Letting fee?

[Monopoly]

I tend to agree with Ozperp on this one.

The value in having a new lease signed is surely worth something to us as investors. So if the PM is providing value for you, then surely they are entitled to put a price on that value is warranted.

Particularly if you've signed a contract with them that authorises such fees in the first place.

As an agent (former? sorry James not sure if you're still in that game) I would expect this sort of view.

Just to clarify though, reletting (to the same tenants)/extending a lease was a "no fee" clause that I INSISTED on as part of signing up with my current PM. Not because I was being tight-fisted, but because I was be being a businesswoman sick to death of being ripped off by a system of sharks who expected to be paid at the drop of a hat for little or no effort.

Sounds mean I know, but I didn't get to where I am on compassion, I save that for the real charity cases (I work "for free" with).

 

[skater]

The value in having a new lease signed is surely worth something to us as investors. So if the PM is providing value for you, then surely they are entitled to put a price on that value is warranted.

OK, a new lease with new tenants, yes. But not to re-sign existing tenants. A new lease takes time and effort, especially if they have to do multiple inspections with prospective tenants, whereas they have nothing more to do for an existing tenant.

Personally I don't really care that much for set leases. Once the original expires it reverts to a month to month, so you are still covered by the terms of a lease. In saying this, however, it all depends on the IP and the area that it is in. I do have some that I insist on set leases, simply because it suits me better.

Particularly if you've signed a contract with them that authorises such fees in the first place.

Well, that goes without saying. If you have signed a contract authorising it, there is not a lot you can do. I have never authorised a re-letting fee.

 

[JamesGG]

As an agent (former? sorry James not sure if you're still in that game) I would expect this sort of view.

Just to clarify though, reletting (to the same tenants)/extending a lease was a clause that I INSISTED on as part of signing up with my current PM. Not because I was being tight-fisted, but because I was be being a businesswoman sick to death of being ripped off by a system of sharks who expected to be paid at the drop of a hat for little or no effort.

Sounds mean I know, but I didn't get to where I am on compassion, I save that for the real charity cases (I work with).

Oh, don't get me wrong. If you can negotiate to reduce your costs; fantastic.

Yes, former agent (but never a PM). Got out of that game a long time ago now, but in business, my view is the same. The effort required is irrelevant. If value can be provided, then an invoice can be justified.

And, IMO, the value in re-signing a tenant is worth the cost. For their own reasons, some may be a little more apathetic to that side of their investment strategy.

But again, if you can negotiate your way out of the expense, then that's brilliant. I don't believe that reduces the value of the service, though.

 

[Monopoly]

The effort required is irrelevant. If value can be provided, then an invoice can be justified.

And, IMO, the value in re-signing a tenant is worth the cost. For their own reasons, some may be a little more apathetic to that side of their investment strategy.

But again, if you can negotiate your way out of the expense, then that's brilliant. I don't believe that reduces the value of the service, though.

Fair enough James, each to their own.

But I can't help but ask:

How did this extension come about?

If it was at the request of the tenant seeking to extend; then IMO no value was added (by the agent) because it would have continued regardless of anyone's efforts, and the lease could have been reverted to a month-by-month (as many including some of mine do also) however....

If the agent had to coerce the tenants in any way to extend by a further 6 months, then the landlord has received value (and payment of monies is justifyable).

Either way, it's a win-win all round I guess!

 

[dan c]

I'm with Monopoly. You shouldn't pay anything for re-letting to the same tenant.

I had our PM tell us that all they do for re-letting is print out a form and have the tenenat sign it. Why should you pay 200 bucks for that?

 

[JamesGG]

I had our PM tell us that all they do for re-letting is print out a form and have the tenenat sign it. Why should you pay 200 bucks for that?

Depends on how much value you hold on having a signed lease in place, I guess?

 

[Perp]

If you're happy to pay $350 or $700 (1 or 2 weeks' rent) as a letting fee, but zero as a re-letting fee, it sounds to me like you're giving your PM a big incentive - in a reasonably hot rental market - to say to you "I wouldn't re-sign them; this tenant's been a nightmare, ringing us every day complaining about things, and I'm worried that he hinted he's going to lose his job and they won't be able to afford the rent..." or stuff like that, which can't be disproved, but could give you the idea that you need to get rid of the tenant.

Then, on their advice, you don't renew, you let the property sit vacant for two weeks while you source a new tenant, then pay another 1-2 weeks' letting fee. Net result: you lose 3-4 weeks' rent ($1050-$1400 in this scenario), and the real estate agent is up $350-700, less the actual $100 or so that vetting a new tenant costs.

I prefer to have the business interests of my agent aligned with my own, rather than conflicting.

 

[Monopoly]

If you're happy to pay $350 or $700 (1 or 2 weeks' rent) as a letting fee, but zero as a re-letting fee, it sounds to me like you're giving your PM a big incentive - in a reasonably hot rental market - to say to you "I wouldn't re-sign them; this tenant's been a nightmare, ringing us every day complaining about things, and I'm worried that he hinted he's going to lose his job and they won't be able to afford the rent..." or stuff like that, which can't be disproved, but could give you the idea that you need to get rid of the tenant..

If my agent said that my next question would be "why is the first I've heard of this?" to which he/she had better have an absolutely plausible response otherwise I'd advise him/her that I will be taking my business elsewhere!!

I prefer to have the business interests of my agent aligned with my own, rather than conflicting.

I align mine with my own; I'm not in a partnership with them, but I hope your agent appreciates your loyalty, and rewards it accordingly.

If I suspected foul-play (such as that kind of BS) I would make it my business to investigate and once proven, I would take the matter further. Frankly that kind of behaviour is unethical and unprofessional, and if the sort of thing he/she will do for a lousy buck, then he/she deserves to be discredited as a reputable agent!!!

 

[Perp]

If I suspected foul-play (such as that kind of BS) I would make it my business to investigate and once proven, I would take the matter further. Frankly that kind of behaviour is unethical and unprofessional, and if the sort of thing he/she will do for a lousy buck, then he/she deserves to be discredited as a reputable agent!!!

I totally agree it's unethical, but you'd never be able to prove or disprove whether an agent's opinion to you wasn't justified.

I just think that it's commonsense that any business rewards system should be structured so that both parties benefit from the optimum outcome. You should give them an incentive to engage in the behaviour which gives you both the best outcome - re-sign an existing tenant and they get a little bit, you get a lot - rather than provide any incentive to engage in a behaviour (change tenants) which gains them a little but costs you a lot. That's all I'm saying. But admittedly I may be over-influenced by some familiarity with game theory and maximising utility in decision-making.

Fortunately I believe I now have an excellent PM (I recently changed), who is well-paid but worth every cent, and who charges a very minimal re-letting fee which I'm more than happy to pay.

 

[Monopoly]

I totally agree it's unethical, but you'd never be able to prove or disprove whether an agent's opinion to you wasn't justified.

Bottom line, don't care, if I can prove it (and believe me I'd be prepared to spend the "extra" money trying) the mere fact that "I smell a rat" and I have not been informed of the agent's concerns about said tenants until such time as these claims were made, would be enough for me to deem that the agent was not doing their job, and as such, warrants moving onto one who will!!

I just think that it's commonsense that any business rewards system should be structured so that both parties benefit from the optimum outcome. You should give them an incentive to engage in the behaviour which gives you both the best outcome

I do, they have my business (and aside from the usual niceities each Xmas and Easter and their birthdays!) I expect 110% professional conduct in the management of my properties. That means open and honest communication, regular updates etc and for the commission they get, I don't believe that is asking too much!!

But admittedly I may be over-influenced by some familiarity with game theory and maximising utility in decision-making

Excuse me, I'm not following here. Are you inferring insider information?? You're an agent?? I know my agents, I've engaged most of them for years (except one who is a fairly new recruit) and they know me all too well. They know that I won't tolerate BS, so game-playing is best left in the playground because this player most certainly will not stand for it; if I even so much as "suspect" it; I walk!!

Fortunately I believe I now have an excellent PM (I recently changed), who is well-paid but worth every cent, and who charges a very minimal re-letting fee which I'm more than happy to pay.

If you're happy to, then that's all that needs to be said.

 

[Perp]

But admittedly I may be over-influenced by some familiarity with game theory and maximising utility in decision-making.

Excuse me, I'm not following here. Are you inferring insider information?? You're an agent??

No, not an agent, and no insider information. No idea whether this practise exists or hwo common it is.

There's a whole body of social science research based on "game theory" - which is nothing to do with "playing games" in the sense that you're referring to. It's about how people behave when they expect certain outcomes from their behaviours, based on the outcomes they expect other people to receive from their behaviours, and maximising utility.

I'm not arguing with you, or suggesting agents should or would act to discourage re-signing or that it would be ethical to do so; I'm just saying that, human nature being what it is, and having some passing familiarity with game theory, paying a modest re-letting fee provides further encouragement to the agent to engage in behaviour that is mutually beneficial.

Paying zero letting fee provides a financial incentive to the agents to change tenants rather than re-let, which would be to their financial advantage and your financial disadvantage. I still wholeheartedly agree that it would be unethical and poor form for an agent to do this; I just don't see the sense in setting up a contractual arrangement in such a way as to provide the other party with a temptation to act contrary to my interests.

 

[tarah]

Most PMs in Adelaide charge 2wks rent for their letting fee. The PM I use in QLD only charges 1wk, which is great. Maybe your PM upped their letting from 1wk to 2wks rent recently? The advertising fee is probably because realestate.com have increased their fees to list properties, or so my PM tells me when I enquired about the listing fee doubling!

 

[Monopoly]

No, not an agent, and no insider information. No idea whether this practise exists or hwo common it is.

There's a whole body of social science research based on "game theory" - which is nothing to do with "playing games" in the sense that you're referring to. It's about how people behave when they expect certain outcomes from their behaviours, based on the outcomes they expect other people to receive from their behaviours, and maximising utility.

I'm not arguing with you, or suggesting agents should or would act to discourage re-signing or that it would be ethical to do so; I'm just saying that, human nature being what it is, and having some passing familiarity with game theory, paying a modest re-letting fee provides further encouragement to the agent to engage in behaviour that is mutually beneficial.

Paying zero letting fee provides a financial incentive to the agents to change tenants rather than re-let, which would be to their financial advantage and your financial disadvantage. I still wholeheartedly agree that it would be unethical and poor form for an agent to do this; I just don't see the sense in setting up a contractual arrangement in such a way as to provide the other party with a temptation to act contrary to my interests.

I should have realised, I don't know why I was thinking psychological game-playing ??? as opposed to financial strategy...Go figure...

Okay look.....

I know you're not (wanting to) argue with me (nor do I, with you) and frankly I'm over trying to explain it any simpler than I already have.

I WON'T (pay "extra") you WILL, there is no RIGHT or WRONG, only DIFFERENT.

Horses for courses....

 

[skater]

I should have realised, I don't know why I was thinking psychological game-playing ??? as opposed to financial strategy...Go figure...

Okay look.....

I know you're not (wanting to) argue with me (nor do I, with you) and frankly I'm over trying to explain it any simpler than I already have.

I WON'T (pay "extra") you WILL, there is no RIGHT or WRONG, only DIFFERENT.

Horses for courses....

It could also be a bi-product of the PM's in the area(s). I used to have properties in one particular area where ALL the Agents had the same unreasonable costs as each other AND none of them would negotiate them. In situations like this you really don't have an option.

My main two PM's have lots of competition as there are many Agents in the area. This could be why they are more willing to negotiate.

 

[morg]

I'm with Monopoly on this one.
I have not, and will not pay a letting fee on resigning an existing tenant.
Fair enough with an incoming tenant PM has to advertise, organise viewings etc, but for just printing out a new lease doc, no way.

 

[ACTInvestor]

What do you think is a reasonable re-letting fee, Monopoly? Or do you expect them to prepare a new lease for nothing?

Agreed. Sometimes there is nothing involved in preparing a new lease, the tenant may contact the PM and a new lease is prepared. However, mostly, the PM needs to contact the L/L - find out what they want, then contact the tenant to see if they are happy with the proposed increase etc. There can be some negotiating back and forth, then there is the preparation of the document itself as well as meeting with the tenant for the signing. If you get a good PM, you should expect to pay for the service they provide. half of one weeks rent is pretty standard, but quite frankly you should ask those questions before you even sign an Agency Agreement.

 

[cu@thetop]

Okay look.....

I know you're not (wanting to) argue with me (nor do I, with you) and frankly I'm over trying to explain it any simpler than I already have.

I WON'T (pay "extra") you WILL, there is no RIGHT or WRONG, only DIFFERENT.

Horses for courses....

If the signed fresh lease for existing tenants has any value to you I think it is in your interests to pay an appropriate amount (not a full weeks rent but sufficient to reflect the work done).

I don't follow game theory (might look into it though) but I try to treat people as I expect to be treated.

If I agreed to this deal up front then tough titties to me, but if there are going to be attempts to change the retainer so that I work for nil (who gets sued if the new lease is not correctly filled out leading to landlord loss) then I would use the Predo principle and sack you as a client so it is no longer my problem.

If you can get away with paying nil more power to you, but the reality for me is that such behaviour towards subordinates /contractors will undermine their self confidence and efficacy and ultimately make it counterproductive for me.

I went a capable agent not the cheapest. I have rarely found both in the same place.

Having said that I enjoy your different point of view and I welcome your posts Monopoly.

 

[Monopoly]

If the signed fresh lease for existing tenants has any value to you I think it is in your interests to pay an appropriate amount (not a full weeks rent but sufficient to reflect the work done).

I don't follow game theory (might look into it though) but I try to treat people as I expect to be treated.

If I agreed to this deal up front then tough titties to me, but if there are going to be attempts to change the retainer so that I work for nil (who gets sued if the new lease is not correctly filled out leading to landlord loss) then I would use the Predo principle and sack you as a client so it is no longer my problem.

If you can get away with paying nil more power to you, but the reality for me is that such behaviour towards subordinates /contractors will undermine their self confidence and efficacy and ultimately make it counterproductive for me.

I went a capable agent not the cheapest. I have rarely found both in the same place.

Having said that I enjoy your different point of view and I welcome your posts Monopoly.

Thanks cu@thetop,

I understand what you're saying and of course, I would never recommend to anyone that he/she should opt for the cheapest agent simply to save a dollar. If it means you have to pay more for a better service, then it should be considered money well spent.

As I said, I don't pay for these little "extras" (I don't believe I should) BUT I believe in recognizing my agents commitment to doing a good job, and often will reward them in other ways ie. referrals, gifts, and the odd (strictly business) lunch.

 

[Lil Skater]

IMO, it's fair enough to charge a re-letting fee. I wouldn't be impressed if they charged the full leasing amount if they are re-letting to an exisiting tenant.

But i think it's fair to pay for this service, whether you believe it's just a printed piece of paper or not.

 

[NotAllPMsRBAD!]

i love how all landlords expect PMs to basically work for free and then in the same breath ***** about how the PM is inadequate, that there is a high turnover of staff, that the PM is nothing but a 20 year old with no experience in the same breath. It is these owners who will also expect you to be on call 24/7.

If you keep beating agents down on fees then the vicious cycle continues to repeat... you pay low fees then the PMs get paid low wages, and there is no way know any normal rational human being would do this job for very long on low wages. It seems that the popular opinion is that we sit on our butts and do nothing all day, that all we do is 'collect the rent' and nothing more.

Come in sit at my desk for just one hour and i can assure you that instead of trying to get me to work for nothing you would be doubling the fees that you pay us.

why should we pay for YOUR advertising??? have you any idea the 10s of thousands of dollars we are charged by the websites to list your property?? Do you have any idea that any given tenancy requires at least 15 hours worth of work just to lease out. Would YOU perform 15 hours of work for $150????

personally i dont charge for re-leases, despite the fact they are still a lot of work, however i also charge a 3.3% leasing fee and wont negotiate so that is covered in that.

All landlords can take credit in part for the disintergration of the standard of Property Management. not all pm's are bad, and most of us work our butts off for you. No we are not perfect and sometimes mistakes can be made, alot of the time it isnt a mistake but just generally being the meat in the sandwich trying to make everyone happy and often failing due to contraints of the owner/tenant/legislation.

certainly i lose out on listing because of my fees, but quite frankly those are the listings i dont want anyway, because guaranteed the owner who forces you to drop a few percentage points off your fees will always be the highest demanding owner as well. 20% OF YOUR CLIENTS TAKE UP 80% OF YOUR BUSINESS. they are the 20% i dont want.

end rant!