It was a tough year for New York City’s residential real estate players.
The market got off to a slow start in the first quarter, waylaid by a series of interest rate hikes that continued until November. The subsequent mortgage rate increases limited supply, keeping prices afloat and suppressing activity.
As the market struggled relative to the post-pandemic bonanza of 2021 and the first half of 2022 well into the summer, optimistic forecasts from agents in the Northeast for a strong second half were replaced with pessimism and uncertainty for the fourth quarter and the start of 2024.
The industry was rocked by a bombshell antitrust verdict that threatens to undo commission structures.
The residential firms based in the Big Apple faced some shaky financials. Compass posted two consecutive quarters cash-flow positive, but said it wasn’t likely to be cash-flow positive for the fourth quarter or the full year. By contrast, it’s been over a year since Elliman posted a profit.
The year ended on a high note, when the city’s residential bosses lauded the Federal Reserve for indicating in December that it would no longer raise interest rates and will likely look to lower them in the coming year.
Here are the top residential brokerage stories of last year:
1. REBNY changes commission rules
The Real Estate Board of New York announced new buyer’s agent commission rules in a bundle of five changes to the Universal Co-Brokerage Agreement, which governs REBNY and the Residential Listing Service. The amendments took effect Jan. 1.
The update came amid renewed scrutiny from the Department of Justice and the trial for the first of two monumental class-action lawsuits against National Association of Realtors, Keller Williams and HomeServices of America over buyer’s agent commissions.
2. The broker commissions lawsuit wave reaches NYC
The jury in the landmark Sitzer Burnett antitrust lawsuit dealt the industry a blow when it found the NAR and the two brokerages liable of conspiring to keep commissions high under the industry group’s Participation Rule, which dictates commission splits in exchange for access to the MLS.
The action hit home with a copycat case filed in New York Southern District Court after the verdict. The complaint on behalf of New York City homeseller Monty March against the Real Estate Board of New York and 26 firms similarly alleged the trade group inflated commissions by way of its rules requiring sellers to pay buyers’ brokers.
“This inflexible commission practice has become so ingrained in the system that people have either accepted its unfairness out of deference to tradition or do not understand the nature and economic implications of the commission fee,” the complaint says.
3. Elliman, top agents named in Section 8 discrimination suit
Elliman and dozens of its agents were named in a Section 8 discrimination lawsuit that alleged top agents ignored inquiries from a New York voucher holder about help with her apartment search. Some did not respond to Shaniqua Newkirk, while others turned her away or claimed to not know what Section 8 is or to not have apartments appropriate for the vouchers. Some tried to help her and were ignored.
Fair housing attorney Craig Gurian, speaking generally and without direct knowledge of the lawsuit, said violations are judged by whether the agents responded to Newkirk as they normally would a client. Agents who told Newkirk they don’t have apartments that qualify for Section 8, or who said they don’t work in that sector of the market, may be found guilty of a violation for not referring her to a colleague who does.
4. Bespoke hit with legal action over discrimination claims
Former Bespoke executive Jarret Willis filed a discrimination complaint against the brokerage and its founders, Cody and Zachary Vichinsky. Willis, who is Black, alleged that another employee addressed him by the N-word and that various employees referred to him as Jafar, the villain from “Aladdin,” in a derogatory manner.
Willis also alleges an anti-Jewish slur was frequently used at the firm’s Hamptons office and that the brokerage withheld from him hundreds of thousands of dollars in commissions.
The New York State Division of Human Rights said in November it found probable cause regarding the complaint and called for a hearing, according to a legal filing obtained by The Real Deal, calling one necessary to settle “material issues of fact” that the investigation could not resolve.
Bespoke wasn’t the only brokerage to face discrimination claims from within its ranks.
A judge awarded a former Brown Harris Stevens agent in the Hamptons $800,000 in damages in a wrongful termination lawsuit. Shauncy Claud, who is Black, alleged she was fired in retaliation for airing complaints about her manager treating her differently from her white colleagues.
Claud’s termination stands in stark contrast to the firm’s handling of another agent’s misdeeds. One of BHS’ top producing agents in the Hamptons, Christopher Burnside, was sued by his clients over an alleged “sexcapade” with one of his team members at their home. Burnside is still employed by the firm and the other agent involved in the lawsuit continues to work on his team.
5. Top broker Tamir Shemesh out at Serhant
Tamir Shemesh, one of New York City’s top producers, was terminated from Serhant in February. It’s unclear why Shemesh was let go, but the ousting marked the broker’s third abrupt departure in the past six years.
Shemesh joined Ryan Serhant’s eponymous brokerage only a year prior to his termination, following a sudden exit from his second stint at Douglas Elliman. Before jumping to Elliman, Shemesh was asked to leave Corcoran in 2017 following a dispute with senior management.
Just a few days after his termination, Shemesh landed at Nest Seekers International — the firm where Serhant built his business and rose to stardom as a cast member on “Million Dollar Listing New York.”
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