Yesterday we gave a simple example of net effective price calculations. There is also a more in-depth explanation in our rental guide. In an ideal world, the net effective price is identical whether you approach a landlord or use a broker to help. A few landlords still use an outdated incentive model, called “1 or 1” pricing.
Understanding 1 or 1 Pricing
Here is the problem. Landlords are hurting in a slow market, so they give concessions. They give free rent, and they are also willing to pay the broker fee, sometimes called “OP” short for Owner Pays Broker Fee. The problem arises when they will only do one, but not both. Here is a recent broker blast from Mercedes House, a luxury building in Midtown West.
Notice that for unit 1104 at 550 West 54th street, the landlord will pay BOTH the broker fee, and give one month free. However, for unit 812, a studio, the landlord will only pay the broker fee if they are not giving the free month.
It’s strange and confusing for all sides. On one hand, they welcome brokers and recognize the time saved from using a network of open listings agents. On the other hand, they are under-cutting the relation by asking renters to come directly… but only for certain units.
Even worse, some unethical brokers take advantage of the situation using a 1 OR 1 scam. They list the net effective, AND call it no fee when advertising. Only later on, do they inform the client that the no fee benefit only comes if they pay the gross price! As much as we believe landlords should eliminate 1 or 1 pricing, brokers advertising a No Fee must give the true no-fee price. Otherwise, it is false advertising and a clear violation of our policies.
Editor’s Note: We updated this article to enhance readability.
