment is simply taken up by someone right away. The other option is to find a building managed by a larger company. They almost always have "0 fee rentals". However, they often cost more too since they tend to have many facilities. Honestly, many landlords like the broker system because brokers weed out bad renters by referencing their credit and arranging all the paper work and the landlord doesn't really have to do anything. The tenant pays all the fees and as this article pointed out, the landlord may in fact receive kickbacks. At least in the NYC area, I don't expect brokers to go away any time soon. NYC is a beast upon itself in the housing world for renting and buying. I would love to see brokers go away, however. I have a suspicion they largely drive up rent prices as they can create an artificially small market and because they rely on inefficient methods, tenants are really only able to visit a small subset of places and brokers can get them to bid against each other. This creates an artificially small market that is largely in the landlords favor. They also will usually not show you places unless you are ready to move in by the end of the month which creates time pressure and panic in renters which, as you guessed, artificially drives up rent.

pavel_lishin 11y ago

> No matter where you live in the US it seems that if you are looking for a new place to live, you have to go through a broker. I lived in Dallas and Austin for many years, and have never even heard of a broker being used to rent a personal apartment. On the flip side, we've had about a 50/50 experience of needing brokers in New York in the past six years.

acmeyer9 11y ago
Interesting, yea I've lived in both Boston and NYC and it was almost impossible to find a place without a broker.
santaclaus 11y ago
NYC is the only city I've lived in where I went through a broker. Cities where I haven't needed a broker: San Jose, Denver, and Portland, among others.
mooreds 11y ago
Yeah. I'm in the Denver/Boulder market, and have never heard of anyone needing a broker (had a friend use one once, but she didn't get a ton of value out of it). In fact, a company I used to work with tried to do a broker model (concierge renting) and it never went anywhere. SF/NYC/other coastal cities may be a different world, but rental brokers in my neck of the woods are just not used in my experience.
hbosch 11y ago
I want to add my own experience here: I moved to Seattle from NYC, and to NYC from Savannah, GA. In Savannah, finding an apartment was as easy as driving by a house and checking it out. Craigslist was the de facto method, though. Never any misrepresentation, or other real estate trickery going on. As a student of the local private art & design school, my enrollment there was as good of credit as I ever needed. Often a jobless student could walk into an apartment with the landlord and sign the paper right there, without any background checks or financial statements. I thought this was reality. In NYC the fact that brokers required bank statements, tax returns, credit check, background check, pay stubs, plus all of that and more from a co-signer (if needed) was downright disrespectful and degrading. Not to mention paying a broker 2 months worth of rent meant they never tried to get you a deal. Don't even think of using Craigslist in NYC. Now I live in an apartment in Seattle. It's on the west side of Queen Anne hill, with a view of Elliot Bay. We found it on Craigslist. The price was so good we knew it was a scam and almost wrote it off entirely, based on our experience in NYC. Turned out it was exactly as pictured, and even better. We've lived in it for just over 3 years now and have no desire to move. If brokers are the standard way of purchasing in major cities, then that is a real shame. I find them to be pure slime, absolutely the worst people to be dealing with. Anything that disrupts their industry is a good thing.

xfour 11y ago

The reason this is kind-of a terrible idea unless you're AirBNB is the fee structure is setup in a way where a high amount of the transaction would be going to them. https://www.airbnb.com/help/article/104/what-are-guest-service-fees https://www.airbnb.com/help/article/104/what-are-guest-servi... So if my napkin match is correct, we have 3% Booking fee and 6% low end guest service fee, you're looking at a 10% off the top of the transaction which in the end, doesn't really need any middle-man in there. It's common for the first month's rent to be guaranteed via cashier's check or equivalent, then usually you are building a trust relationship yourself. I suppose in cases of short term renting, there isn't time for this trust to be built, so the value-add is the security the service provides. Perhaps that really is worth 10%?

acmeyer9 11y ago
I suppose, but I have personally found you can actually get higher rents through Airbnb. This might change as it becomes more popular, more clientele, etc. but we've made more on Airbnb as landlords (including fees) then we did just doing it all ourselves. Don't forget all the marketing, time spent with potential renters, background checks, etc you have to do on your own.
- acmeyer9 11y ago
  And in the case of renters, they usually have to pay a broker's fee (if used) which is typically 1 month up front. So 8% right there plus if you factor in time value of money could be more.
pavel_lishin 11y ago
> you're looking at a 10% off the top of the transaction Brokers in NYC routinely try to charge two months' rent, which is a whopping 16% of the rent. I've had them try to tell me, with a straight face, that it's only 6-10%. They always look surprised when I ask them what two twelfths is. I think that some of them literally don't know what the actual percentage is.

rch 11y ago

It probably won't be AirBnB that does it, but brokers should definitely be contributing to a rainy day fund.

nemo44x 11y ago
Probably eventually but as the author notes there is a large pile of bodies where enterprising companies trying to reform the broker model used to stand. It's hard and landlords are mostly not interested in changing a system that has worked in their favor for years with people they have personal relationships with. Brokers have keys to the apartments too. This is not easily disrupted.

empath75 11y ago

I think brokers will just start managing listings on airbnb directly for owners. About half the time I've used airbnb, the person I was dealing with didn't actually own the property, they just managed a bunch of them for people.

acmeyer9 11y ago
This has happened but managing a property is different job than being a broker, not quite apples to apples. We'll have to see if it becomes more and more popular to do that if it increases the prices over time.

pinkrooftop 11y ago

Competition in this space is sorely needed in LA. There is westsiderentals.com and they're the only reliable place for rental listings (Craigslist is very miss with a little hit).

pedalpete 11y ago

I too have never heard of a broker in North America for rentals, but having lived in Chile and Australia, brokers run the markets there, and are universally hated for being lazy and not worth the money they take.

6t6t6 11y ago
Don't come to Japan then. Not only they are lazy and not worth the money, but also the tenant has to pay them an extra month of fee every two years, when the contract is renewed. And if that's not enough, in Japan there's no law that regulates the rental contracts so, every time that someone wants to rent a flat, he has sign a bunch of abusive clauses. In any case, being a broker must be a good business because Tokyo is full of them.

reustle 11y ago

I've been using AirBnB to find some of my longer term rentals (1-2 months) while traveling and I'm forced to look elsewhere because of the fees. A $50 fee on a $400/mo place is not small change when you're trying to watch your spending closely. Plus, that extra $50 will get you a slightly nicer place in most areas.