354 West 23rd Street #4B
1 bed•1 bath
Co-op in Chelsea
335 W 29th Street
1 bath•400 ft²
Rental Unit in Chelsea
50 West Street
Condo in Financial District
I am in the market to buy, and don't believe a buyers broker will add value. My wife is on the loose end and might have time to spend to get a broker's license so she could act as my "broker". That way, we can keep the 3% commission, which, on a $1M place could be $30K (no chump change). Is this a feasible option?
1. Are there rules against brokers buying apartments for themselves and keeping 3% comission?
2. How long does it take, and how much does it cost for a reasonably smart person to get licensed as a broker in NY?
Because the term broker is often loosely applied by those outside the industry, you may be confusing an agent license with a broker's license. A broker's license, unless the applicant is an attorney, is available only after a certain volume of sales have been completed by a licensed agent who has been licensed for at least one year.
See the NYS page here:
In order for you to keep the 3%, you would have to be a broker and incur the costs of maintaining the license.
It's too bad that you haven't found a good agent to help you with your search. I would like to think they are out there.
CSPAN_rocks is incorrect that you have to have a license.
It is within reason that you could approach a broker about a listing and say you are self represented and therefore expect the final purchase price be less the 3% buyer's brokerage commission (2.5% if the broker is operating on a 5% commssion) as you are not represented by a broker.
A brokerage license is not required when transacting on your own behalf.
So I can just go to an openhouse and say "i'm representing myself, and hence will pay 3% less"? Is it really just that simple? I'd think the broker cartel would have a way to block this - no?
I'm confused. I thought the seller paid the broker in RE transactions.
Am I missing something?
My guess is you'd have a harder time getting the 3% on a hot property. I'm sure brokers would rather support each other and their ridiculous system by giving priority to other brokers. I had test drove an agent before I bought my place and he was utterly useless. When in buying mode, you comb StreetEasy several times per day. I saw listings way before he sent them to me. In the end, I bought at a new development and they weren't willing to budge on the price. However, they gave me priority over other brokers since I didn't have a leach attached to me that was going to take 3% away.
eric_cartman: Do you have any buds who are attys? If so, couldn't you list them as your broker when you go to open houses. If the deal comes togehter they are technically your broker (even though you've done all the work pulling together the board package etc..) they may have to field a few calls from the seller's broker for you. At closing they get 3% and what happens next would be up to you and your bud. (He'd have to pay taxes on "his" commission of course). Am I missing something? (Making bids 3% lower than other bidders (b/c your not using a broker should work but it doesn't, I think it turns sellers off).
It just can't be that easy. Besides it won't make a difference to the seller, would probabaly create bad will between you and the listing agent who might sabotage the deal for you.
The advantage of not using a broker is that you can pay less and the agent won't have to split the commission, giving them an incentive to push for your bid. If you tell an agent that you're 'self-representing' and then just so you can get the commission - yeesh.
They are such a cartel - the govt should do something about this (e.g., seller pays sellers broker, buyer pays buyer's broker) that way each has a choice in whether or not to use broker.
wrong. co-broke is ONLY available to licensed NYS real estate brokers who are ALSO REBNY members. I know, i've gone through this process. The process for getting licensed as an RE broker (unless you are a licensed NY attorney) in NY takes at least 2 yrs, first licensure as a salesperson, then tutelage and sponsorship under a broker or brokerage. sure, perhaps if you're a superstar you can take the broker test sooner but it is in no way a quick process.
Igor777: It DOES work this way. Lets go through it together: I'm an atty. My friend puts my name down at an open-house, makes the highest bid for the place, it goes to contract, the contract lists me as buyer's broker and is signed by both parties, I pull together the board package, I walk away from the closing-table with 3%. If I'm not listed on the contract as buyer's broker the deal doesn't close and listing broker goes back to square one and since 3% in-the-hand is better than the POSSIBILTY of 5% or 6% in-the-bush, it will always work this way.
The broker gets 3%, the spouse would also entitled for another 1.25% or a bracket not exceeding $75,000, the larger 10% and 15% bracket would go to the family. A little more than half of the commission goes to FCSA, Fair Commission Standard Act based on the broker's work records.
again, to get them to give you the co broke, you have to be licensed as an r.e. broker AND be a rebny member, attorney or not. i've gone through all of this. these brokerage shops all follow this, legal or not. thats what they do. so unless you want to sue them for the cobroke, get licensed and become a rebny member. these people do not fuck around when it comes to money.
How does an attorney go about getting a RE license AND become an rebny member? Is it an easier process? What are the fees and steps involved?
it's pretty easy SBL, I looked into it. Google helps. I can't bring myself to write a long boring post spelling out the steps.
The requirements for a real estate broker license in New York include being at least 19 years of age and being a U.S. Citizen or an alien lawfully admitted for permanent residence. Broker license applicants must have at least one year of experience as an active licensed real estate salesperson, or at least two years of experience in the general real estate field. Full time is defined as 35 hours per week for at least 50 weeks per year. Applicants may apply for a combination of these two types of experience. Broker license applicants need to successfully complete 90 hours of specific approved real estate courses before taking the real estate exams. Those who have completed a degree program with a major in real estate may apply for a waiver of the education requirement.
Broker applicants need to apply for their license within two years of successfully completing the examinations or the exam results will be invalidated. Attorneys who are currently members of the New York State bar are exempt from both the educational and experience requirements. All broker applicants must have a physical address that they will be doing business from: a post office box number as a business address is prohibited.
All applicants for a real estate license in New York State need to complete and submit a Child Support Statement, whether they have children or not, or any support obligation. If anyone is four or more months in arrears in child support their license may be suspended. No person shall receive a real estate license if they have ever been convicted of a felony, but this rule may be waived in certain circumstances. The examination fees are $15.00 for both broker license applicants and salesperson license applicants.
Licensed real estate agents need to complete 22 ½ hours of approved continuing education courses during their two-year license period. Exemption from this continuing education requirement is granted to real estate brokers who have 15 consecutive years of real estate licensure and who are actively engaged in real estate at the time of renewal. New York State attorneys admitted to the bar may also waive this requirement.
The approved real estate schools for prelicensure and the approved continuing education schools are located online. Distance-learning real estate courses are available as well as classroom courses.
The nonrefundable license application fee is $150 for a real estate broker, and the license will be effective for two years. The salesperson real estate license is $50.00. The expiration dates for both are staggered.
Igor777: Have you ever done this--stiffed a buyer's broker (who is also an atty) out of his 3% on a deal? If so, how was the litigation, fun? Out of pocket cost for an atty. to file an action for his commision would be the $50.00 filing fee, that's it. She'll then bury you with motions/paperwork. Your costs to defend would be MUCH higher (likely higher than 3% of the sales price). Also, perhaps a complaint to your professional-body gets filed, and (since you'd have to report the suit to your malpractice carrier) your professional insurance premiums would increase, not to mention the bad PR about you in the market.
Perhaps better to just take the 3% and move-on to the next deal. Pigs get fed, hogs get slaughtered.
qwerty. on the flip side, any attorney with a brain would simply get their NY RE license ($150) and join REBNY to avoid the headaches ($700+ app fee). Unless, of course, that attorney is just an obstinant prick and enjoys suing people, which many do.
totallyanonymous, Igor777: Thank you both for the pointers. I already have a RE license (obtained by virtue of being an atty) and will certainly join REBNY b/f my next purchase (either for myself or one of my buds)--no reason to risk missing-out on 3%. So far I've just been relying on the sales contract and comission-split agreement to get my 3%.
Igor777: You can/could've sued under equitable doctrines such as unjust enrichment to get your due from the John Doe Living Trust. Mr. Doe signing the brokerage agreement in his own name instead of the Trust's created detrimental reliance on your part (as well as possibly constituting fraudulent inducement). As your "best bud" attorney should know; there's always more than one way to skin-a-cat. If the statute of limitations has not yet passed you may still be able to get your $ (at the very least Mr. Doe would settle for some number south of what it would cost him to defend the suit. Good luck.
Igor. A lawsuit is not "frivolous" merely because you deem it so. I personally agree that under current New York law, a licensed real estate broker is ENTITLED to a commission in a transaction in which he/she is a party. I've cited the case on this board, in fact. However, that commission may or may not be the full 3% depending upon contractual agreement otherwise. To avoid potential litigation with people like you, I've advised that (and done this myself) any attorney just pay the licensure fee and join REBNY. I know its bullshit, but it avoids headaches with people like you who, no insult intended, appear to have no idea about the legal ramifications of their actions, other than some REBNY-sponsored CLE course they took in 1983. Again, no offense. I know that the prevailing view among brokers is that all attornies are idiots, and many of them are, generally the ones in bed with the real estate brokers. However, as you would leave the real estate selling to the professionals, you should leave the legal opinions to the professionals as well.
guy -- you can post whatever bullshit opinions you like. if they're wrong, i'll let you know (and they usually are). And just so you know, New York law trumps the MLS regulations. this isn't Stalingrad.
guy, you need help. First of all, its not a NYS "law", dipshit, its a NY case, as in "caselaw" which is something you clearly do not comprehend. Perhaps in mother Russia, they don't have courts of law which issue "opinions" which have the effect of law, as they do in these here United State, unless overturned by a higher "court". Your limited intellect suggests to me that my time is not worthy of back and forthing with you. My suggestion to you is to realize your intellectual inadequcies and use that knowledge before you speak, or in this case, write. Suffice to say that NY "law", which, and I'll go slowly for you, includes "caselaw", not merely statutes, regulations, et al., currently holds that the NY statute governing broker commission was never intended to freeze out a party to the transaction from receiving such commission, barring agreement to the contrary. The "case" is Liuzzi v. Nigro. If you have the capability or the intellect to retrieve this case, best of luck, if not, shut the fuck up, please.
109 Misc.2d 526, 440 N.Y.S.2d 448
Supreme Court, Albany County, New York,
Louis A. LIUZZI, Jr., a/j/a Louis A. Liuzzi, Plaintiff,
Frank J. NIGRO, Jr. and Frank J. Nigro, Jr. and Frank J. Nigro, Sr., d/b/a Frank J. Nigro Real Estate, Defendants.
April 20, 1981.
Real estate broker, who conveyed certain real estate formerly owned by broker's deceased father and listed with broker's employing firm to a third party, brought action to recover commission on sale. On cross motions for summary judgment, the Supreme Court, Albany County, Special Term, Lawrence E. Kahn, J. P., held that: (1) real estate broker, if his sole relationship to transaction was as either executor or beneficiary of father's estate, would be a “party to the transaction” within meaning of Real Property Law section proscribing real estate broker from paying commission to any person who is “party to the transaction” in which commission becomes due to broker, and thus prohibited from receiving a fee or commission; but (2) under Real Property Law section, Legislature intended not to preclude a duly licensed real estate broker or person from obtaining a commission upon sale of property where such duly licensed individual is party to transaction.
 “[S]ection 442 of the Real Property Law prohibits the splitting of fees by a real estate broker with unlicensed persons acting as brokers in real estate transactions ....” ( Strong v. Cuomo, 67 A.D.2d 705, 412 N.Y.S.2d 413). It is clear, that since the enactment of these provisions of the Real Property Law in 1925, the courts have interpreted the statute to be a legislative mandate to prohibit unlicensed individuals from acting as real estate brokers and salesmen. (See J. L. Holding Co. v. Reis, 240 N.Y. 424, 148 N.E. 623 and cases thereafter). The first paragraph of the statute specifically authorizes the common practice of paying a listing commission to a duly licensed real estate salesman. Further, and most significantly, the second paragraph of the statute prohibits the splitting of a commission with a party to the transaction except “when permitted pursuant to the foregoing provisions”. Thus, it is apparent that the legislature intended not to preclude a duly licensed real estate broker or person from obtaining a commission upon the sale of the property where such duly licensed individual is a party to the transaction.....
Liuzzi v. Nigro
109 Misc.2d 526, 440 N.Y.S.2d 448
Liuzzi v. Nigro 109 Misc.2d 526, *528, 440 N.Y.S.2d 448, **450) (N.Y.Sup.,1981)
I love Westlaw.
I think it's just brilliant that the underpinning of totallyanonymous's position is a 1981 lower court decision from Albany County. In 27 years, the Liuzzi v. Nigro decision has been cited all of only one time as authority by another court, and then only in passing to say a licensed broker can be entitled to a commission. In the real world, this single lower court decision has virtually no binding effect on another court if the latter wished to rule otherwise. Sometimes, a little knowledge of the law is a dangerous thing. Waiving this decision around as if it's the definitive answer on the issue is a gross overstatement of the case law of NYS on this point.
agree with kylewestlaw there. This is an interesting thread. I think totallyanonymous should take a test case, perhaps by trying to enter a real estate transaction with Igor while represented by a lawyer bud. Then take it to the Supreme Court! (Or at least the NY Court of Appeals!).
As an attorney I can easily obtain my license and joing REBNY. In purchasing a place for myself, what would you recommend? Should I obtain my license and join REBNY and when making an offer (full price?, less 3%?)submit a cobroke? Can I just ask for a 3% cut without having to do all the rigamarole?
igor dude. your posts make absolutely no sense. Not sure if you understand that, but they dont. Not sure if your reading comprehension skills have ever been tested, but you make absolutely no sense. Kylewest, not to question your amazing interpretation, however "virtually no legal binding effect" means fuckall in that no higher court has overruled this case. Simply because its a lower court does not negate its effect. Of course an appellate court is not bound by its decision, nor is a sister court by that matter, but it is precedent, the only one in fact on this self-commission topic. Until you come up with a better rule, its all there is. This Igor character is retarded and continually cites brooklyn MLS rules as if anyone gives a fuck. This case is the only thing on point as to this topic. Until then, we all have to license ourselves and join REBNY to deal with complete fucking idiots like this Igor.
All: thanks for your input on this topic. I've found it very helpful. Seriously.
Boss77: The lesson is the old belt and suspenders one (as totallyanoymous indicated earlier): Attorneys looking to get commissions (whether for themselves or their buds) should get a RE license (simple form and $50 fee and join REBNY (form and $700 fee). Then make sure you're listed on the sales contract as a broker and make damn sure you have a signed co-broke agreement with the other broker before you sign the sales agreement.
Can I be my own broker and co-broke a purchase in NJ even if I am licensed only in NY? Please help!!
No you cannot.
i didn't even read the whole thread but the first thing that came to mind was greed. a broker needs a brokers license, that's two years worth of being the business, and $3500 points, or combined experience of over 5000 points.
REBNY's rules for contacting Sellers are different than the Brooklyn MLS rules IGOR777 mentions http://rebny.com/cobroke/UniversalCoBrokerageAgreement.pdf
"Section 7. Communications with Owners. No Co-Broker may contact the Owner
without the Exclusive Agent’s prior consent.
Section 8. Negotiations with an Owner. A Co-Broker may only negotiate directly
with the Owner with the full knowledge and consent of the Exclusive Agent."
your eric cartman - you do what you want
Hello, I "self-represented" in my recent transaction as a buyer. However, I didn't "keep" 3%, however, during my negotiation, I was able to leverage off the fact that I did not have official representation and knock off a couple % off the purchase price.
I purchased a place on the UWS in 2003 and represented myself. Because I represented myself, it gave me a strong negotiating position. My bid was not the highest bid, but it was accepted, primarily because of the fact that I represented myself.
Does anyone know how long it typically takes for your application to get processed? I sent mine in last week and I'm wondering if I can help a friend out. I am an attorney, if that makes any difference w/ processing time.
application for what? access to the town pool?
gcondo: that was an unnecessary a$$ comment. The thread should give you context for the question. Go take a swim.
I am an attorney and just bought an apartment and collected 1/2 of the commission at closing. A few thoughts/pointers:
1) While technically not required (an attorney can act as a broker, even without actually getting a license), it makes things much easier if you do have a license. It is very, very easy to get a license as an attorney. You fill out a two page form, check that you are a licensed attorney in NY and pay a $150 fee. Use this link: http://www.dos.ny.gov/licensing/re_broker/re_broker.html and click on the Broker Application link. If you do not have a NY state driver's license, you will need to go to the DMV and have your picture taken. Once you mail in the form and your check your Broker's license arrives in about 2 months. You will get a certificate (looks like the same certificate, a paper ID card and an ID card.
2) When you go to open houses, list yourself as a broker.
3) The Seller's broker on my apartment was experienced and didn't make an issue of it at all. I can imagine a young, obnoxious broker making a big deal, but just go over their head. The Seller's broker (who was from one of the big NY RE shops) didn't quite know how to fill out the paperwork (she wasn't being difficult; she just hadn't come across this before) at first. I think she had to check with a few people internally but once she saw I had a license it was no big deal. Basically, she sent me their standard co-broke agreement with my name filled in and wrote "Licensed NY state Real Estate Broker" below my name with my broker's license number. She asked for a copy of my broker's license. This was all resolved in less than a day.
4) Make sure you tell your lender you are doing this - especially if you are getting a conforming mortgage. I had to clear some things with my lender. I would not have wanted to show up to closing and have my lender find out for the first time I was doing this as it would have created big issues.
As to whether I could act as a broker for a friend, I don't know and don't plan to do so. I did this only for myself. Remember, if you plan to do this for a friend, my understanding of RE rules is that the broker has to be physically present at the first meeting with the seller's broker. You can't just show up and list a friend's name on the open house sign in sheet and expect that person to collect 3% for you. Others may tell me this isn't correct but this is how I understood it.
I hope that helps.
I should add I am not a member of any MLS - I just paid my $150 fee to get my license.
dt1234: That is very helpful info. Nothing like hearing it directly from someone who has actual experience with the process. I'll be looking to do the same. Additional question: do you think being listed as your own broker affected the sale price in any way?
Nice work DT1234. I am a broker that utilizes rebates as one aspect of my services to help buyers maximize their purchase power. If you are a buyer you may certainly sign in your brokers name at a public open house, this is common practice in the industry. Many brokers from all the firms are not present at Sunday open houses with their buyer clients. It's just not possible to be with every client.
What is important, though not "legally" necessary is that you allow your broker to make any private showings for you and in this case the listing broker will expect your broker to be there.
I have provided a link to some information regarding rebates written by the DOJ, you may find this useful.
Keith Burkhardt (broker)
olaash - I don't think it affected my purchase price at all. The reason is that regardless of whether the seller's broker got the whole commission or split it with me, the seller was going to pay the same amount in commssion. I doubt he cared who the money went to. Where I could see it being an issue is if there were multiple bidders. An (unethical) broker could tell the seller that the person acting as his/her own broker was not as serious or otherwise de-rail his/her bid so as to get the seller to choose the bidder where the broker gets the whole commission.
I also think it helped that the seller's broker has been in the business a long time. A young broker who hasn't sold many apartments and is scrapping by may have made a bigger deal of it.
Wasn't an issue in my case, but I could see that happening.
One other thing I would add - even though I was happy to act as my own broker, I never even considered acting as my attorney. The $1900 I spent for my attorney was well worth it. There is actually a large amount of work done by your attorney in getting readty for the closing and wthout experience in residentail real estate closings, you would be lost. Just like a brain surgeon wouldn't operate on his own heart, a non-real estate attorney should not act as his own real estate attorney. Just my nickels worth of free advice.
Totally agree with you on that, dt1234. I'm a PE corporate attorney. I can advise on complex transactions but as I always tell my non-lawyer pals whenever they ask for help on domestic legal issues: if someone sued me for anything, I wouldn't have an inkling as to what to do; I'd have to hire a litigator myself. I'd think the same applies for a residential real-estate deal. I can probably figure it out given enough time but I'd rather just not take the risk and hire someone who does it for a living. Brokering on the other hand...:)
Interesting that attys seem to think "you get what you pay for" in terms of using transactional real estate attys (who are generally not very good at what they do) and not in terms of using buyer's brokers (many of whom are lousy but some of whom are very good).
If you choose not to use a buyer's broker, you're basically saying that you are taking 3% but that you can price an apartment, do due diligence, and run a transaction smoothly yourself.
Sometimes that's the case, sometimes it's not. We've certainly seen a recent counter-example on these boards, where the potential buyers at 320 East 57th didn't perform their due diligence adequately, and their transactional real estate atty didn't save them.
for those who missed it, the thread is here:
DG Neary Realty
Ali R. - I think the point you may be missing is the allocation of risk in the transaction. When it comes to legal documentation of real property, the law is pretty established but, nevertheless, complicated. What that means is that I'd rather shift the risk of documentation error to a lawyer who is representing me on the deal - if the lawyer messes up, well they'd be on hook for my damages/loss as a result of their malpractice (in theory, at least). With a broker, there is no risk to allocate - they simply offer a service of convenience - it comes with no guarantees. I agree that certain brokers are worth their salt but with much of the info readily available these day, a savvy buyer (and I am not necessarily saying I'm one) can easily handle the process of searching, making an offer and negotiating. I appreciate that you are a broker and I don't mean to dawg your profession but understand that the value add in many cases is negligible for those who have enough time to put in the work.
DT1234 - Congrats. I'm a lawyer and took a similar approach, but asked the seller's broker to save me the hassle of getting the license and paying the $150. We agreed on a price, the seller got a commission of 3% on that price, and we deducted 3% off the price for me.
Ali - Most lawyers are familiar with the process of due diligence and running deals. Looking at comps and coming up with a bidding strategy is much easier with Streeteasy available. There are good brokers out there, but a person has to ask is it worth 3% of the purchase price? Some say yes, but it is easy to see why some people would say no. A real estate lawyer costs about $1500-2000 - that is peanuts in comparison, and given the large amount of paperwork involved in a real estate closing, easily seems worth it.
omega -- any intelligent person, atty or non-, can run do due diligence and run a deal. I'm fairly confident, for example, that I could buy a mid-sized company (if I had the financial backing).
However, what an experienced practitioner brings to the table is pattern recognition -- "does this smell like it should"? ... "is this going as it should?"... that's what you give up when you DIY.
I do agree with olaash that for some people (and certain personality types) it's worth it... my point is just that consumers should realize the choice that they're making instead of going "hey, free 3%!"
For example, do you really want to be in a situation where you have to sue your own representation? wouldn't it be better just to work with people who are aces at what they do in the first place?
> I do agree with olaash that for some people (and certain personality types) it's worth it... my point is just that consumers should realize the choice that they're making instead of going "hey, free 3%!"
guess that at the very high end where some of the properties tend not to be listed publicly at all that 3% is justified. but with higher mkt transparency, if you have the time it's not imho. looking for a house is important and even pleasurable for many, why delegating it when the info is finally not only readily available but it's also fun to access it?
I don't know the percentage of people who buy without their own broker (i.e., by going to an open house and making a bid) but I do know it is a significant part of the market. By acting as my own broker, I am already in a better place than all of those people because I am getting half the broker's fee. While I am sure people can point to example where a broker has pointed out something that made a difference, I can say with a high degree of confidence that having a broker on your side adds little or no value (and certainly not 3% of the cost). I read real estate publications (purely because of interest) and can look up previous sales on streeteasy. I have looked at literally 100+ apartments over the last 10 years (again because of interest). I rarely come across a broker who has significantly more market knowledge than I (and I don't claim to be an expert at all - I just have some fairly basic knowledge). I have NEVER met a broker that I thought justified giving up 3%. I think brokers are generally needed to sell an apartment (I don't want to deal open houses and marketing an apartment) but as a buyer, I think 99.9% of brokers would add 0 value. As an example, I have met brokers who have been in the business for several years and couldn't articulate the difference between a mortagage recording tax and the transfer tax.
If there the option to take half commision and act has your own broker open to everybody (not just attorney's or brokers) I would bet 90%+ of people would forego a buyer's broker.
> I rarely come across a broker who has significantly more market knowledge than I (and I don't claim to be an expert at all - I just have some fairly basic knowledge). I have NEVER met a broker that I thought justified giving up 3%. I think brokers are generally needed to sell an apartment (I don't want to deal open houses and marketing an apartment) but as a buyer, I think 99.9% of brokers would add 0 value.
exactly! as a seller is worth it, as a buyer 99.9% of the time it's not.
Ali - my point is that you are making an analogy between using a RE lawyer and using a buyer's broker where it is not an apples to apples comparison given the amounts involved. 3% of the purchase price is a lot to spend on something as nebulous as "does this smell like it should"? ... "is this going as it should?"... Especially where there is no guarantee that everything will work out right. May be worth it to some folks, but not all. A RE lawyer looks at board minutes, prepares the paper work and attends closing - tough to argue that's not worth $1500-2000 to most people.
I'm an attorney and acted as my own broker. I bought into an established coop with a number of market comps. Perhaps a broker would have saved me $5,000 or so in negotiating price, but it is inconceivable that they could have negotiated a price that $20k + lower than what a paid.
In response to Ali's comment, if the issue were how to price the unit, I think it would be better to find a real estate agent that would be willing to consult on an hourly basis. I doubt that any decent lawyer purchaser would have difficulty "running the deal," especially if they have a real estate lawyer on their side. After the deal is priced, I don't really see the benefit of a buy-side broker, but I'm happy to be educated.
Omega, I think the reason most RE lawyers aren't very good is that $1500-$2000 to "look at board minutes, prepare paperwork and attend closing" isn't very much money. Those practitioners have to do a lot of volume in order to make a living, and in practice 1) much of their work is done by minions (and some people are better at supervising their minions than others) and 2) the attorneys don't have much play in their practice to deal with anything out of the ordinary, because they're not getting paid for it.
I believe a couple of the RE lawyers I like charge closer to $3,000, but at least for that, you get a little more of their attention, and they are capable of going a little bit beyond contract preparation.
Twocents, I'm not strongly pushing the buyer's broker position (my clients hire me on the sell-side too, so there's enough work) but let me think up a couple of examples where a buyer's broker might be helpful:
1) Buyer's lending bank refuses (for whatever reason) to lend to Target Building A, and for some reason, the mortgage broker/banker didn't know that this would be this case. So now we're at the deal's 11th hour, purchaser has been denied a loan but still wants to go forward, but now seller is now nervous about purchaser and probably has a contractual out.
Who works with Target Building A to make the building lendable while keeping the seller from saying sayonara?
2) Buyer falls in love with Target Co-op B. Target Co-op B typically doesn't like buyers with the profile of this buyer; in this situation, of course, it's the job of the listing broker to know his/her board, and shoo the buyer away. But for some reason the listing broker doesn't do that. (Let's hypoothesize an all-cash buyer, paying above list, which snows the listing broker, but with at least one other residence and relatively low AGI).
So now the turn-down is like a slow-motion car wreck... Who is the channel of communication who works to get the board to accept the atypical buyer?
front_porch - The answer to both of your sceniorios is the Buyer. Neither of those situations are overlly difficult. The bank/coop board will have its requirements. All I need to do is ask what their issue is and work around it. There is no rocket science to it. I had excellent credit, plenty of income, etc for my loan and still got some tough questions from my lender. I think being an attorney does help deal those situtions but the reality is neither of those situations justify 3% of the sales price. Also, in your hypotheticals, the seller's broker has an interest in getting the deal done and should be of some help. But even if he/she isn't, it's still not rocket science - all that is needed is to ask what the concern is and do your best to address it.
ali r--you could buy a "mid-sized" company on your own with no professional advice? have you ever been a principal or other in a similar transaction? how do you define mid sized---are we talking middle market? would it matter what industry the company was in or are all companies basically similar?
how would you satisfy yourself that major balance sheet accounts were fairly represented---not from an accounting point of view but from the real world? how would you determine that reserve accounts were appropriate?
what type of holdback would you insist on and what terms would you determine were appropriate for its release?
and on and on and on.
are you kidding?
Ali - ok let's say that a really good residential real estate lawyer costs 3k...it still doesn't compare to the 3% of the purchase price that goes to a buyer's broker. I wasn't saying that most residential real estate lawyers are good (or not good). I was just saying that willingness to pay for a real estate lawyer (whether $1500 or $3000) shouldn't be compared to the costs of a buyer's broker.
The real estate brokerage business model is ancient and new technology has unfortunately been mostly window dressing. As I have said before, it's the firm that is holding progress back. Many agents are holding onto the idea that buying an apartment in NYC is a very complex act which requires the skill-set of a surgeon; the education requirement tells me something different.
I don't have a an Ivy league pedigree, yet I have managed to close 100's of deals successfully (21 years not one board turn down) including a recent coop deal that involves the CEO of a fortune 25 company; all parties are very satisfied (:
There is so much we can discuss, I think for starters that the % you earn should be adjusted according to the closing price of the property. I think that if a buyer is doing a large % of the research, has the tools available to understand relative value; they should be compensated. I don't think there should be any mystery in any of the process, the client should be part of every conversation that happens between the brokers. It all makes for a smoother transaction, a happy client and an overall better business environment.
That said there is a subset of the market that wants a very full service model, they want hand holding every step of the way; they are not concerned about the 6% transaction cost (or capturing some of it). There are plenty of agents and very qualified firms that can provide this level of service.
That's not my client, I focus on the subset of "real estate quants" who want to be compensated for their contribution to the buying process. They want a partnership, 100% transparency during the entire process. I can provide this service because I don't pay out a large % of the commission to a "Brokerage firm" (neither do the agents that work with me).
I have also found that all of my clients have felt they benefited from the service I provided, the insight into value, bidding strategy, investment quality, understanding the positives & negatives of various units; and what those will mean to future buyers. The shock when I vehemently advise a buyer not to buy and lay out my reasoning. Even the most cynical buyer, the real "broker-hater" has approached me after a closing and thanked me for my assistance and a buyer friendly model. I recently rented an apartment to a very well known, successful Hollywood type. He was shocked at the layers of BS just to rent an apartment for his family; someone that knows the territory can certainly be very helpful.
Make no mistake you can absolutely purchase an apartment without the use of a broker, but I do feel if you can find the right partnership it will add value and peace of mind to the process at both the financial as well as emotional level of the purchase.
The Burkhardt Group
Im an attorney and am representing my family in negotiation for a condo. We were using our "no-broker" status as a bargaining chip - just realized that I can easily get my brokers license and am kicking myself for not doing a little research earlier. My question has to do with timing, when do I have to put the other party on notice that I intend on claiming the commission? Looking for the license law now. Advice from you seasoned professionals would be helpful!
DT1234 (or whoever else knows)... did you get the co-broke commission paid to you from the listing agent or did you reduce the purchase price? adv/disadvs of either? thanks!
I think its probably preferable to get the co-broke commission from the perspective of the actual buyer and the actual seller - this way you are certain that the 3% reduction in price is not an additional reduction borne by the seller. think of the following two scenarios:
100,000 apartment: commission is 6,000, $3,000 for selling agent, and $3,000 for buying agent (co-broke commission check paid). Seller receives $94,000.
100,000 apartment: commission is $6,000. Buyer (representing himself) negotiates an additional 3% reduction to $97,000. Seller Agent takes 6% of $97,000 (5,820) and seller receives $91,180.
Newbie1 - When I bought my apartment, technically the seller paid my broker's commission (I am an attorney and went through the process to obtain a broker's license). For some reason, my lender would not let me walk away from the closing table with check for the commission (they claimed this was a Fannie Mae requirement). The way it worked (practically speaking) is the amount of money I had to show up with on the closing date (to cover the additional down payment, mortgage recording taxes, tax escrow, attorney's fees, first month common charges, etc. etc) was reduced by the amount I was due from the seller on account of my comission.
you can be what ever you want to be
"you can be what ever you want to be"
you raise me up.......to more than i can be
why is this supposed to be such an inspirational song, anyway? sounds like it's describing an unhealthy bordering on codependent relationship which results in the inevitable ultimate disappointment for everyone involved.
I hate to weigh in after all this time, but the appropriate statute is Real Property Law Section 442-f (the Saving clause). It says "the provisions of this law shall not apply to...attorneys." NO NEED FOR A BROKER's license, no need to join MLS. Problem is as you see above, many non-attorney brokers with whom you will co-broke do not know this. You will need to decide whether suing for the fee (to which you are entiltled) is worth it. In most cases, it is.
I hate to have stumbled upon this message board so late, but it would seem that most of the brokers on this forum are from the wild west of the outer boroughs MLS... There isn't a single member of REBNY or experienced listing broker on the isle of Manhattan who would dare tell another broker that they will not co-broke on a listing.
I have friends in Brooklyn who lived under the premise that their listing is their listing and they will go out and seek a buyer and pocket both sides of the commission. This was all fun and dandy during the RE Bubble a few years back, but now, even those people are coming to terms with the notion of showing their clients spaces which they don't directly represent and allowing other brokers to bring clients to their listings.
It is a complete disservice to a seller if the person with whom they have a listing agreement refuses to show their property to the entire pool of potential buys simply because some of those buyers are being represented by other brokers.
To those who are attorneys who've acquired their brokers license, and would like to represent your buddy in a purchase or sale of property, go right on, if you are the seller's broker, simply state the percentage of the sale which the buyer's broker will receive in the co-broke agreement and tell them to sign before any negotiating commences or they can kick rocks... if you're the buyer's broker, demand a co-broke agreement before any numbers are discussed... I've worked as a rental agent, listing agent, sales agent and commercial broker for both sides of deals and the one thing which I've learned from all those positions is to simply have brokers on both sides understand their roles before any discussion of the property commences.
Is every listing that is in the Brokers' MLS on Street Easy?
2right -- that is quite an interesting point about Section 442-f. This suggests that a NY attorney can act as a broker for his own purchase and still collect a 3% commission, all without first obtaining a separate broker's license (and saving himself $150). Does anyone have any experience in going this route without first obtaining a real estate broker's license? I'd be really interested in hearing about whether this has worked successfully without too much pain (regardless of what the law is in the books).
Question since it seems like we have a lot of real estate brokers here:
Does a "broker" or "agent" need to be licensed in NYC (or anywhere) in order to obtain/ask for a fee in NYC? I am being told by a certain "broker" that if I want to sign a lease/continue living in the apartment I am currently subletting (the sub lessors are not continuing their lease), then I need to pay a broker's fee. Yet, this person is not licensed, nor is he affiliated with any realty firm, nor is he performing any service for me except possibly presenting the lease.
Have any attorneys applied for the license and used it for a house? Not an apartment/coop? If so, does it influence offers on purchase price etc.?
If one wishes to avoid the brokers fee its a lot simpler to deal directly with the other side.
If i were a buyer i would be leery that my attorney who is supposed to be representing my interests would earn 3% in the event i purchase a property. What if there is something in a title report that suggests i shouldn't buy a property, is my attorney representative going to be ethical with 3% hanging in the balance? Sounds like a conflict of interest to me, commissions are not implied they have to be negotiated by licensed real estate salespersons, associate brokers and brokers. Agents and Brokers add value to the transaction you just have to be certain you select a professional opposed to someone who just holds a license. The value will be far greater than 3% happy hunting.
gords. Sorry for the delay in responding. Yes, I am attorney with no separate broker's license (see my prio post; no separate license required for an attorney). I have co-brokered 2 houses (both my own primary residences approx 13 years apart) and took a 3% fee each time. The remaining 3% went to the seller's agent. My word of caution, though, involves income taxes. Many attorney buyers simply decrease the purchase price by their 3% fee. However, regardless of how you do it, it is income derived by virtue if your law degree and is taxable. What I did was take it as an actual fee (the seller cut me a check at closing) and included it as taxable income in my tax return. My accountant advised me that most likely would not have done that. Make your own decision, but that was mine. Good luck. One final note, you may encounter RE agents who try to suggest that you are taking their fee. In my case, not one of the seller's agents advised me that i was entitled to a fee (and all fought me when I tried to collect it). In short, they would have been perfectly happy to pocket my fee and say nothing.
Just a quick response to jhamdan. First, I agree that it appears to be a conflict of interest for someone claiming to represent me (as the buyer) to earn a fee based upon the sale price. However, that is precisely how "buyers' agents" function in my local market. This is among the reasons that I have chosen to represent my self in the purchase. Second, I agree with you that it would not make sense for an attorney buyer to use an attorney as his/her agent. My points have been in reference to an attorney representing him/herself in the purchase, not another attorney. Finally, while I strongly advocate an attorney representing him/herself in the purchase in lieu of an agent (and accepting the earned fee), I recommend against serving as the attorney for yourself at the closing (unless you are a real estate attorney). That type of work is time consuming and tedious and serving as your own attorney saves very little money (locally, attorneys only earn approximately $400-$1000 per closing), whereas serving as your own agent can save tens of thousands of dollars.
There are other options for buyers that don't trigger tax consequences and can assist with all aspects of the purchase.
The Burkhardt Group
You know what they say, a man who is his own client has a fool for a broker.
They don't say that.
Who is they?
Who isn't they?
"It is within reason that you could approach a broker about a listing and say you are self represented and therefore expect the final purchase price be less the 3% buyer's brokerage commission (2.5% if the broker is operating on a 5% commission) as you are not represented by a broker."
I think one needs to be careful about how the dollars work in asking for 3% reduction. Let's do the math: on a 1M sales price, total brokerage is 60K. If you ask for a 30K reduction by representing yourself, the sales price drops to 970K. The total brokerage is now 6%*970K = 58.2K. So the "broker" still gets almost the same amount of commission (58.2K vs 60K) and you indeed benefit by 3%. However this comes out of the seller's pocket by 30K, and effectively the seller is paying a total commission 8.82% between the reduction to you and the commission to the broker: i.e. (30K + 58.2K)/1M = 8.82%
So, in reality it maybe hard than it seems on the surface to simply ask for a 3% reduction since it is really funded by the seller. The "broker" is still netting about the same commission after the price drop (i.e. 58.2K vs 60K).
From the attorney comments above, it seems that using an attorney has its challenges too.
Like many things, devils are in the details and it is easier said than done.
Prana Risk Insurance Services, LLC
That is nut how it works.
Hello Nut. This is not how it works. If total brokerage is 6%, 3% goes to the attorney/buyer and 3% to the selling/listing agent. It does not cost the seller anything. It is is 5%, it is 2.5/2.5. It is no different than with
a "buyers agent." The attorney buyer co-brokers. Whether the seller chooses to pay the 3% to the attorney buyer or decrease what the seller is owed by the 3% (you could add it to down payment if it makes it easier to understand) does not affect what the seller pockets.