Apartment locating demystified

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A look at the role apartment locators play in the multi-family housing industry

In a market that has seen apartment occupancy rates drop as low as 84% in 2010, apartment locators make up for over 50% of all leases in major metro areas in the Southeast United States such as Houston, DFW, Atlanta, and Tampa.

Apartment locators offer a free service to tenants and are paid a commission (typically the equivalent of one month’s rent) by the apartments where the tenants are placed.  Using a locator does not cause any rent increases to the tenant, and most locators offer a $100 rebate back to the tenant.

Perception and value of locators

Locating companies have existed for over 30 years, and despite offering a free service to the consumer and quantifiable leases to apartments, locators have not always been well received in the multi-family housing industry.

Phil Silberman, President of ApartmentWIZ, says, “Many management companies and landlords regard locating companies like ours as a necessary evil. If the apartments could keep occupancies high without locators and a modest advertising budget, they would prefer it that way.”

Silberman says that locators have remained valuable because consumers demand a sizeable selection of apartments and management companies before making a leasing decision.  Even the largest management companies and Internet Listing Services (e.g. Rent.com) can only offer a fraction of apartments from which to choose in a given metro area.  Locators are the only apartment source that provides a near comprehensive search for the consumer.

Locator Regulation

Locators are in a tough place because even though the apartments pay their fees, locators have a fiduciary relationship to the consumer who is the client.  Houston real estate attorney, Brian Laviage, says that locators in most states like Texas are regulated by the state real estate commission and required to be licensed real estate agents.

“Conflicts arise when one apartment is paying a higher commission than another, and the lower paying apartment may actually be in the best interest of the consumer. Real estate agents are required to place the client’s interest above their own,” says Laviage.

According to Houston locator, Tirey (Ty) Counts, over 95% of properties pay locators a minimal commission that allows locators to send clients to properties profitably.  “The Real Estate Licensing Act does not require us to lose money and send a client to a property that does not pay locators.  Since so many properties want to work with locators, my clients get a tremendous selection of properties and a great service,” says Counts.

Bottom line

Statistics show that apartment communities that work with locators do better on a price per square foot basis than properties that chose not to work with locators.  According to Apartment Inventory Management, locator friendly properties receive 90 cents per square foot as opposed to 77 cents at properties that don’t use locators.