Developers struggle to recover lost advances

New York /
Oct.October 18, 2010 03:30 PM

Gary Barnett

Though brokers typically get their commissions at closing, developers hoping to attract buyers to unfinished properties have advanced brokers part of their commissions when the sales contracts were signed. But since then, many of these deals have fallen through, and developers have been battling to get their money back, according to the New York Times. Gary Barnett of Extell Development, for one, is fighting to get back the more than $1 million he paid to various brokers who found buyers at his Lucida condominium project at 151 East 85th Street. If a deal fell through, brokers were obligated to return the commission in most cases. But until recently, they never had to worry that buyers would want to back out before closing. For the most part, developers and brokers were able to get buyers to close and when they didn’t, they have reached deals. Barnett said brokerages have paid him back in most cases. But he said the experience has taught him a lesson. “We’re not going to do that anymore,” he said, referring to advanced commissions. [NYT]

 

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