Selfish selling brokers who won't co-broke
Anyone want to discuss the still-prevalent practice in Brooklyn of real-estate brokers who refuse to co-broke? (That is, listing agents who will not split their commission with a buyer’s broker?) The vast majority of brokers across the country co-broke as a matter of course; personally, I think refusing to do so should be illegal. Why?…
Anyone want to discuss the still-prevalent practice in Brooklyn of real-estate brokers who refuse to co-broke? (That is, listing agents who will not split their commission with a buyer’s broker?) The vast majority of brokers across the country co-broke as a matter of course; personally, I think refusing to do so should be illegal. Why? After spending two months working with a nice broker who showed us 30-something houses, I found the right one in the Times. Unfortunately, despite our repeated pleas, the seller’s agent would not relent from this practice–meaning that if I wanted to buy the place, I would have to do the negotiating myself, without advice or representation (I’m not an expert in negotiating and I’m also really busy). I would also be placed in the awkward position of having wasted my buyer broker’s time–unless, I suppose, I wanted to shell out a fee for his time, when I had expected from the beginning he would be amply compensated at closing, the way most transactions work. Aside from my own issues with this practice as a buyer, I believe it is a HUGE disservice to the seller–it means that an enormous number of potential buyers will NEVER see your house because their buyer brokers have no incentive to show it to them. Potential sellers: Trust me, DON’T list your house with an agency that won’t co-broke. And thanks, B-stoner, for letting me get that off my chest. Thoughts?
I’m a broker & REBNY member and am also frustrated by the non-cobroking firms. I have had a few customers expressing remorse when they’ve found the perfect place thru one of these brokers. It sucks for all of us but you’ve got to buy the place that’s right for you. I trust that you will remember who did such a great job for you when it comes time to sell! THAT’S why we do it. It’s luck of the draw. Sometimes there’s a huge commission and sometimes there’s none. It all balances out in the end.
However, although it is true that I work for the seller when the listing is with my company (even if I’m not the listing agent) I do not work for the seller when I sell a cobroke listing. I am then a buyer’s agent, even though I am paid by the seller (more specifically, by the seller’s agent).
And yes, we do work for ourselves (don’t you??) But if I advise a buyer to “pay more” it is only to get the deal for that buyer. If you raise your offer $5k you may get the house–the alternative is that you lose it for $5k (divide that by 12 months/30 yrs–is it worth it?) I want my buyer to buy the property because if they don’t I get NADA. the $5k or 50k difference in a bid is not that much by the time I get my sliver of the commission.
Tomorrow’s NYT has an article about the agency rules:
http://www.nytimes.com/2006/12/31/realestate/31home.html?ref=realestate
There are some agencies that are so lame out there that I’m glad they aren’t co-broking because I would never show their listings anyway because the broker in charge is so unscrupulous. At least if you show another agency’s listing and then they try to do sleazy stuff you have a means of complaining about them through REBNY as another REBNY broker. But there are agents out there at REBNY and non-REBNY firms that are best left to their own devices is all I’m going to say! Also some sellers are just penny wise and pound foolish because they list with these smaller agencies that don’t co-broke for a lower comission. But they ultimately lose out because the selling agent hasn’t shown the place to that many people so the price might be lower by a wide margin than it would have been if they listed it with a professional REBNY agent because they would get it seen by the max number of buyers.
OP, here. Thank you all for your comments, especially the thorough primer from Anon 9:42, which was indeed excellent. I’d also like to say that I respect and appreciate most agents, and think everybody deserves to be paid. And thanks for the support, Anon 9:57–I don’t feel too guilty. But let me add that I have never suggested that the listing agent doesn’t deserve to get their fair share for showing me their listing. I’m saying they don’t deserve the *entire* 5% or 6% commission at the exclusion of my buyer broker, who, like the listing broker, should also be respected as a valuable part of the buying/selling system. The buyer deserves a representive. Brooklyn realtors need to grow up, join REBNY, adopt the same professional standards as every other real-estate community in the rest of the country, and agree to split their commish with buyer’s reps. (A benefit that they, too, will enjoy when they show someone else’s listing to a wide-eyed Brooklyn newbie buyer.) I’ll say it again: It’s striking, telling, and amusing that not a single Brooklyn broker–NOT ONE–has emerged in this thread to defend the practice of screwing their own sellers with the practice of refusing to co-broke. This is because they know the only party that benefits from this is the listing broker themselves. Sellers: If you want your house to sit on the market for months with 1/10th the traffic, these are the agents for you. Okay, I’ll give it a rest at last. I swear. Happy New Year, y’all! 🙂
Any agent working with a buyer in Brooklyn knows that they are not necessarily going to be the agent that sells their buyer the property because there are still a number of not very good agencies who refuse to co-broke. So I don’t think you should feel guilty about your agent not making money off of your transaction. That said if you haven’t already presented your offer you can put it in writing that you are presenting it contingent on the listing agent co-broking the listing with your agent. You will risk not getting the property though because the seller may not want to be bothered with a dispute with the listing agent because of this condition you are presenting. But it is your option to present it if you like. This is something that should probably come in writing from your attorney though if you really want to play this game. And I’m confused though, how did you arrange to see this property if you didn’t deal with the listing agent. At this point perhaps it is too late because the listing agent has already done the work of showing you the property, etc and probably does deserve to be compensated for working with you at this point.
Oh now I feel badly, because I made all Brooklyn agents sound like they’re not willing to fight for the buyer. The agent who posted at 1:12pm sounds really good. So they’re out there, the good ones. I just haven’t had the best experience with feeling like my agent was looking out more for me than the deal, here in Brooklyn. My CA agent was better.
That’s the best information anybody here can get, 9:42am. Brownstoner should keep your advice on a permanent page somewhere on the site.
It’s true to always remember your agent as the buyer will always simply be trying to make the deal go through. I had a rarely found type of agent in L.A. once who actually was an aggressive negotiator. Unlike most or all buyers agents in Brooklyn, from what I’ve seen! Don’t get paranoid about your agent if you’re a buyer, but remember the advice you get from them sometimes is NOT always in your interest. It just means sometimes you might have to tell them “no, I will not pay more, go back and make the deal or I’m walking away”. When you love the house or coop/condo that’s hard to do, to threaten to walk away. Which might not be an option if there are other offers close to what you’ve offered yourself.
But for properties with no offers or only low offers, once your agent is presented with the option of not making any commission at all, they’ll negotiate better for you. This is why you hear that conflicting advice, “don’t get emotional about a house” vs. “you should find a house you love”. They’re both true. Find a house you love and then be willing to lose it.
As an agent at a Brooklyn firm that does co broke let me say that it is infuriating when small agencies won’t co-broke. I have had to guide several of my clients to listings at small agencies that have the perfect house/apartment for them. It is hard to work with someone for months (really understanding what they are looking for) showing them numerous (yes maybe as many as 30 or more) listings only to watch as they buy something from a small firm that doesn’t co-broke.
Believe it or not we (brokers/agents) are not all immoral jerks just looking to make a quick buck. Some of us truly enjoy helping people find homes that that are ecstatic about and do tell them about listings even if we know that we won’t get paid on the deal.
BTW- Most of the small firms that do not co-broke are not members of REBNY. You should always work with firms that are members of REBNY—they are held to a higher standard of conduct.
-Brooklyn Broker
I have successfully bought and sold several homes in California and New York City. Please allow me to make some points (in laymen’s terms) for those who might be new to the game.
1. New York City (especially the non-Manhattan boroughs) operates on an antiquated (perhaps even provincial) system of selling real estate. It is an entirely different animal than dealing with realty in other states.
2. Traditionally, Realty firms here in brooklyn offer their listings independently of other agencies nearby, in hopes of just attracting your average Joe-Schmoe buyer who walks in off the street, who will simply decide to buy the property, make an offer, get an accepted offer, and then have an attorney draw up the paperwork. Most RE attorneys in brooklyn charge about $1000. to take care of all of the necessary paperwork, to draw up a contract, and to legally (and in person) represent the buyer at the closing table, and to ensure that the buyer is obtaining legal title (a clean deed) to the property. Of course, there are many other variables that can affect this ballpark figure.
But no decent, working attorney is going to spend time looking at properties or conducting long, drawn-out negotiations (some will not negotiate at all.) The same attorneys here work with the same realty shops here all the time. They often know each other. They don’t want to be aggressive or nasty with each other, because they’ll be facing each other at the next closing the next month.
3. In Brooklyn, my experience has been that almost all the agencies here (especially the mom & pops) are quite wary of the MLS (multiple listing service) and they fear that using (I would say “upgrading to”) this method will cut into their profits. Using the MLS system essentially means that it is understood that there will normally be a 50/50 split of the commission between the selling agency and the agency representing the buyer. (the buyer’s “agent.” To clarify: Co-broking means splitting commission proceeds 50/50; it also usually means that the agencies are willing to utilize the MLS. This is usually 5% or 6%. So each agency takes 2.5% (or 3%) and each agent gets about 1.25% or 1.5% of that. This is pretty much how it breaks down.
If you go to an agency that does not co-broke, nor uses the MLS, that agency will only show you the properties that have been listed with them for sale.
Think about it: Would you rather have one salesperson only show you one “line” of appliances made by one manufacturer or would you rather work with many salespeople who can show you the complete line of all models and makes of appliances currently available?
Tip for those not yet getting it: Go to as many different agencies as possible, see as many different properties as possible, look at properties online and start using your business sense. Think about location, condition of property, maintenance fees, price per SF, quality of zoned schools, noise levels on that street, etc. Do not trust others to make these decisions for you! You must get off your duff and do the legwork if you want to be happy with where you live and make a profit when you sell.
When you find the property you love and get an accepted offer: Make the deal contingent on the property passing a home inspection (and make sure you hire the guy! Don’t use the inspector that the agent recommends! I know people who have done this – duh!) Often, the inspector will find correctable problems that you can use to negotiate a lower price. So don’t skimp: the inspector can easily pay for himself and then some.
4. Repeat after me: The seller’s agent has a fiduciary duty to the seller, and the agent representing the buyer ALSO has a fiduciary duty to the seller. And no, this is not a typographical error on my part. When I lived in California, I had to sign a disclosure that stated that I was aware of and understood this very fact. This means that both agents do what it takes to make the deal go through. Why? Simple – Both agent’s livelihoods depend on that commission. California law wants you to be sure you know the deal.
5. When you are using a “Buyer’s agent” here, it really can only be a situation where you are paying that person for their time, or that person is only cooperating with agencies who co-broke. But remember, if you’re not paying them a fee (flat or time-based) then they will ONLY have a fiduciary duty to the seller! And mos def, you should get a contract in writing that states the fiduciary position if you hire somebody on your behalf.
6. Good luck, and know that knowledge, information, insight, and being on top of all the listings available will put you in the driver’s seat. I have found the NY Times website to be quite helpful – you see many different properties from many different agencies. But you’ll have to do the looking and deciding on your own. And in the end, you can only trust yourself.
My suggestion for the future is that you send a letter to both seller and seller broker informing them that you are prepared to make a serious offer if the seller’s broker agrees to cobroke or is otherwise compensated by the seller. If your bluff gets called you can always make an offer anyway.
The seller’s broker DOES have a fiduciary obligation to the seller and refuses a bonafide offer at their own peril. This is the definition of a breech of duty; elevating the broker’s interests above those of their client.
I think we should confront fiduciaries with their duties whenever possible. Make it clear to broker and client that there is a potential conflict and force the broker to acknowledge the problem. Copy the Department of Consumer Affairs, REBNY, The Attorney General, etc. and get the broker’s name in the system, if nothing else.