As the busy season approaches us, the name of the game is to close as many deals as quickly and efficiently as possible. Unfortunately, this is often easier said than done. Very few deals are “routine,” and you’ll probably experience complications here and there along the way.
Your skills and experience as a real estate agent will play a big role in how many deals you get across the finish line and, ultimately, how much money you’ll make.
The good news is that over time a lot of the same deal-killers present themselves again and again — and you get better at addressing and overcoming them. The following is a list of 10 potential bombs that could blow up your deal and how to handle them when they arise.
1. Not knowing landlord requirements
No two landlords are the same. Some take credit very seriously. Others aren’t so concerned with credit as long as a client meets their income requirements. Some require guarantors even if your client does meet the income requirements. You get the idea.
Always try to get a feel for a landlord or management company before submitting your client’s application package (or before you even show your client the property).
A good resource may be other agents in your firm who have done deals in the building — they’ll have a better idea of what a landlord generally looks for. For example, a landlord I represent on the Lower East Side will not accept applicants who do not have a guarantor — even if they make 40-times the rent or more.
This is the first thing I mention to any client who inquires about the listing. If they don’t have a guarantor, it probably makes more sense to show them other listings where they’ll have a better chance of getting approved.
2. Working with under-qualified clients
Rental requirements in NYC are strict, and necessarily, so in a city with more than 8.5 million people, landlords need to be careful about who they allow to live in their buildings. Quite often, a client might fall a little short when it comes to income and/or credit requirements.
The best option here is to approach the situation honestly, and prepare your client with some sort of contingency plan. For example, if your client’s income is 35-times the monthly rent but the landlord has a 40-times income requirement, it often makes sense to mention this to the landlord right up front in the application package and offer a solution to alleviate the landlord’s potential concerns.
For example, mention on the cover page “client x’s income falls $x short of 40x the rent. However, client is willing to pay an additional two months security and/or secure a guarantor to alleviate any concerns.”
The landlord will appreciate your honesty, you’ll present your client in the best possible light, and ultimately, your client will thank you for getting them approved and starting them off on the right foot with their new landlord.
3. Having a housing court record
This can often be the kiss of death to any deal. Regardless of how well-qualified your client is, a housing court record can indicate a history of non-payment, eviction or worse. The record will appear when the landlord runs the client’s credit and background check, and by then, it’s often too late to change the landlord’s mind.
However, there are situations where a client will have received a housing court record through no fault of their own.
For example, last year, I had a client who had been living in an apartment in Brooklyn and paying her monthly rent on time to an “owner” who had rented her the apartment but, she later found out that the “owner” did not actually own the property.
When the real owner ultimately appeared and served her with eviction papers, the fake owner claimed it was all a misunderstanding and advised her to stay in the apartment. She and her roommates wound up in the middle of the two and ultimately in housing court.
Luckily, she had saved all of her documentation (including housing court records and cancelled rent checks), and it substantiated the fact that she had been the victim of a scammer and wound up in housing court through no fault of her own.
We presented all of this documentation to the owner of the apartment she was applying for, and she was approved.
4. Not disclosing net effective rent or broker fee
These are both very important details that you should be sure to explain to your client up front. Net effective rent can be confusing to clients. Always educate your client on the concept and indicate which month of rent is free and whether the savings from the free month or months can be amortized over the entire term of the lease.
Similarly, always disclose whether the property has a broker fee. When clients are on a tight budget, both of these can significantly affect their ability to move forward and rent the property. Your clients will thank you for being upfront and honest with them, and you’ll avoid finding yourself in the unpleasant predicament of having a client back out of the deal at the last minute.
5. Not knowing pet policies
Refer to back to No. 1. Educate yourself on a landlord’s or building’s pet policies, and always ask your clients whether they have or are expecting to get a pet.
Policies vary depending on the landlord. Some do not allow any pets, while others allow certain breeds. Some may require a one-time pet security deposit, while others add a monthly charge per pet. Others may have a non-refundable fee to cover “deep cleaning” of the apartment after your client vacates the property.
Always disclose these policies to your client, and always mention any pets to the landlord when submitting your client’s application package. If your client has a 150-pound Bernese mountain dog, don’t have them apply in a building that only accepts cats.
And don’t be that agent who tells your client that they should get rid of their pet so they will get approved for the apartment (yes, I’ve heard of it being suggested, and no, your client will not react kindly to it).
6. Not bending on repair requests
This can be a tricky one — you often need to feel the situation out and make a judgment call. Of course, reasonable requests should be honored.
For example, if a refrigerator does not work or there’s a large hole in a window, these repairs should be made as soon as possible. If a landlord refuses, this probably is not an owner you want to work with.
However, if your client requests that expensive and unnecessary window treatments are installed, for example, chances are slim that the landlord will honor such requests — and even making such a request might significantly reduce your client’s chances of being approved.
Be sure to manage your client’s expectations. If they are being unreasonable, consider finding a polite way to tell them so. And tread lightly before asking a landlord to make a repair or upgrade that isn’t really necessary to the apartment.
If the deal is absolutely going to die unless blinds and curtains are installed, you can always offer your client an American Express gift card toward the cost of making such improvements themselves.
7. Requesting changes to a lease
NYC landlords generally use boilerplate, standard lease templates for all of their apartments (the standard Blumberg lease is very common). Some landlords will make an occasional change to a lease term to accommodate a new tenant, but this is the exception rather than the rule.
Make sure to set expectations with your client ahead of time. And if your client wants you to forward the landlord a list of 10-plus lease changes, proceed with caution. Such demands can often be indicative of a tenant who may prove difficult down the line, and the landlord might decide to backtrack and rent the apartment to somebody else.
8. Building pending certificate of occupancy
All new construction buildings in NYC require a certificate of occupancy before new tenants are legally allowed to occupy the property. In a bureaucracy as large as NYC, even the smallest of issues can delay the process by weeks or even months.
Make sure that clients are aware of the process, and advise them to only apply if their move-in dates are very flexible. If a client absolutely must be out of their apartment by a certain date in the near future, a new-construction building pending a certificate of occupancy might not be the best choice for them.
Two years ago, I had six deals approved in a building that was pending a certificate of occupancy. While my clients were all informed and well-aware that their move-in date could potentially be pushed back by a few weeks to a month, the building failed an inspection, and we soon found out that the delay would likely be several months.
We immediately informed our clients of the delay and refunded all of their funds and application fees. Such an outcome was not ideal, for my clients or for me, but I’d rather lose out on all these deals and do right by my clients than the alternative — having upset clients indefinitely living out of suitcases while they await a certificate of occupancy with no estimate of how long the delay might be.
9. Reaching a negotiation stonewall
When negotiations with a client get so intense that you’re at the end of your rope in frustration, it sometimes makes sense to hand off the deal to a partner or colleague who can get the deal across the finish line.
Even if you need to offer your partner or colleague a percentage of the commission, it’s better to do this than lose the entire deal. When your partners or colleagues finds themselves in a similar situation in the future, they might even turn to you for the same assistance.
10. Failing to disclose market rate vs. preferential rent
In buildings that are rent stabilized, there can often be confusion between market rate versus preferential rent. The market rate rent is the maximum amount that the owner can legally charge for rent, while the preferential rate is usually a much lower amount the landlord has agreed to rent the apartment for.
For example, an apartment may be advertised for $3,000 per month — the preferential rent rate — but the first page of the lease will state the market rate rent of $5,000 per month.
Make sure that your clients are aware that the apartment is rent stabilized, and educate them on the difference between market rate and preferential rent — before they receive the lease. There will be a rider (addition) to the lease stating the reduced preferential rent rate that will be charged for the duration of the lease.
But if your client is not aware of this concept and the existence of this rider, they will likely panic when they see the higher market rate rent amount listed on the first page of the lease.