Cutting brokers out
Some dollar-conscious buyers sneak around agents in hope of saving money on their purchase November 02, 2009 07:00AM By Candace Taylor
Edward Longley of City Connections Realty at 88 Greenwich Street, where a client tried to go around him to buy a condo.
Real estate brokers are often stereotyped as shysters and double-dealers. But in today's rocky market, buyers are sometimes the ones being deceptive.
Edward Longley, an associate broker at City Connections Realty, was shocked to discover recently that his clients were planning to buy the 88 Greenwich Street condo he had shown them -- but without paying Longley a commission. And real estate agent Carleen McManus arranged for her client to see a unit at Jersey City's 77 Hudson before she went on vacation, only to return and find the client negotiating to buy a unit there.
More and more agents say buyers they have worked with -- often for months at a time -- are cutting them out of the deal when it's time to pay the commission.
In a declining market, they say, buyers are fixated on paying the lowest price possible, and many think the seller will give them a better deal if they aren't represented by a broker. Moreover, in a market where buyers expect rock-bottom prices, they're more likely to be disappointed with a broker's performance in still-expensive New York City.
"People think right now in Manhattan they're going to get this incredible deal on apartments," said Longley. "When they don't get it, they're looking for any angle to get money back."
In other parts of the country, it's common for buyers to sign exclusive agreements with brokers. But such agreements are rare in New York, where the seller pays the entire commission, explained Steven Spinola, the president of the Real Estate Board of New York. REBNY co-broking rules state that an agent who brings a suitable buyer to the table is entitled to share the commission with the listing agent, he said.
At any point, a buyer may decide he no longer wants to be represented by his broker, leaving agents here vulnerable to buyers' whims, explained Antonio del Rosario, president of the sales division at brokerage A.C. Lawrence. That's especially true if a long period of time elapses or the buyer tries to go behind the broker's back, because the listing agent may not know there was ever a buyers' broker involved.
"Here, it is about loyalty," said del Rosario, who said he once lost $30,000 in commission fees when a buyer became displeased with him at the last minute.
That loyalty has become more elusive in an environment where purchasers are anxious about falling prices.
"Buyers are wary of the market," del Rosario said. "They're less trusting, and brokers must do more work to earn that loyalty."
Longley learned that the hard way. He showed a family some 40 apartments this spring, including several at the Greenwich Club Residences, a new condo in the Financial District. In late August, he called to check in, only to discover that they'd returned to the building without him and arranged to buy one of the apartments that he had shown them, but directly from the listing broker, thinking they'd get a better deal that way.
At most new developments, a broker is entitled to a commission if they showed the buyer the apartment, but at 88 Greenwich, that only applies for 90 days after the buyer has seen the apartment, Longley said.
Once Longley found out what transpired, he appealed to the developers, Buttonwood Real Estate and Thor Equities, and they agreed to pay him a commission. But the experience was frustrating, Longley said.
"I wouldn't have cared if I had met them once," he said. "But it's disheartening when you've put in hundreds of hours of work for someone. I did everything for this client, and they tried to cut me out."
Longley said he had a similar experience at 99 John Street, where he found out from the listing broker that his client had submitted an offer without him.
Buyers sometimes ditch their brokers because they have an unrealistic idea of how low a price they'll get, and blame the broker when it doesn't work out, Longley said.
"They think if you can't get the price low enough, you're a bad broker," he said.
Some buyers also believe that the seller will give them a discount if they don't use a buyers' broker, since that means paying one commission, not two.
"People think they're going to get a better deal if they don't use a buyers' broker," said Kate Meckler, a senior vice president at Sotheby's International Realty, noting that buyers seem more concerned with that than usual in a climate where they are "thinking out every dollar and where it's going in the deal."
Meckler was recently told by a prospective client: "We want to work with you, you're sending us great things, but we won't get as good a deal if we work with you," Meckler said.
In reality, however, the commission is determined in advance, Spinola said, and the seller generally pays the same percentage regardless of whether it is split between two brokers.
Although there are some cases where the listing agent agrees to take a slightly smaller commission to help a deal go through, buyers' brokers are often more effective at negotiating the best possible price for a client, Meckler said. And new developments are especially keen to work with buyers' brokers in the current climate, where they get less walk-in traffic, since buyers' brokers bring in potential purchasers.
That turned out to be the case for A. C. Lawrence's McManus, who had been working with a buyer for a month and a half before leaving for a weeklong vacation this summer. McManus had arranged an appointment for the client to visit 77 Hudson, a new waterfront condo in Jersey City, while she was away. When she returned, she found him negotiating directly with the developer to buy the apartment he'd seen. McManus called her manager, del Rosario, in tears.
"It was nerve-racking," she said. "I was thinking [he was] going to complete this without me after I had put all the work and time into finding him a home."
Del Rosario contacted the listing broker, who said he wasn't aware that McManus was representing the buyer, but then quickly agreed to pay McManus the 5 percent commission the developer was offering buyers' brokers. The listing broker then also reached out to A.C. Lawrence with more promotional materials.
Del Rosario has asked REBNY to introduce a policy of buyers' brokers agreements. In the meantime, the best way to ensure a buyer's loyalty is to show them that the broker is working tirelessly on his behalf.
"Brokers now have to make deals happen by doing legwork, by proving that we add value to this transaction," he said.
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Comments
Anonymous
Well, what do you expect? In the ages old and gone-everywhere-else tradition of often presenting the guise of "representing" buyers, while all the while REALLY working for the sellers, is finally biting you in the a--. It's about time.
Comment #1 Posted By: Anonymous 11/02/09
Anonymous
#1 you are an uneducated idiot. There are brokers out there who do faithfully represent buyers. What do you do for a living? Maybe we can find a way to cut you out.
Comment #2 Posted By: Anonymous 11/02/09
Anonymous
#1 is a complete moron. As a retail broker, i know first hand about loyalty and the word rare are usually never in the same sentence. To use a quote from the "godfather", "this is the life we choose"! But it doesnt have to be that way. As a commercial agent in nyc i can tell you that everyone is trying to eat my lunch. Competitive within and without the place you work. The last thing you need is some sniveling ingrateful tenant, buyer or seller stabbing you in the balls after youve worked tirelessly on deals that are running so lean these days, only to be left holding your dick after its all over. In fact, you may owe money afterwards. Whatever happened to honor? Either way, yankees in 6!
Comment #3 Posted By: Anonymous 11/04/09
Anonymous
When I work with a buyer, I'm very loyal. That's why I rarely experience anything bad. I say rarely because there will always be a jerk out there. I've been a successful broker for over 10 years. If the buyer isn't loyal, I let them go. It's their lost.
Comment #4 Posted By: Anonymous 11/04/09
Anonymous
Maybe that's beacuse many agents (featured in article?) aren't exactly "cursed with integrity". Their bottom line is sales and commissions....I worked with an agent at Elliman whose bottom line was finding us a "home" and guess what.....he did and we are all happy and have a relationship that now generates referrals....not just phony listings.
Comment #5 Posted By: Anonymous 11/11/09
Anonymous
# I is an idiot. Any truly sophisticated buyer & seller know's how important a good broker is.
Comment #6 Posted By: Anonymous 11/12/09
Anonymous
Real Deal, please don't print comments for example # 3. People like 3 are what give this business & my profession a bad name. low class # 3 all the way.
Comment #7 Posted By: Anonymous 11/12/09
Anonymous
There is no reason to bring your own broker to a new development sales office or worse, have them take you. The sponsor WILL save on the outside commission and should be able to pass along a better price with the buyer. Assuming the buyer knows what they're doing and can negotiate. This assumes that the sponsor has an in house sales team or a pre-negotiated commission structure with the selling agent.
Comment #8 Posted By: Anonymous 11/12/09
Anonymous
Yea your right #9. A buyer should go right to a developer and try and negotiate on his own. There is alot more to real estate than price my friend and if you think a developer is looking out for you good luck!!! you deserve what you buy.
Comment #9 Posted By: Anonymous 11/12/09
Anonymous
So let me get this straight. In a market where people are desperate to sell and find a buyer. This is a good time to not have a professional represent you??? Someone who does it for a living day in and day out??? Good luck you idiots. Use that money you saved on commission to get a good retainer for your attorney.
Comment #10 Posted By: Anonymous 11/12/09
warren
When are real estate brokers going to start using contracts for their work, prior to doing anything ? At that point there is legal recourse.
Comment #11 Posted By: warren 11/12/09
Anonymous
Commercial tenant brokers have been compensated with a percentage of money they save the tenant (depending on the current offer). Residential brokers should catch on. It aligns goals with clients and you can add value with your market knowledge.
Comment #12 Posted By: Anonymous 11/12/09
Anonymous
I am a bulk REO broker who represents both buyers and sellers. The only way to gain the trust of your respectful party is to be completely transparent. Additionally, if you are a broker who can not relinquish control of a deal and put the buyer and seller in contact, it will kill the deal.
Comment #13 Posted By: Anonymous 11/12/09
Anonymous
Dear #7, "Any truly sophisticated buyer" will do exactly as #9 said, do his/her homework (very easy nowadays with the internet), call directly the seller, fix an appointment and see the apt. Why the hell should I spend 30,000 $$$? just because he opened a door?? I remember a broker who brought me to a couple of apts I had already seen on my own, so it was clear his role was really unnecessary
Comment #14 Posted By: Anonymous 11/13/09
Anonymous
What value add does a buyers broker do? I can look up comps, I can find the listings, I can contact the brokers, I can negotiate the prices, I can look up the deeds, I can look up any outstanding violations, I can perform a walkthrough and see what needs fixing or adjusting in the contract... What does a BUYER'S broker actually do? I think SELLING brokers help market the place, but a buying broker doesn't do anything. I know - I represented a buyer once and I felt utterly useless.
Comment #15 Posted By: Anonymous 11/13/09
Anonymous
#3 - don't call someone a moron and then say something moronic like "usually never"
Comment #16 Posted By: Anonymous 11/13/09
Anonymous
Loving #15's comment. Right on the head.
Comment #17 Posted By: Anonymous 11/13/09
Anonymous
I've represented many buyers and I was never useless. In fact, the opposite was true. I was the buyer's advocate, advising them about the building, the financials and the price. I also qualified the buyers working closely with their mortgage brokers. If a broker didn't do a good job as a buyer's broker, chances are they didn't get good training or they have no experience. Buyers are too busy in NYC to be alone when purchasing even the most inexpensive property.
Comment #18 Posted By: Anonymous 11/13/09
Anonymous
most people who van afford to buy in nyc are too busy making money AT THEIR JOBS. they need the service of the buyers broker. Besides the buyers broker in NYC !!!! does not represent the seller but the buyer - according to a REBNY rule. Talk to mr Spinola all of you
Comment #19 Posted By: Anonymous 11/13/09
Anonymous
#18 and #19, You gotta be kidding me saying that there's a lot of work being done. I'd say, besides accompanying the buyer to open houses and looking through listings, the amount of work done is about 10 to 20 hours. The mortgage broker qualifies the buyer based on the buyers information. The buyer can perform the necessary due diligence to find out about the building, the financials and the price. Propertyshark, ACRIS, Streeteasy make most of that work easy to do over the web. At the end of the day, the BUYERS BROKER represents his/her own interest in getting a deal done - not looking out for the buyer in giving them the BEST choice given the market (especially if the best choice is to not currently buy and consider a few months/years down the road)
Comment #20 Posted By: Anonymous 11/13/09
Anonymous
I have bought twice in Manhattan and used the same buyer's broker both times. My broker even told me at one point not to buy something and he was right. I made alot of money on my first purchase. I could not have done it without him. He also worked very hard. I saw all the market analysis he put together for me. I'm an ER doctor and I don't have time. I trust my broker and I will always do what he says in terms of real estate. I would pay my broker if I had to. Luckily, the seller does that.
Comment #21 Posted By: Anonymous 11/13/09
Anonymous
A truly professional borker does make the transaction seem 'easy'. However, neither the buyer nor the seller ever kow the amount of stress and psychological maneuvering brokers spend 'to get the deal' done. There are so many egos involved! If the buyer or the seller think that they're saving by avoiding the broker, they will use that money on attorneys. Yes, there are some brokers who don't do much and unfortunately, REBNY has no way of dealing with these part-timers who have no business in THIS business.
Comment #22 Posted By: Anonymous 11/13/09
Anonymous
My mom is a NYC broker and she's represented many buyers. She works day and night for them. She advises whether it's a good building or not, negotiates, spends weeks perfecting their board package and even helps them with their move. Anyone who would ever cheat a broker like my mom should be ashamed of themselves.
Comment #23 Posted By: Anonymous 11/15/09