Brokerage execs grapple with how to dole out pricey exclusives
When Douglas Elliman brokers Raphael De Niro and Victoria Logvinsky put a Midtown Manhattan penthouse on the market for a record-high $100 million last July, “my name went around the world in the course of weeks,” De Niro told The Real Deal last month. That’s true despite the fact that the property lingered on the market, and in fact still hasn’t sold. (See “The $90 million club”)
In the wildly expensive world of New York City real estate, one high-profile listing is all it takes to propel a broker to stardom.
“Big listings, even if they’re grossly overpriced, can help attract attention to the individual agent, even if the listing isn’t going to sell,” said Donna Olshan, president of Manhattan brokerage Olshan Realty. “The firm is footing the bill for the advertising, but the agent becomes the brand.”
So it’s not surprising that who gets these exclusives, and how, is among the industry’s most-discussed topics, especially at a time when inventory is scarce but $90 million — and even $100 million — listings seem ubiquitous.
Real estate agents are usually on their own when it comes to getting exclusive listings, but for very expensive or high-profile properties, firm heads or managers often get involved. When the chiefs of New York City brokerage firms — who are often wealthy and well-connected — bring clients and listings to the firm, they must decide which broker to dole them out to.
And it’s not always easy to make the right choice; company heads told The Real Deal they grapple with how to hand out listings fairly while still keeping the firm’s — and the seller’s — best interest at heart. It makes sense to give prominent, high-priced listings to the agents they know will get them sold, they said. But handing too many listings to a small group of agents often leads to jealousy and gossip, as other brokers complain that the firm heads are playing favorites. And firm heads must also juggle other considerations, like keeping top-producers happy and rewarding loyalty.
This month, The Real Deal talked to numerous New York City managers and firm heads — many of whom wished to remain anonymous to avoid jeopardizing business relationships — about how they navigate this sensitive subject.
Divvying up listings
In New York City, home-sellers typically sign a listing agreement giving a broker the exclusive right to market their property for a given amount of time, usually 180 days.
Typically, brokers secure these exclusive listings by arming themselves with facts and figures, then convincing an owner that they’re the best person to sell a property.
But agents also sometimes get clients through their firms; when a potential buyer or seller walks into a storefront office, for example. To distribute these leads, many firms use the so-called “uptime” system, in which an agent is required to be at the office for a certain time period each week to answer phones and be available for walk-ins. That agent is then entitled to represent any new client who walks in or calls during that time.
The uptime system is “a pretty equitable way of allocating potential clients,” said Sonia Stock, a broker who works out of Elliman’s Tribeca office, which uses the method. But firm heads and managers said there are downsides to that model. While it’s the fairest system for the brokers, sources said, it’s not necessarily the best way to get deals done.
“If a customer comes in, and they want a four-bedroom apartment on the Upper West Side, and they happen — through the luck of the draw — to get affiliated with a broker who for the most part does townhouse sales in Brooklyn, where does that put everybody?” said one office manager, who asked to remain anonymous. “Ultimately, it runs the risk of putting the customer in the hands of a broker at another firm.”
That’s one reason Town Residential doesn’t use the uptime model, which Town CEO Andrew Heiberger called “a really old, ‘Glengarry, Glen Ross’–type system,” in reference to the tyrannical management style depicted in the 1984 play, and later, movie.
Instead, he said, new clients who walk into a Town office are referred to an office manager, who then determines the best broker to handle the listing.
While the uptime system raises the issue of which brokers get chosen to handle the busiest times for walk-in traffic, things get more complicated when it comes to very pricey or high-profile listings, which are rarely walk-ins.
Many top real estate executives are active on the New York social scene, and tend to get leads while hobnobbing with the rich and famous. Other times, celebrities or billionaires (or their handlers) contact firm heads directly when they want to sell their homes, as a means of ensuring privacy and top-notch service.
Sometimes executives pass these leads on to managers to distribute as they see fit. But when the client is high-profile enough to garner publicity for the company, the boss often hand-picks an agent to work with them, explained Michele Kleier, president of Kleier Residential.
When an unassigned listing comes in to her firm, Kleier said she generally decides who to give it to based on an agent’s area of specialty. For example, if a buyer comes in looking for an apartment Downtown, she said, she’ll match them up with a broker who works in the area.
Making these calls, she emphasized, is not illegal or unethical.
“If you own the company,” she said, “and you want to give somebody business because you like them for whatever reason — whether it’s a [personality] reason, which often it is — or because they’ve performed well for you in the past, that’s your prerogative.”
Naturally, executives are likely to choose seasoned agents they know will do a good job.
“Why wouldn’t I give it to someone who I know is going to make the deal, rather than a new person?” said Paul Purcell, a co-founder of Rutenberg Realty and the former president of Douglas Elliman. “I’m going to give [listings] to the person who can sell ice to the Eskimos. It’s not that they’re my favorites, it’s that they make me look great.”
Neil Binder, principal of Coldwell Banker the Bellmarc Group, said when a listing comes through him, he hands it off to the relevant office manager, sometimes with a recommendation of which agent should handle it. But on rare occasions, he’ll give it directly to the broker of his choice.
“It might be personality,” he said, noting that he tries to pick agents who will be “particularly empathetic to that kind of [client].”
But it’s an open secret in the industry that firm heads do sometimes hand out choice listings for reasons other than who is best for the job. Sometimes it’s a reward for loyalty, or as a way to keep top producers from leaving the company. After all, brokers are independent contractors rather than salaried employees, and there’s little to keep them from moving from one firm to another, noted Purcell.
Purcell said he’s seen executives give sought-after listings to certain brokers because they’re afraid of losing their stars to the competition.
“You want to keep those heavy hitters happy,” he said. “The model is kind of crazy. We don’t pay them any [salary], and they can pick up and leave at any moment.”
For agents, these decisions carry more weight than the fate of one listing. The publicity generated by a celebrity-owned or very expensive listing — even before it’s sold — has something of a snowball effect, leading to more listings and clients in the future.
“Success breeds success,” said Kleier, noting that her firm’s exposure on the HGTV show “Selling New York” has prompted customers to cold-call the firm and ask to work with her and her daughters.
So it’s not surprising that when firm heads single-out the same agents over and over, it can breed resentment among other brokers, who feel they’ve been overlooked. The industry is full of rumors about brokers becoming break-out stars by virtue of a family connection, friendship or even romantic relationship with a top company executive.
“There are certain people that, for whatever reason, are able to cozy up to the powers that be and use their charm,” one luxury broker, who asked to remain anonymous, told TRD. “You do meet a person once in a while, and you think there’s no way they have the technical ability to get the business they’ve gotten, unless it’s somehow being directed to them.”
In some cases, of course, that may be true; the dynamics of flirting, favoritism and brown-nosing are present in real estate just as they are in any industry. A 2011 study conducted by Georgetown University’s McDonough School of Business found that some 84 percent of senior business executives had seen favoritism (defined as giving preferential treatment based on factors such as friendship or connections rather than qualifications and performance) at play in employee promotions, while 23 percent admitted to practicing favoritism themselves.
And no matter what firm heads do to be fair, when it comes to handing out listings, “I don’t think sour grapes can be avoided,” one manager said. Certain brokers are “going to feel as though there’s an arbitrary or unfair aspect to almost any approach that you take.”
One way to navigate these tricky dynamics, Purcell said, is for firm heads to give high-profile clients several different brokers to choose from. He recalls being asked by Edward Milstein, the brother of Elliman’s then-owner Howard Milstein, which broker should list his apartment. Purcell gave him the names of several brokers and suggested interviewing each of them before making a decision.
And, sources noted, many mid-level agents assume gifting listings is more common than it actually is.
After all, most high-net-worth individuals don’t need to cold-call a brokerage; most either know several brokers from their social circles, or have been actively pursued by agents looking to sell their existing properties.
“The phone does not ring all day long with people wanting to sell their homes,” Purcell said. “That simply does not happen.”