The pace and stress of the real estate market in New York has over the years created an adversarial relationship between real estate brokers and managing agents.
While many brokers complain that managing agents, who serve as the go-betweens for brokers and the board of a building, do not return their phone calls and are generally unresponsive to their needs, managing agents say they are overworked and resent the enormous commissions paid to brokers.
But the relationship changes – at least a little – when broker and managing agent work for the same employer.
While some residential brokerages shun property management as a not especially lucrative or glamorous business, other brokerages, most notably Douglas Elliman and Brown Harris Stevens, have built up large property management divisions, and they are continuing to grow as the industry consolidates.
Douglas Elliman’s property management division, which covers more than 60,000 units in 240 co-op, condo and rental properties, is a “great standalone business,” said Howard Lorber, an owner of the company.
“We realize there is a lot of upside to property management,” he said earlier this year. “You can’t look at it just for leads; you have to provide great services.”
Douglas Elliman is the largest property manager – with about three times the volume of its closest New York competitor, he said. But Brown Harris Stevens is on its tail, with the company acquiring Heron Ltd. last month, an acquisition that adds 7,000 units to the 10,000 apartments it currently manages. Brown Harris says its managed properties are exclusively doorman buildings.
Hall Willkie, president of Brown Harris Stevens, said there is a natural synergy between the building management and brokerage side – largely because a building management division can provide information about co-op sales.
“The sale of a co-op is not a matter of public record. Because our company manages the building, it gives us tremendous information regarding what specific properties sell for,” he said. “A co-op is a private corporation and one responsibility of a management company is to handle the close of all apartments and help tenant shareholders to evaluate what their property is worth.”
But Neil Binder, principal of brokerage Bellmarc, said the property management business is not particularly attractive to him. He said the start-up costs and meager profits are the reasons his company and other large brokerages, like Corcoran, do not have property management divisions.
“Building a property management company is a long process with thin profit margins and it’s not a generous business to enter,” he said.
“Marketing and salesmanship is not the key to property management. It’s a different mindset.”
Diane Ramirez, president of Halstead, said having a brokerage and management division (the company started its management division three years ago) makes each party more sensitive to how they can serve the other.
“I think having a sister firm that does management makes it less adversarial, so it’s much smoother when you work together,” she said.
“The fact that we speak to each other keeps us in the loop. An independent management agency won’t take the time to educate the broker.”
Jim O’Connor, president of Douglas Elliman Property Management, said, “brokers are demanding and they want the deal to close. It’s unacceptable if someone in their own family does something to make the deal go bad.”
Ramirez maintains brokers don’t get special treatment. “The [building management division] will never put an agency above the building,” she said. “I think they are very fair-minded and we don’t have any trick access to them.”
But Binder believes otherwise. For a seller’s broker, he advises, “never tell a managing agent anything about the deal until the contract is signed.”
“They have the right to refer,” he said. “So they might tell the broker on the team and they will get compensated for their lead.”
Some property managers feel shortchanged in what they earn compared to brokers.
“I wish the fees that we collect for property management were remotely close to the brokerage commissions on some of the apartment sales in our buildings,” said O’Connor. “When a broker makes a sale at one of the better buildings, that commission represents about 10 years worth of management fees.”
Managing agents also say they are very busy with daily building concerns and complain that brokers pepper them with calls and do not accept the information they get, according to Binder.
Real estate educator Esther Muller believes both sides need a better understanding of each other’s role.
“There is a lack of communication that happens before they even speak to each other,” she said. “The common denominator between brokers and property managers is that they both deal with people and they need realistic expectations. Sometimes we act as if we are at war instead of as if we are in the same team.”
“It’s a hell of a job, especially when it’s a hot market,” said Binder.
“It’s a burden because they are handling an enormous amount of transactions with the same resources, which slows the process down.”
“The managing agent is only a conduit and sometimes brokers are overly aggressive,” he said. “They have two different agendas.”