Q: I recently bought some rental property in Pennsylvania. The management company charges me 10 percent commission plus one month's rent on new rentals. This is considerably higher than I am used to paying in the Washington area. Do state real estate boards set standard fees for such services and, if so, where can I find out about Pennsylvania?
A: I can't help in Pennsylvania but can give you some general comments.
With respect to the specific question in Pennsylvania, while I seriously doubt that any state has any set fees, you are advised to contact the state Real Estate Commission, which should be located in the state capital, Harrisburg.
Your letter has raised an interesting question, however.
As this column has suggested on numerous occasions, fees and commissions are totally negotiable. The underlying concept of competition is -- or should be -- available in the real estate market. When a real estate broker tells you that the commission for managing property (or selling a house) is fixed at a particular fee, that is their set fee -- but not necessarily what other brokers and agents will charge.
The Justice Department on several occasions has brought antitrust lawsuits against the real estate industry when they attempted to "fix" their fees and commissions. The public deserves competition, but the public also has to understand that they have to negotiate with those professionals to take advantage of this competition.
In today's economy, many industries are being affected. Clearly, you may find another real estate company that will be willing to manage your property for less than 10 percent. The one month's rent on new rentals may seem a bit high but is not unreasonable when you consider the fact that the real estate agent is absorbing the cost of advertising to obtain your tenants. However, that fee also should be discussed and negotiated.
I assume you have a contract with your management company. Hopefully, it is only for one year. If this is the case, attempt to renegotiate a lower fee with that management company before the expiration of the contract. If they are unwilling to do so, shop and compare prices before you commit yourself to another one-year management contract.
But price is not the only thing to consider in choosing a management company; quality is important, as well. When you are searching for a good management firm, the capabilites and the personalities of the management company also should be taken into account. Will they keep you informed on all aspects of their management? Are they interested in your business, and who will actually be in charge?
Make sure that you discuss all your concerns before you sign the contract.
As in any other aspect of real estate everything is -- or should be -- negotiable.