While Coldwell Banker Hunt Kennedy brokers expressed concerns about what will happen to their listings and commissions with the company closing, sources confirmed that JoAnne Kennedy and the majority of Coldwell Banker Hunt Kennedy agents will move to the Corcoran Group, though Corcoran has said it has no formal agreement with the soon-to-be-defunct brokerage.
“Nearly all” of the current Coldwell Banker Hunt Kennedy agents are moving to Corcoran, said Philip Kiracofe, chief technologist at Coldwell Banker Previews International, CBHK’s luxury home marketing arm, who is “overseeing the transition.” Corcoran and CBHK share ties to New Jersey-based Realogy Corporation.
Though Kennedy, the COO of CBHK, did not respond to repeated requests
for comment, a company source, who asked to remain anonymous, confirmed
that Kennedy is moving to Corcoran, and said that other CBHK brokers
are moving to Sotheby’s International Realty.
The source also said all brokers have been told the four CBHK offices will be closed by June 5.
However, Corcoran CEO Pamela Liebman told The Real Deal last week that “there is no formal incorporation of Coldwell Banker agents into Corcoran.”
Kiracofe said more details of the arrangement will be announced soon.
Confusion surrounding the situation is heightened by the companies’ complicated ownership structure. NRT, the parent company of Corcoran and Sotheby’s, is a subsidiary of Realogy, which also owns international real estate company Coldwell Banker. But Realogy, not NRT, operates independently owned Coldwell Banker franchises including CBHK.
Realogy declined to comment, but Kiracofe said the reason for the closure of CBHK was a desire by Realogy to save resources by “consolidating” the company into Corcoran and Sotheby’s.
“This is very much not a scenario where [CBHK] couldn’t hack it in the New York City real estate market,” he said. “Realogy is looking at Manhattan and saying, ‘do we need three successful brands, or can we consolidate?’ It really made sense to integrate CBHK with the two NRT brands in New York City.”
Kiracofe said the company will now be able to focus more of its resources on new innovations at its other companies.
Realogy has struggled amid the nationwide housing slump.
While the bulk of the agents are being encouraged to stay within Realogy, not all of them are being offered jobs within the company.
“The ones who are top producers are getting top priority,” said a CBHK agent who spoke on the condition of anonymity. “Corcoran is choosing the top brokers from the company and will phase out the weak ones.”
It’s in Realogy’s best interest to keep their best agents working for companies under its umbrella rather than lose them to the competition, said Kathy Braddock, a founding partner with real estate consultancy Braddock + Purcell and the New York brokerage Charles Rutenberg Realty, who said her company hired several former CBHK agents this week. Halstead Property’s Diane Ramirez told Crain’s that she, too, is interviewing CBHK agents.
“If I was Realogy, I’d want to keep as much business within my brands as possible,” she said, adding that Corcoran and Sotheby’s may “sweeten the pot” to retain best producers.
But some agents prefer not to stay within Realogy, the CBHK agent said.
“After this, would you want to stick with them?” the source said, adding that agents are frustrated because they’ve received little information about the company’s fate.
“We don’t know what’s going to happen,” the source said, adding that there is a good-bye party for agents next week at the company’s 555 Madison Avenue office.
Listings and commissions
Kiracofe, who is overseeing the CBHK transition, said in situations where CBHK agents are moving to Corcoran or Sotheby’s, the listings will automatically follow the exclusive broker.
“It’s a very smooth transition,” he said. “We’re working closely with all the parties.”
If a seller wants to list their home somewhere other than those two companies, he said, they would need to break the exclusive sales agreement.
But he said as an incentive for sellers to keep their listings within Realogy, Corcoran and Sotheby’s are now “taking a serious look at” membership in the National Association of Realtors, a professional association with which CBHK is affiliated. Kiracofe is the president of the Manhattan Association of Realtors, which is the local chapter.
But agents, especially those who are not going to Corcoran or Sotheby’s, are “very worried” about what will become of their listings and commissions, the unnamed CBHK agent said.
“If you stick with Joanne, you’ll be fine and you’ll get to keep your listings,” the source said agents are being told. “If you don’t, it’s ‘well, best of luck to you.'”
The fate of exclusive sales listings and commissions can be a source of confusion and disagreement when a company closes, said John Serpico, a real estate attorney at Brooklyn-based law firm Serpico, Serpico & Siddiqui. That’s especially true since it’s not yet clear whether CBHK will be sold, declare bankruptcy or become absorbed into another company.
If CBHK declares bankruptcy or ceases to exist, exclusive sales contracts with the company likely will automatically be terminated “because one party doesn’t exist anymore,” Serpico said.
It’s slightly more complicated if CBHK keeps its name, but is sold or becomes a division of another company, he said.
In that case, CBHK technically could choose to enforce its exclusive sales agreements, since they are legally binding contracts, Serpico said, even if the original sales agents are no longer involved.
However, a sales firm almost always releases a seller from an exclusive agreement if the seller requests it, said Rutenberg’s Braddock.
“Ninety-nine percent of the time, they release [the seller],” Braddock said. “You don’t want that bad blood — this is a business that is people-oriented.”
When an agent leaves a firm, the seller is generally given the choice of staying with the brokerage, or following that agent to another firm, even if it means violating the terms of the exclusive agreement.
“It is a contract, but in many cases the company is not going to really enforce it, because it’s bad for business,” Serpico, the attorney, said. “I would think it would hurt their reputation if the word got out that they were trying to hold people to exclusives.”
That said, a brokerage may sometimes fight to keep exclusives if they are for large sums of money, he added, saying that the ability to hold onto some exclusives is one incentive for Realogy or a new buyer to keep the CBHK brand name alive.
And exclusive sales and marketing contracts for new development projects may be more hotly contested.
“The real estate company is probably more inclined to keep [new development contracts] because they’re bigger,” he said.
For example, CBHK is the exclusive marketing and sales agent at 142-unit condo development Twenty9th Park Madison, on 29th Street between Madison Avenue and Park Avenue South. A spokesperson for the developer, Espais, said no decisions have been made yet about what will happen to the sales contract there.
Then there’s the matter of commissions. Technically, all brokers should receive the commissions that they are owed from all the deals they have done in the past, and those from units that are currently in contract once they close, Serpico said. If these commissions are not paid, agents have the right to sue.
However, since commission checks are made out to the brokerage, the agent who did the deal does not always receive their payment right away. Firms may “house” money for a few days or weeks after a broker brings them a commission check, sometimes using it to pay bills or other expenses, explained Rutenberg’s Braddock.
Payment delays are of particular concern when a brokerage is short on cash, Serpico said.
“I would be concerned about the [agents] getting their money when [the brokerage] is having financial difficulties,” he said, adding that he would advise a broker client to ask that the money be kept in escrow rather than being cashed by CBHK.
As The Real Deal previously reported, CBHK is believed to owe somewhere in the neighborhood of $12 million to its creditors.
Serpico said the current economic climate may lead to more acrimony than usual between agents and their soon-to-be former employers.
“In this economic situation, there will probably be a lot more arguments because everyone’s going to be fighting over that last nickel.”