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First time buyer here, so I would appreciate to hear your thoughts on the pros and cons of using a Buyer's broker in NYC.
Here is my story:
After attending a very basic real estate workshop where a broker argued that using a Buyer's Broker was pretty much a "free option", admittedly without giving it much thought I asked for a recommendation from a friend who works in Real Estate and started working with a broker.
After a few viewings with him (all initially identified by me through web searches), I started to get the feeling that he wouldn't add much value in my home search.
Still, I liked one apartment and made an offer through him. While I do think that he might be of some value in the closing process to guide me through the bureaucracy, it was during the offer process that I realized that using a broker wasn't a free option at all. I realized that if the other offers for the same apartment were self-represented, I would be at a disadvantage, as the seller would have an incentive to steer the sale towards the self-represented bidders so he could keep his 6%...
Anyways, as it turns out I didn't get the apartment and I'm not sure if I want to keep working with him or not.
(1) Do you agree with my assessment that I'm at a disadvantage against self-represented bidders? In practice, how big of a deal is this? What percentage of buyers use a buyers broker in NYC roughly?
(2) Am I missing any big pros and cons of using a buyers broker?
(3) If I decide not to use him anymore, is it good etiquette to tell him so or I can just move on without having to have this unpleasant conversation?
(4) If I decided to make an offer for an apartment I saw with him (though identified by me), would it be wrong/unethical to do it without him? Would he have grounds to complain or even sue me?
Regardless of whether or not you have a broker, the commission is the same. If you have a broker, the selling broker and your broker split the commission 50/50. If you don't have a broker, the selling broker gets the whole thing (usually 6% but sometimes negotiated to 5%).
Unless you are looking for a broker to identify apartments for you, a buyer's broker is of no value and will do nothing for you. If you know which neighborhood you are interested in and prefer to find apartments yourself, there is no need for a buyer's broker. As for the closing process, you will need an attorney and he/she will deal with the closing logistics. This is different than many states. In other states I lived in, the work that is done in NY by an attorney is done by the brokers. In NY, the ONLY thing brokers do is show you the apartment. A monkey can do it - they walk in - they say "This is the living room, this is the kitchen, this is the bedroom; you want to make an offer".
If you saw an apartment with a broker and make an offer (assuming you have a signed agreement), expect the broker to come looking for his/her fee. If don't have an agreement, it will be more difficult for the broker to collect his fee, but expect to be hassled.
One thing I will saw, however, is that if you do not have a broker, the selling broker is more likely to steer the seller to your offer especially if there is another offer from somebody who does have broker b/c then the selling broker gets 100% of the commission. This is totally unethical and brokers are not supposed to do it, but the still do.
One last thing you should know - Once you make an offer, expect the selling broker to tell you there is "another full price (or above ask), all cash offer" and that you should "raise your offer". In short - don't believe it. This is the oldest broker trick in the book. Totally unethical yet it happens all the time.
The short answer to your question is yes and no.
In this day and age if you are willing to educate yourself to the re market that you're aiming for than you really do not need a buyer's broker to help you shop. You will need a buyer's broker to purchase and negotiate effectivly as well as administering the purchase process.
Consider a buyer's broker like the firstname.lastname@example.org
They will provide 'just' the services that you are interested in at a great savings to the buyer.
By the way...when you're the buyer you pay EVERYONE...your broker, the seller's broker, the mansion tax, the flip tax, the lawyer(both sides). When you buy, only you sign checks.
Thanks, downtown. By the way, you were spot on in your last paragraph, that's exactly what happened. At the end, I did improve my offer late in the game but the contract was ready to be signed by the other buyer and I did lose the apartment.
I don't have a signed agreement with the broker by the way. I'm leaning towards telling him that I won't work with him anymore although it's an unpleasant conversation to have.
if the seller has a broker, usually they will be paid less of a commission 5% vs 6% say, if you do not have a broker. so there is pricing power there for you. But your offer would be more attactive to the selling broker, yes.
If you can search the internet, and negotiate, all you need is a lawyer.
falcogold1 - what do you mean that the buyer pays the buyer's broker, seller's broker, etc? I have never heard of a transaction where the buyer pays the the broker's fees. The only time I have ever heard of the buyer paying the seller's attorney is if you buy directly from a a sponsor.
This can be argued either way. If you are the one always sending the broker listings then it is pretty silly to use them. If you have a broker that works 6 to 7 days a week and is constantly sending you listings that fit your criteria, as well as keeping you updated on everything new that hits the market (within 24hrs), then it is worth it. Right good deals are going fast and if you have another job that is somewhat demanding then having this kind of buyers broker makes sense. Like any industry there are people who are good at their jobs and there are those who aren't. Real Estate in NYC is fast paced compared to the rest of the country so make sure if you do use a buyers broker that they are very active and hungry. Not someone who is doing this as a second job. Good luck with your search hope this helps.
There's nothing like a seasoned real estate broker who knows how to negotiate the best price for the buyer. With the broker doing the negotiations, the buyer who is emotionally involved in the transaction cannot do as well. Also the broker is far more informed about the market.
Licensed Real Estate Broker since 1987
Licensed Mortgage Broker since 1990
yes of course brokers are going to tell you that you need a broker. Of course, most brokers are imbeciles and unfortunately few are "seasoned" lol.. thanks that was helpful. Nothing like hiring someone whose ultimate interests are not aligned with yours.
when people say the buyer pays for everything, they are saying that the buyer's money is being used to pay for everything, one way or another - and that is why the buyer paid the price they paid.
just to try to clarify the financial point.
when a seller contracts with a broker to sell their property--there are two different commission structures in the contract. as an example, if the commission is 6% for a sale with a represented buyer, the commission on a sale for an unrepresented buyer could be 4%.
so. if you're unrepresented, your offer is 2% better to the seller (who saves 6%-4% or 2% on the commission he pays to his broker).
and...your offer results in the selling broker making 4% rather than 3% after a split with the buying broker.
On a $1 million deal, the seller gets $20,000 more and the broker makes $40,000 instead of $30,000.
Thank you all for your comments. The bottom line is that there is really very little reason for me to get a buyer broker in NYC... I wonder if I would have gotten the apartment I missed if I had worked without a broker. Anyways, I'm definitely going solo from now on...
full disclosure, I am a broker . Just wanted to add something. Sure , buyers broker is there to find you listings , but in my opinion , value you get from a buyers broker is when it comes to negotiation. Every buyer wants to get a place for the BEST PRICE possible . This is a public information and anyone can get it , BUT it takes time from the moment the deal has been closed until it has been recorded with the city. During that time every broker will be able to get the information for his client with relationships we have in other companies etc. and buyer himself CANT get it. This is only just a small example where you can SAVE money using a buyers broker...
Seller agrees to pay a commission usually 6% which is later split 50/50 between buyer broker and listing broker . Usually , if buyer comes by himself , then listing broker will get 5% . This is in majority of cases. So going by yourself , you can maybe get a 1% additional discount from seller , but I am 100% sure that a good broker will save you much more money than 1%.
I mean , if you don't care about the money and you don't mind overpaying for an apartment , go and do it your self.
Traditionally , 95 % of the deals in NYC involves a buyers broker.
Without using a buyer's broker, how do you get into the apartment to view it? Do you just call the seller's broker and meet up with him/her? Aren't you then, in effect, still using a broker?
are you kidding?
What I mean is: the 6% re commission, the legal fees etc. are all proceedes of the transaction or additions to the transaction. Essentialy all or most generated by the buyer.
Isle_of_Lucy - You either go to the open house (if there is one) or you contact the selling broker and ask to view the apartment. The seller's broker works for the seller (and thus is obliged to act in the seller's best interests), regardless of whether you have your own broker or not.
I found my apartment on StreetEasy and saw it an Open House. Still I am 100% thankful I used a buyer's broker because of everything she did for me from that point on including: giving me advice on the offer and conducting negotiations with the seller's broker; (importantly) preparing my board package; working with the seller's broker to arrange the best sequence of events vis a vis the sale of my other property and my board interview. I probably could have done all of that on my own but it would have been a huge time suck and an overall PITA.
downtown1234, thanks, of course not all apartments have open houses. But even if you just contact the seller's broker to see it, make offer, and close, s/he will still get the full 6% commission.
I guess my point is that it doesn't cost a buyer any more money to go with a buyer's broker. Not sure why so many people seem to fret over whether or not to use one.
Sorry, hit send too soon. NativeRestless, even if they do nothing else, I think they earn their keep just preparing the board package (copying, collating, distributing).
you might want to read what i posted above---there is a different commission structure to the selling broker based on whether or not its co-brokered.
Isle_of_Lucy, given that the listing agent will be paid differently depending whether the buyer uses a buyers broker or not, he would much rather sell it to someone who is self represented.
In the process of making an offer for an apartment using a buyers broker, I strongly felt that I might have been in disadvantage if the other offers were not co-brokered (there were supposedly two other offers for the same apartment).
At one point, I even wondered if the broker could withhold my offer from the seller even if it was the best offer. For the sake of argument, assume that my offer was 1mm and the second best was 990k. The listing agent would rather receive 6% or 5% of 990k than 3% of 1mm...
When I think of a buyer's broker, I think of million dollar listing, where all the brokers (both buy/sell) go back and forth and eventually meet in the middle of an asking price. I have rarely seen any purchase where the buyer got around the initial offer, its always somewhere right in the middle.
I personally wouldn't want a buyer's broker because I would want them to stay firm and not sway my initial offer up, since I would have considered the offer "fair" based on ppsf, location, etc. I think the buyer's broker would have brought my emotions into play a lot more had I used one.
Lucy, Agreed. If I were to buy again I might go with the Burkhardt Group but I would never go totally DIY.
about 4 hours ago
Member since: Jan 2009
ignore this person
report abuse you might want to read what i posted above---there is a
That's a very passive, non-specific statement. Maybe that's why what you posted above was ignored.
I don't know. I like my broker. And he knows my real estate obsessions. So when the appraiser asked for some potential comps he called me up and asked me if I wanted to do them. Hell yes I did. Yet the broker for the seller was both a newbie and a bit of an asshole (relisted the apartment and had an open house when we had a signed contract) so I was happy to have him deal with the jerk.
>Yet the broker for the seller was both a newbie and a bit of an asshole (relisted the apartment and had an open house when we had a signed contract) so I was happy to have him deal with the jerk.
If you were to have listened to people like Wbottom/yikes, you would have withdrawn your offer or somehow cancelled the contract in spite.
Hb, I must confess part of me wanted to tell him to go fuck off.
But logic prevailed.
Yes, indeed. And here I sit.
& good for you.
actually hburg (since you seem to be communicating for a change) i have bought and sold multiple properties here in the big city---with great success and profit, in fact.
in general, buyers' broker are impediments to sourcing/purchasing the right apt at the right price.
and, whether the seller has arranged things as CC describes or not, at the negotiation stage, it is quite easy to explain to the seller that the sale need not have a 6% commission attached to it, for obvious reasons.
Thanks for the nice words but best to reach me at keith at theburkhardtgroup dot com
>and, whether the seller has arranged things as CC describes or not,
columbiacounty clearly implies its automatic
Few things are automatic. What I describe is what is currently available for the asking. It is automatic from a main stream broker who senses that he/she is dealing with a potential client with experience. I have presented it here to help those who may be unaware.
No, you made misleading statements.
You specifically stated that "there are two different commission structures in the contract."
Yes, it could be asked for, by the seller, but you stated that it was automatic in the contract and that the buyer should rely on this fact. Only now, once called on it, do you moderate your statement and say that it could be asked [by the seller, by the way] for or would be "automatic ..." if sensed by the broker.
You misled the OP.
But what's new?
columbiacounty, Jim Hones - two (or one?) of the biggest misleading and nasty posters on streeteasy.