Hypothetical

Just move on! That's what your broker did - tried to save you from wasting time with the seller's broker. And for the next place, pick a different broker anyway since you aren't comfortable with this one.

MTH, Why wouldn't you go to the open house and put in an offer via the broker of your choice?

You will find it hard to find a broker who is going to all the showings with you for a studio when they can guess that you may not be quick to pull the trigger.

Thanks for the comments

@Rinette How was the buyer's broker trying to save the buyer time? Wouldn't it be more accurate to say he mininformed the buyer?

@300 - These are virtual showings via Zoom given the distance of the buyer from properties. Maybe the buyer should be contacting seller's brokers directly to request virtual showings? Then when ready to make an offer call the broker - or a broker - in? Or just use the seller's broker? Because the commission is so slim it might be move motivating to have a single broker serving both parties.

MTH, Since you want to see virtually, it will be indeed be easier with the seller's broker directly. In general, zoom buyers are not seen as serious buyers. Of course, if the property is not getting enough traffic, the seller's broker will do what he/she can to sell it including zoom requests anytime.

> Wouldn't it be more accurate to say he mininformed the buyer?

It doesn't matter how it was worded. Your current broker doesn't want to waste time on you (not a serious buyer as you are not in the area, the commission is low due to a small apartment, the apartment already had an offer).

As other people said, you may work with the seller's broker directly. If the apartment is a difficult sell, he is more likely to work with you, though this is not the case for the current apartment as there is already an offer.

FYI, I bought apartments in Queens twice without using any buyer's broker.

@300 - That makes sense. I know the area well enough to make a call after a Zoom tour and have financing lined up. It's a question of finding the right place. Yes, I realize that involves making (the right) compromises. Lesson learned: speak with sellers' brokers for small deals.

@Woodside: that's the point - the seller didn't have an accepted offer. If a small deal is not worth it to the broker, absolutely OK with me. Why not just say that at the outset instead of fibbing? Can't fathom what he was thinking. The seller's broker was also surprised.

"It doesn't matter how it was worded. Your current broker doesn't want to waste time on you (not a serious buyer as you are not in the area, the commission is low due to a small apartment, the apartment already had an offer)."

Another potential answer is that s

"It doesn't matter how it was worded. Your current broker doesn't want to waste time on you (not a serious buyer as you are not in the area, the commission is low due to a small apartment, the apartment already had an offer)."

Another potential answer is that since the commssion is small it is the seller's broker who doesn't want to split it so they are doing the best they can to effectively block co-brokers.

One would think brokers right now do have a lot of capacity to go after smaller deals or zoom buyers, but this just goes to show NYC brokers won't lift a finger for a smaller commission. Like in many other industries in NYC, worker expectations are often very high while quality of work quite low. I am not sure why this is the case, but it is. "Small deals" in NYC are average size or larger in many other places.

>> In general, zoom buyers are not seen as serious buyers.

In NYC that is mostly true.

However, I have purchased outside NYC via zoom, and it was seen as a normal situation there. I got excellent service, even though commission wasn't huge (houses in nowhere cheaper than most Manhattan studio apartments, and I negotiated a small rebate).

In NYC buyer broker value add seems to be a bit less than that in other geographies.
- Apartments don't really need too many mechanical things checked, such as boilers / ACs / roofs etc (outside NYC when I was looking at single family houses, brokers educated me on condition of various systems in each house they were showing and were very knowledgeable on a variety of relevant topics)
- NYC seller brokers are usually present at showing and can tell you about the apartment (vs in other geographies, buyer broker picks up the keys and does the showing without seller broker present)
- NYC buyer brokers think attorneys should do most of the diligence on the building, and all contract work (in many other states, buyer's brokers does the contract, you don't need to hire a lawyer)

You might want buyer broker help with a coop application in NYC, or navigating hairy/unusual situations. But if you are looking for a cookie cutter studio apartment and buyer brokers are not giving you the attention you need, why not go direct, given it makes much more sense to do so in NYC than in other states?

>>Another potential answer is that since the commission is small it is the seller's broker who doesn't want to split it so they are doing the best they can to effectively block co-brokers.

Illegal, isn't it?

Not illegal. Realtors are supposed to cooperate but not all people with a real estate license pay their National Association of Realtors dues.

Don’t they have a fiduciary duty to the seller? Blocking potential buyers would be a violation, no?

Most Manhattan agents are not Realtors/not members of the NAR, but rather are members of REBNY instead.

@krolik - Regarding "Don’t they have a fiduciary duty to the seller? Blocking potential buyers would be a violation, no?" I would say that as with so many things in life, even if someone is falling down on their duty (and I don't personally know what technical legal duties real estate agents owe anyone), ask yourself how are they going to be held to account? Is the prospective buyer going to sue them? I am thinking that the most the prospective buyer could do is report them to whatever licensing agency might care, and if the licensing agency is a self-regulating-organization where members don't find the alleged conduct egregious, the organization is unlikely to prioritize investigation and discipline related to the alleged offense. Same with the Attorney General if it has any jurisdiction. I suppose the prospective buyer could reach out directly to the seller through whatever publicly available contact information they can find if they are really interested in the place at issue and feel they have been boxed out of the only apartment that will work for them; otherwise I would just move on. I agree with all the advice about not using a buyer's broker for sub-$1M purchase in NYC as being the most effective approach.

MTH's complaint is probably taken as seriously by Rebny as lying about square footage or legal bedroom count.

And not all people with a real estate license are members of Rebny so they might not be required to cooperate

30's read is my read too -- this is not a case of buyer's broker incompetence (and, in a co-op-board-regulated world, buyer's brokers IMHO add a lot of value). This is a case of the listing broker playing "dog in the manger" and trying to capture the potential buyer as a direct client. (Which is a violation of REBNY rules, but it's hard to enforce.)

In Manhattan, the current market is lousy -- the number of recent contract signed is quite low and there's no buyer urgency whatsoever -- but it looks from my email feeds that what's happening is that the superstar brokers (or heavy hitters or whatever you want to call them) and focusing on rentals just to get deals closed. It isn't that they "won't lift a finger for a smaller commission," it's that they are moving to the area of the market that is active in an attempt to keep some cash flowing. Not having the perks of a corporate job -- health insurance, retirement plan co-pays, a steady paycheck -- will do that to you.

Agreed with front_porch - a proper buyer's broker adds a lot of value. Granted the value add is defined very different from what you would expect outside of NYC and I think that is why the perception is what it is. For every client, that value is going to be weighted differently dependent on their needs. Most of my practice is very focused (the West 90's to the West 160's) - an area a lot of Manhattan buyers don't know well and often have misconceptions about (and I have a podcast discussing these areas- stay tuned for my halloween themed episodes such as Haunted Mansion: Founding Father edition- the Morris Jumel Mansion). I do walking tours for buyers unfamiliar with the area, I have a deep understanding of the buildings and what might or might not be a fit- and why, dissecting valuations, providing guidance throughout the process- whether it be on financing options the buyer never knew might be possible, negotiation points the buyer didn't even think about (i.e. purchase cema's, the buyers contribution toward the purchase of the super's apartment in new construction, etc), contractor/engineer/architect suggestions, etc. I also do a deep dive into a buyer's REBNY (which all agents should do, but too many don't or don't know how) to determine not only if a buyer is likely to meet a co-op's requirements- but also if there are ways to strengthen a buyer's REBNY- agents shouldn't take what the buyer provides for granted because they don't do this routinely and could forget items (i.e. residual income) or have too much cash sitting in their business while not having enough cash in their personal accounts if they are self employed. This is just a small sample of the value add. If the buyers agent isn't doing these types of activities then the buyer should be considering what they may need out of the process- and ask questions of buyers agents what services and value add do they provide.

As to the specific situation, its hard to make a determination without knowing all circumstances- but at least with the info provided, it does sound like the listing agent is not living up to their responsibilities and is actively working not to co-broke the deal. The true circumstances could be different- but that's how it appears to me with the information in this post.

Belmarc Realty had an entire division which only worked the 500,000 and under market

Belmarc Realty had an entire division which only worked the 500,000 and under market

is this discussion still ongoing? over this studio apartment that's already spoken that the buyer's own broker didn't want to waste his or her time on? seriously? people are going to file complaints over this?

@30 Belmarc thanks - I may reach out to them

The coda to all this: after giving the broker a chance to opt out of representing me - I'll bring this up again with him bc, honestly, no harm, no foul - he got back in touch with the seller's broker and set something up. I think 30 and Uptown were correct - barring a misunderstanding, the seller's broker tried to put the buyer's broker off the scent.

The broker tell lies all time, the square footage, the number of bedrooms, the neighborhood of the property, having an offer. Their mantra is to do everything they can to make a deal.

In this case, you guys’ conclusion is that “the seller’s broker is lying”, not “the buyer’s broker is lying”.

Anyway, in this case, using a buyer’s broker reduced the pool of properties for the buyer or putting the buyer in a disadvantaged position (e.g., if the seller’s broker has two offers, he is more likely to push the offer directly coming from him, not the offer coming from a co-broker)

>> The broker tell lies all time

In NYC. I have not seen brokers tell lies in other states. Very curious to know why.

Krolik, Do you mean LA, Miami and Chicago (or for that matter for an apartment in any city with more than 100k population) real estate agents are upfront about every thing?

My hypothesis is that in small towns, the real estate agents have to be more honest as the word gets around fast. But you wouldn't find any data on this.

Other places also have stronger rules against broker lies. When I bought in Nowhere (which has about 10 active realtors), I got a square footage survey done by a third party who had come and measured the house, my own inspection (which turned up all sorts of issues - resulting in a price adjustment), and a dossier of building permit/zoning/title info including a topographical survey (for flood insurance). And there was a standard contract that everyone uses so no lawyer was involved. Closing was entirely by FedEx. Title was recorded and turned up online two days later. So much easier than NYC.

NYC is a PITA because (1) condo and coop boards like being painful, (2) lawyers need work, (3) sellers love to try to screw buyers with the contracts, (4) government is dysfunctional. Not really the fault of shifty brokers but they sure don't help.

George, Why do you say that "Other places also have stronger rules against broker lies"?

Wouldn't it be more accurate to say only 10 active realtors have a lot more to worry about their reputation than a city with 1000 plus brokers?

Also, if your own inspection turned up all sort of issues, does it mean the seller's broker lied?

I agree with #1 about NYC. #3 - both sides have lawyers so they try to screw the other party. Not a surprise. That is how they make their living and prove their worth to their clients. Doesn't mean that there aren't many honest real estate lawyers in NYC.

To add, do people here think that NYC is not dog-eat-dog. Thought it was well-known.

American Psycho was not set in "nowhere". It wouldn't make sense.

As to NYC Condo and Co-op boards like being painful- this might be true in some situations, but it's often for solid reasons. I served as Treasurer and later as President of my condo board- and I implemented some controls not because I wanted to cause pain- in fact it was due to the opposite, trying to help avoid some pains in the future. My neighbor defaulted on her mortgage, heloc and her common charges back in 2009. We tried to work with her to get her back on her feet but she rejected our offers of help. From default to getting new owners in took nearly 13 years and cost us a fortune. As a condo, we didn't have a great deal of power to stop this- but we did implement some additional controls to help minimize the odds of other owners needing to be foreclosed on. Vertical living can add complexity vs single family homes- and additional controls many be needed to address problems that the board has dealt with- or wants to avoid in the first place. Sure, the might be painful, and some boards add truly unnecessary controls - but hopefully most are not painful without legit reasons.

In my experience with cooperative living in other places, nowhere has been even close to as bad as NY. I moved into two condo buildings outside NY without even submitting an application. Here I had to submit 6 letters of rec and a bank recommendation (which my bank had never heard of) plus a ton of other docs and $3000 - just to rent a condo. Tell me that's not purposely being a PITA.

As for enforcement, Rebny seems quite happy not being part of the NAR in part because it means they don't have to enforce even basic rules, which is why there are so many blatant lies in listings (esp square footage and bedroom counts). To the point that started this whole convo: "Even though REBNY’s rules and its Universal Co-Brokerage Agreement are very strict in language, actual enforcement is quite lax much to the relief of its members."

George:

That is really dumb of the condo board to let this continue. I get 2 letters of recommendation and a bank/brokerage statement and employment letter.

"Here I had to submit 6 letters of rec and a bank recommendation (which my bank had never heard of) plus a ton of other docs and $3000 - just to rent a condo."

One may say if any financials are needed besides a credit check to avoid criminal elements as the owner carriers the default risk of the tenant.

Uptownspecialist, What do you think of the above?

Brokers lie all the time because you guys reward the one's who tell lies and punish the one's who tell the truth. You're like drug addicts who call a bunch of drug dealers to deliver drugs to them, go with the one who tells them there that they will be there in 15 minutes even though that guy always shows up in an hour, and then complain that all drug dealers lie.

Like sellers who bring in a bunch of brokers to pitch a listing and then go with the one who says the highest price. And then complain that all brokers try to buy listings.

Or when I tell them that I want to put the actual square footage rather than inflated one, what do you think happens? But go ahead and blame only the brokers for that.

30 that's what happened to me. Accepted cash offer, high credit rating and the seller's broker kept raising the bar on my board package requirements. I think he was hoping I would get frustrated and give up so he could get the commission to himself from another buyer.

"Brokers lie all the time because you guys reward the one's who tell lies and punish the one's who tell the truth."

It's not the industry participants' fault, it's the general public's fault!

Sure, of course there are some buildings that like to make things painful- i.e. 6 letters of rec, bank rec, etc to rent a condo - but not all buildings want this. It could be the building is trying to not punish buyers- but is trying to dissuade too many investors in a building that can be harmful to all owners. My building has more than 50% investors which has a detrimental impact on the owner residents. Not only are interests often not aligned between the investors and primary residents, but having a majority of the building owned by individual investor units makes financing or refinancing more expensive. Since the building is a condo- there isn't a lot the building can do to dissuade investors other than putting up hoops for the buyers/tenants to jump through and/or add fees.

The square footage game is insane but I always advise buyers whatever I know- i.e. there is a new construction building on the UWS- they are including the public hallway in the space of the apartment to be included in the calculation as a limited common element- but advertised included in the published square foot number. They argue this is a full floor apartment (with a long and wide public hallway) - but it is effectively exclusive to the apartment- so they can include it. So if I use it as personal space- and the fire department fines the building for cluttering up the public hallway- does the building hold me liable? Other buildings might use other sketchy spaces inclusive of the sq ft calculation but we have failed to come up with standards- so the numbers will always vary widely. I can't get behind any agents that just outright lie about square footage- but when the calculations are provided in the offering plan- I might not agree- but it is what I will provide.

The problem of people going with the agent who offers the highest price is perennial. But there are solutions to other problems like (1) deliberately inflating the square footage, (2) Board with ridiculous requirements, (3) racial discrimination by coop boards, and (4) brokers not cooperating with each other. Rebny couldn't care less about any of those topics so they resist reform.

Specifically, the solutions: (1) something like the Loi Carrez for square footage, (2) limit what Boards can reasonably require, subject boards to privacy standards, ban all fees, require that rules be conspicuously disclosed, require that rules be approved by the Attorney General (3) all of #2 plus ban in-person interviews and require that all decision be justified in writing within 30 days, (4) ban one broker representing both sides; allow self-represented brokers to collect their own 3%.

None of this will happen of course.

Rinette,
Let's go over a specific example which happened on this forum
There's a thread about a Coop on 57th St. Some famous brokers on a reality TV show claimed they sold it on the show, but they didn't. When I simply pointed out that Real Estate reality TV shows present fiction, I got personally attacked, called names, whatever and the liars were defended. Then eventually, the poster appologised...

Rinette,
Let's go over a specific example which happened on this forum
There's a thread about a Coop on 57th St. Some famous brokers on a reality TV show claimed they sold it on the show, but they didn't. When I simply pointed out that Real Estate reality TV shows present fiction, I got personally attacked, called names, whatever and the liars were defended. Then eventually, the poster apologized... to someone else. So, yes, I think that's a problem. And I do think that rewarding bad behavior is a problem to be owned as much by the public as by the brokerage community.

Exhibit A of the public and the media rewarding ethically challenged real estate practices: https://www.nytimes.com/2023/10/02/nyregion/trump-fraud-trial-letitia-james.html

actors not practices

Love the give and take here, so many realities and great anecdotes

But I'll be clear: of course I don't think it's ONLY the public; just that if the public didn't enable them these practices would wane considerably.

>>Krolik, Do you mean LA, Miami and Chicago (or for that matter for an apartment in any city with more than 100k population) real estate agents are upfront about every thing?

Example 1: Top 3 city in Arizona, very large population
Example 2: City with population over 250k in the South

Buyer broker immensely helpful and handled the digital contract. Seller broker upfront and cooperative. Minimal fees, zoom showings, no lawyers, fedex closing, brokers handled the contract and coordinated everything. Great experience. Got a small commission rebate in both cases at a price point near national median (so much lower than price of studio apartment in this thread).

>>>"Brokers lie all the time because you guys reward the one's who tell lies and punish the one's who tell the truth."
It's not the industry participants' fault, it's the general public's fault!

@30yrs and Rinette, what do you suggest public should do? pick a broker with the lowest valuation/listing price proposal?

Krolik, @30yrs and I no longer work at the same firm. He's my competitor now.

Despite that, if he walks through an apartment that you want to sell, and says, "this is what I would do to sell this apartment, and here's what you need to do (repairs, board communication, whatever) to help me, and this is the price I recommend listing at" -- then you should listen to him.

OF COURSE it's human nature for one to want to follow the diet guru that offers the "best" results for the least amount of effort, but in your experience, does that diet guru get you to where you want to go? No. But sellers then turn around and make the same mistake when it comes to their listings...to go with the person who tells them it will be easy, and the results will be wonderful.

That's not to say all super-brokers are bad; some are very smart, work very hard, and deliver good results. But in general, flash is overvalued by the public.

Ali, how does consumer not following this board know to listen to 30yrs and not to another broker that says he would do all similar things, but the price should be higher?
Brokers do have an incentive to underprice to achieve a quick sale, how do they know 30yrs isn't sandbagging?

K, generally when you're on a listing pitch you offer comps. Still, I just lost a bake-off in a building where I said, "the resident broker has X for sale, at Y price, and it has been sitting, and Y is more nicely renovated than your place, so the ideal listing price for your unit, if you want it to move, is (Y-something).

Curious to see who I lost to (in addition to the resident broker I was up against at least one well-liked area specialist) and what the property gets listed at....but more importantly, I would bet you that when it's listed, the things that I pointed out "should be done" before listing aren't done. I could tell during the pitch that these sellers were just not receptive to the idea of a list of fixes, even though the best way to their quickest and highest price would involve getting those fixes done first.

While in other industry, the consumers can do the comparisons of different products very easily by reading the label and reading unbiased review. There are still frauds, e.g. the great organic fraud as described in the New Yorker, https://www.newyorker.com/magazine/2021/11/15/the-great-organic-food-fraud

It's the reality that the consumers have to do a lot of their own homework in real estate due to the very relaxed regulation on the broker's bad behavior. And this board seems to advocate that the control of the broker's bad behavior is up to the consumers (the sellers and the buyers).

When I was selling my first small apartment a couple of years ago, I talked to a lot of brokers (some local and other are the big names) and also talked to friends about the broker recommendation.

I checked the brokers for their existing record, thanks to streeteasy. I eventually went to a local guy as this guy was most knowledgeable in my property, in my building and the neighborhood. He is the only guy to give the very comprehensive list of similar properties to determine why my apartment could be sold at the such price.

For the record, the local guy's price was probably at about top 25% among all of the brokers that I interviewed. You will be surprised with the range of different price that the brokers may give. The very high one is probably just trying to get the list and the very low one is probably just trying to get a quick sale.

>>>K, generally when you're on a listing pitch you offer comps.

Ali, I am perfectly understanding.

I am just pointing out that consumers have limited ways to distinguish between brokers, and to make their decision, and going with the one that offers the highest valuation seems like one of the perfectly logical choices. If I were selling an apartment, I would definitely do my own homework, figure out listing price I expect, and hire a broker that I think would be honest, available to do showings, and would market the property well. Not all consumers are like me. 10 years ago, I was not like me :). To sell a Staten Island property I hired the 2nd broker I talked to (most brokers did not want to deal with anything in Staten Island, especially not a lower-valued apartment).

And by the way, this particular problem, with seller hiring agents naming the highest price, is a classic. It plays out in other industries, including very regulated ones. When banks pitch a client they similarly present comps and qualifications, but the ones with the highest valuation win the pitch. Because what is the reason for the CEO/board to go with the bank that is suggesting a lower price? Here is one of the most famous cases of this backfiring:

https://www.nytimes.com/2019/05/15/technology/uber-ipo-price.html

"Last September, Uber’s top executives were pitched by some of Wall Street’s biggest banks, Morgan Stanley and Goldman Sachs.

The bankers’ presentations calculated Uber’s valuation almost identically, hovering around one particular number: $120 billion.

That was the figure the bankers said they could convince investors Uber was worth when it listed its shares on the stock market, according to three people with knowledge of the talks. Uber’s chief executive, Dara Khosrowshahi, and chief financial officer, Nelson Chai, listened and discussed the presentations, these people said. Then they hired Morgan Stanley as lead underwriter, along with Goldman Sachs and others, to take the company public — and to effectively make the $120 billion valuation a reality.

Nine months later, Uber is worth about half that figure. The ride-hailing firm went public last week at $45 a share and has since dropped to around $41, pegging Uber’s market capitalization at $69 billion — and officially crowning it as the stock market debut that lost more in dollar terms than any other American initial public offering since 1975."

Aside from the unsolvable principal-agent problem, I am very curious to know why brokers and process suck in NYC so much more than everywhere else in the country in so many ways.

The lying about many things including square footage, refusing to co-broke, turning away buyers or even sellers below 500k or some other price point (which would be higher than national median), no digital contracts/docusign for the numerous forms they ask consumers to sign, a contract that is a photocopy of a photocopy with sections crossed out or written in by hand, grossly overpriced properties refusing price cuts for months/years, brokers with attitude when one wants to do an inspection or asks for building financials, etc.

Is REBNY causing all the issues? There is so much money in real estate here, how come brokers don't have basic 21st century tools like docusign? Remember all the COVID paper/PDF forms? I was asked to "print out, sign, scan, send back". Seriously? Still asked to sign various paper forms at showings. What a waste.

I'll just point out that the big firms have historically been the ones standing in the way of unified (fill in the blank - like a real MLS) because they think the have a competitive advantage due to their size and don't want anything standardized because then everyone would have them.

I personally hate DocuSign because the chances of the person filling out the document misspelling my name are about 50%, and then I can't correct it. At least with Adobe Acrobat (which does, admittedly, get worse every revision) I can change what's wrong in the form before I sign it.

But it's not just brokers -- fifteen years ago my best friend was like, "seriously, the attorneys are figuring out the closing numbers by hand? they don't even have a spreadsheet?"

Set up a form where each person has to input their own name? All other industries are managing.

Oh yeah, real estate attorneys in New York are terrible, and I called this out a few times. I just don't get it. And they do make mistakes in the numbers. Have to watch it carefully.

It's odd that the securities industry is extensively regulated to protect consumers, yet real estate - which nearly everyone will buy or rent many times - is basically unregulated. Imagine how many slumlords would be gone if landlords were licensed and registered like securities dealers. Imagine how much more honest listings would be if they were held to the same standard as a prospectus.

Excellent point George. Securities dealers have a long-held reputation of never exploiting anybody. /s

@Ali - that made me laugh out loud.
@George - Real estate can be physically inspected; securities are an entirely different animal.

Also laughed at the above.

The reason that securities have so many regulations is that they have had many scams in the past. Almost each regulation is a response to a past scam. There is an agency dedicated to looking for scams in securities, and that’s why a lot of securities scams are actually uncovered and penalized.

Real estate is an extremely scammy industry as of today, and I think law makers would be wise to give it a closer look. There are not enough mechanisms to bring the scams to light, so they continue.

George, Is there a min $ rent roll, you think license and registration for landlords should apply? I would think any one with less than $25 mm rent roll (probably $2-5mm profit post all costs ex depreciation) will have very high cost of compliance which will get added to the rent economically just like renters effectively pay for real estate taxes.

>> which will get added to the rent economically just like renters effectively pay for real estate taxes

Is this really right? Renters pay rent, and the price they do is based on supply and demand. So an increase in costs decreases supply at a fixed price, and that results in passing on the costs. So that is a tidy little story.

However, these effects work through complex channels. In theory, increasing rates from 2.x% to 7.x% has increased costs to LLs. So renters should in theory bear those costs too. However, nearly all economists believe this acts to suppress rents. I.e., controlling inflation.

If rates go up, rents are one way to offset those costs to restore supply/demand balance. But another way is for prices to come down. Yet another way is for LLs to collectively make less / lose more for many, many years.

Same with taxes. If prices of RE come down as a result, supply of rent at a fixed level need not change.

This zero-sum viewpoint also misses a large point about regulation. Suppose as a buyer, I’m willing to pay $1000 for an iPhone I knew to be good. But there’s a 10% chance the store sells me a brick instead, and I have no recourse. How much should I pay? $900 at most, because of the chance of being scammed. But more like $800 for needing to bear the risk of being scammed.

So the purveyor of real iPhones can only collect $800. If you get rid of the 10% scammers, that not only redirects the $100 lost to the scanner toward the non-scammers, but it also opens up another $100 because the buyers are no longer bearing the risk of being scammed.

30yrs>> But I'll be clear: of course I don't think it's ONLY the public; just that if the public didn't enable them these practices would wane considerably.

Yeah, but that’s just the nature of “the public” and any self-defeating behavior. Adding onto Krolik’s point, if the public weren’t attracted to scams, there wouldn’t be a need to regulate and protect the public against such scams.

While educating the public is a laudable goal, it works somewhere between generationally slowly and never on these sorts of matters. Some people never learn or refuse to learn. Moreover, every 20 years, there’s a new generation born whose human nature is just as prone to scams, dubious claims, etc. as the last.

Financial scams, bubbles, etc. seem to be as old as human history. Perhaps the species will eventually figure out how to “educate” ourselves against such behavior despite our nature, but given the abysmal track record of the past 5000 years, I’m not hopeful it’ll happen anytime soon.

>>However, these effects work through complex channels. In theory, increasing rates from 2.x% to 7.x% has increased costs to LLs. So renters should in theory bear those costs too. However, nearly all economists believe this acts to suppress rents. I.e., controlling inflation.

Two different horizons: High rates reduces supply long term and demand short term. In the long-run (3-5 years), the rents will definitely go up as the supply will be constrained (speaking generally not just NYC), unless the high rates put us in recession short term leading to job losses which will reduce the demand. So the rent suppression is due to short-term demand reduction.

>> Same with taxes. If prices of RE come down as a result, supply of rent at a fixed level need not change.

If there is no net new housing supply needed, sure short term the rents wouldn't change. But everyone seems to be screaming housing shortage even in NYC. So reduces the incentive to build and that would decrease the supply long-term. In many locations, the price of land is very small relative to the construction and development cost. And developable land has other existing usages such as a shitty existing buildings (say 5k sq ft) which is underusing the total allowable building square footage (say 10k sq ft). So the land prices may not change but the supply of additional housing is constrained.

One size doesn't fit all products. One could say the consumers have a very good way to make a quality distinction in some products by market reputation and actual experience such as phones. So minimal regualtion is needed. Essentially cost of preceived risk and resulting economic loss due to a lack of regulation vs cost of regulation - that varies greatly product by product. For securities, quality distinction takes far more analysis as there is not real product to see justifying the regulatory cost.

>> This zero-sum viewpoint also misses a large point about regulation. Suppose as a buyer, I’m willing to pay $1000 for an iPhone I knew to be good. But there’s a 10% chance the store sells me a brick instead, and I have no recourse. How much should I pay? $900 at most, because of the chance of being scammed. But more like $800 for needing to bear the risk of being scammed.

So the purveyor of real iPhones can only collect $800. If you get rid of the 10% scammers, that not only redirects the $100 lost to the scanner toward the non-scammers, but it also opens up another $100 because the buyers are no longer bearing the risk of being scammed.

One thing I forgot to mention is that the biggest issue with regulation is finding the will and right people to enforce. In real estate, it is really the lack of will by the state licensing authority (speaking of NYC only) rather than regulation. An example of not having the right people to enforce is SVB interest rate exposure. It was clearly well known but no one had the balls to enforce risk reduction.

I think in the case of SVB, and banking in general, there is a good degree of customer protection. “Sorry suckers, it’s your own damn fault for having lent your money to a bank so they could take stupid risk. Better luck next time!”

Nada,

In the case of SVB, FDIC/Treasury protected depositors who were above the legal limits from FDIC insurance fund. If the Fed Regulators in San Fran were capable of doing their jobs, depositors above the limits wouldn't have needed protection. So we create an expensive set of rules, which costs the bank a lot of money to comply with (eventually passed on to the customers), and regulators don't have the capability to understand or enforce it.

The point I am making is that it is very hard to find capable mid-level people working at Govt salary to have the skills or guts to do something about the enforcement of the spirit of the regulation despite having the power to do so. That is why I am generally in favor of enforcing the existing regulation rather than continuing to create new regulations.

And for real estate, there are plenty of powers with the State Licensing Board but they receive very few compaints from consumers and don't proactively enforce much.

Bank regulation is difficult. Would things be better without the regulations and imperfect mid-level regulators? I doubt it, given hundreds of years of history without it. I also suspect regulation at the level of “zero failures”, while easy to create, may not lead to economically optimal outcomes.

Some of this RE stuff is trivial by comparison. For example, George’s favorite Loi Carrez. At transaction costs of $100K to $1M on a $1-10M apt, the cost of a sq ft measurement is a rounding error. And the enforcement mechanism is trivial. No regulator, just rights of redress given to the buyer.

Seems a lot better than the current system. Morally challenged seller wants to list at overinflated square footage => brokers pressured to do so => total disavowal of all/any representations made by brokerage => buyer beware. The brokerage industry should be leading the charge for better systems, but instead they always take a small-minded approach.

Exhibit A is StreetEasy itself. If the industry weren’t so small-minded, they would have signed up for an MLS and never created an opening. But they did. Then on 2013, StreetEasy put itself up for sale for $50M cash. You would think the brokerages had that sort of coin, but they just didn’t purchase. Now, their brokers kick $50M over to Zillow each year and grumble about it.

Every member of the community, from the foot soldier brokers to the leadership, seems unable to see or consider anything more than 3 feet in front of them.

FTR, I am not griping, just making observations.

>>> Every member of the community, from the foot soldier brokers to the leadership, seems unable to see or consider anything more than 3 feet in front of them

in NYC. Many other places are doing much better. Why?

Nada,

How do you get people to agree on square foot measurement method? French method is flawed in my opinion as it encourages apartmens without closets etc and lets a room with more than 5'11' ceiling height counted in the square footage. Here probably a law requiring "gross" square footage will be helpful which is everything outside of exterior wall in. Cellars above 6 foot height at 25% (debatable part). Very few people in the real estate industry can complain about it but you will find disagreement on that too.

Even AG in the condo offering plans let the sponsor decide how they measure square footage as long as they disclose the method.
https://en.wikipedia.org/wiki/Loi_Carrez

>> How do you get people to agree on square foot measurement method?

You don’t, you just have it set by law. The choose-your-own standard for condo offering plans is suboptimal. I like:

- Gross sq ft, but with a carve out for anything structural. How do you define structural? Perhaps as anything the unit owner is unilaterally barred from removing. Pillars, risers, structural walls, etc. The point being you don’t want to encourage / reward structure in the middle of apts.

- No allocation of common elements.

- Sq ft provided for each floor separately. Whether a basement counts, minimum ceiling height, etc. set according to standards of habitability commensurate with building code.

- Same with bedroom count.

What about exterior walls? In a house, they are counted towards square footage. So why disparity between House and an Apartment.

Cellar ("Basement" is a defined DOB NYC term and is habitable) is non-habitable space but useful for mechanical, storage, entertainment space etc. I would think law has to allow some percentage of that as it is better to have a cellar than not have a cellar.

Do you see the difficulty in getting an agreement between the law makers which is near and dear to the home owners? No apartment owner who bought thinking it is 1200 sq ft will like their apartment being 1100 sq ft as per the new law.

Exterior walls start getting into structure, hence my suggestion to exclude. But I’d be fine with a standard that included exterior (and interior) walls, up to a certain thickness. 3 inch concrete walls => much appreciated, for noise. 3 foot concrete walls => not so much.

Yes, I do expect difficulty in getting an agreement. If it makes people feel better, we can require the new standard be “csi” => centi square inches. This will translate 1000 sq ft into 1440 csi. People will be told “it’s about the same as sq ft, only standardized”. Everyone will receive an upgrade!!!

Once again the discussion has evolved (devolved?) into a political one: The debate about when and how much to regulate anything is intertwined with value judgments. Is it the government's job to protect people who don't have the skill set to spot a scam? Or is it the prerogative of scammers to take advantage of those who don't have the time or the skill set to protect themselves? I am not going to dig into this one. It reminds me of a fundamental value difference I have with my historic tribe of Libertarians. They simply cannot understand why I feel the need to get between them and their prey. I have tried to remind them that they themselves could find themselves as prey in many areas where the government protects them. They will concede that they support regulation in some areas, but not others; it is interesting that the areas where they support it all protect them, whereas the areas they find it overkill all seem to involve protecting their prey.

"It reminds me of a fundamental value difference I have with my historic tribe of Libertarians. "

huh?

OP would have been better off moving on like I suggested. Look how indecipherable this thread has become

Rinette, once your post count hits 4 digits, it will all make much more sense.

Speaking of which, anybody up for wagering whether 300_mercer vs 30yr is gonna hit 5 digits first?

Ha. I don't think anything will change in the next 20 years. Just not enough consumers filing complaints to the Licensing board and not enough square footage law suits.

If it makes people feel better, we can require the new standard be “csi” => centi square inches. This will translate 1000 sq ft into 1440 csi. People will be told “it’s about the same as sq ft, only standardized”. Everyone will receive an upgrade!!!

How many lies in this one? For starters, there is no curb cut. But no one is going to complain to the licensing board about the broker as they have to prove harm.
https://streeteasy.com/sale/1683821

@MCR it is not only about protecting consumers from scams, it is about improving the market by lessening transaction costs for everyone. For example, in a market like one we have right now where sq ft measurement is non-standard, every buyer has to hire an engineer (or spend a bunch of time acquiring the skill and doing it themselves) to figure out square footage or a property for sale. It would be more efficient if a listing agent/seller did it once, and everyone could rely on the same non-fraudulent measurement.

Furthermore, even if you do all that, when you try to compare property to comps, you can’t, because you don’t know how the comps have been measured.

Efficiency is good for markets overall, not just gullible or undereducated consumers. NYC real estate is particularly inefficient.

Some issues cannot be solved - many consumers will always pick broker who names the highest price. But some other issues can and should be addressed.

" every buyer has to hire an engineer (or spend a bunch of time acquiring the skill and doing it themselves) to figure out square footage or a property for sale."

Stop!

Same tape or laser measure that measures the couch and the dining room table measures the dimensions of the room and the width and height of the windows. Use your eyes. Ignore the long hallways and the attic you aren't going to use.

You are on the 14th floor but you just found out that there's no 13, oh no, licensing board!

+1 on Rinette's comment. FFS, the reliance on price per square foot metric is for those who have not looked at enough properties in their target market to have a real sense of what any property is worth to them. There is no substitute for doing the work. If you are relying on broker representations of square footage to value any apartment, no amount of regulation is going to help you.

Consider that I would not have gone to look at that apartment, had I known it was 15% smaller than advertised. My time isn’t free.

Also, most people don’t transact in real estate often, so you need to keep that in mind as well.

I obviously brought a laser measure with me everywhere, but I am also not a typical consumer and up to >900 posts on streeteasy board. :-)

@ krolik - I do feel your frustration. Indeed, I experience much frustration throughout my day, every day, along the same lines, but in terms of things anyone else is going to care about, that source of frustration (like the bulk of the sources of my frustration) will never be prioritized. I think long and hard before voicing my frustration about anything these days, lest I be called a Karen. When I think about the various sources of my personal frustration, I cannot say I disagree with society's general "just deal with it and move on" reaction.

@MCR I have been unrepresented by a broker on my three NYC RE transactions as is recommended at the top of this thread for under 1M transactions. I don’t think I am personally too frustrated. The example in my post above was a hypothetical, sorry if that was not clear. I am valuing all buyer and seller time, not just my own.

I have had a chance to compare and I am genuinely curious why NYC RE industry has so many issues while in other states it is so much more efficient. Consider this an “academic interest” of sorts. Excuses like “sellers are to blame as they like to hire the listing broker that overpromises on price” apply to all states equally, so they don’t explain the difference. What is special about NYC that results in subpar experience relative to other cities? Crazy boards is a NYC phenomenon, so that’s one, also MLS suggestion above is interesting, and I am sure there are other regulatory quirks, what are they?

Here's the solution:
Ban quoting square footage period. It's what I have largely done for over 20 years. Tell buyers to look at the fucking floor plan and figure it out.

@30yrs - Ha! I think that is what everyone learns to do after their first rodeo.

@krolik - Just a theory, but I think the NYC problems boil down to lack of accountability in social and business relationships. In other markets, agents are much more likely to run into the client in social settings or in repeat transactions or they need referrals so they care about their reputations. In NYC there is always another client or listing around the corner - the total addressable market is HUGE so nobody cares about anyone else.

@30yrs what is this a solution to?
Buyers often use square footage to filter out properties too small or too large. You are suggesting making it less convenient for buyers which would increase transaction costs, not decrease them. This is the typical NYC broker attitude to be less helpful to the buyer rather than more helpful.

@MCR that’s a very interesting theory. Sort of like the NYC infinite dating scene that people observe, where unlimited new offerings are reducing the incentives to commit to an exclusive relationship.

If buyers use a number which is fictional, and by where the reward brokers who lie more and increase the square footage, then it's exactly as I said they are a prime cause of the problem.

Any idiot can look at a floorplan an in about 30 seconds tell if the units room sizes to meet their needs. But it takes extra special idiots (aka NYC buyers) to look at 2 identical floorplans and think the one where a lying broker listed more square footage is actually larger somehow.

@MCR - re: big city lack of social/business relationship accountability, you hit the nail on the head

In nowhere, broker we bought house from is married to the guy who did the landscaping for the sellers, so we continued with him. The sellers knew them socially prior to the business dealings, and introduced us to some other small biz owners in town

The owners prior to sellers still run a small biz next to one of our favorite restaurants. Our other neighbor is a builder, and his teens work in some of our other favorite restaurants we frequent. We have mutual acquaintances through them as well as they work at restaurants we know the hosts of because we frequent enough & they work across a few places in a restaurant group.

In NYC we all live in our anonymous boxes next to people who get in the same trains to go to different anonymous boxes in midtown to work. Maybe if we had kids it would be different with forced school socializing. But for me its ironic because the stereotype is the burbs have no social life, and if you do it revolves around your kids.. but I have found the opposite.

We have more of a social life with neighbors in nowhere than we do / ever did in NYC, despite living there half time and only recently vs nearly 20 years in NYC. We socialize exclusively in the city with college friends & former coworkers.

It would be unusual here to live near / socialize with people in the trades/small biz (who we find or deal with mediated through an app/3rd party service), for a whole host of reasons... including class stratification.

@steve123 - Our experience mirrors yours exactly. People know and care about each other in Nowhere. Maybe that is because they have to; maybe not. Either way, it is refreshing.

>>>If buyers use a number which is fictional, and by where the reward brokers who lie more and increase the square footage, then it's exactly as I said they are a prime cause of the problem.

Not lying about square footage would also fix the problem

>>>If buyers use a number which is fictional, and by where the reward brokers who lie more and increase the square footage, then it's exactly as I said they are a prime cause of the problem.

Sometimes the measurements on those floorplans are off as well. You suggestion of skipping square footage, while reducing convenience for buyers, would change how brokers lie, not whether they lie at all.

MTH can you give us an update on this situation?

Not long after this post I just stopped looking. It would have been too high a price to pay for the security of ownership. And I get the sense prices for places like it will be moving sideways accounting for inflation, at least for a while. (I don't have a crystal ball.)

It did sell. There's another place in the same building (same layout but a few flights up) that's now on the market.

As for brokers, I can't see myself buying without one, when the time comes. I'm just not that smart. What the fee structure will look like is anyone's guess. No doubt new practices and conventions will evolve over the next few months and years.

https://www.nytimes.com/2024/03/20/opinion/realtors-agents-commissions-settlement.html?ugrp=c&unlocked_article_code=1.eU0.6qbr.HlDXBwA-yHES&smid=url-share

'A 2022 research paper cited by the National Association of Realtors warns that “minorities, lower-income households and first-time home buyers who rely more heavily on agent services would suffer the most” from a ban on payments by sellers to buyers’ agents, because they couldn’t afford to pay the agents out of their own pockets.'

'But it would be possible for buyers to negotiate commissions with their agents without having to pay those commissions out of pocket, the Justice Department said in comments on a lawsuit in Massachusetts last month. It said the buyer could negotiate a payment to the buyer’s agent, then direct the seller to pay the agent that amount from the proceeds of the home sale. The seller would compare bids based on the net payment he or she would receive after any payments to the buyer’s agent.'

Or the buyer could just work without an agent. I don't think it's overly complicated to buy a home in a suburb etc, You'll still have the bank, title agency and possibly an attorney working for you. And if we're talking about house, there will be an inspection done.

I know in England for a very long time only very wealthy buyers enlisted their own agents. I think that has changed a bit. There's also the elephant in the room, but perhaps the big payday that many buyer agents have been getting for simply showing up, in many cases, with warm bodies, is coming to an end. You'll have to demonstrate your worth, and figure out what a buyer would be willing to pay you for your services as an expert in your field. I think this will be the end of the weekend warrior agent, doing a couple of deals a year, and making pretty good money with a little side also.

And also as you point out, there's nothing stopping a buyer asking a seller to pay his agent's commission as part of an offer. Or perhaps some portion of his commission, depending on how the offer shakes out, what the current market is like for that particular home.

But for the first time in maybe close to 100 years, it looks like the process for buying and selling real estate, how agents are compensated is really going to change. I think it might be a bit slow starting out, and it's going to look different here in New York City versus a suburb where homes are trading at $3-400k.

We've been fully negotiating commissions for 14 years through commission rebates and reduced listing commissions. And we've been very successful on both fronts. So as a broker I can tell you you can still make a very good living accepting less Commission and being more productive. Sure, now everybody says commissions were always negotiable, but that was in theory, very rarely in practice. At least in residential real estate.

Here in New York City, we're not part of NAR, but I have a feeling that rebny will adopt the policy of not listing commissions for buyer agents in the RLS, same as what's going to happen with the mls's around the country. I wonder if a seller is willing to pay a buy side commission, can they list that in Zillow or let's say StreetEasy? I think the doj settlement with NAR only prohibits listing the buy-side Commission in the MLS?

If you're somebody that prefers working with a buyside agent, what would you be willing to pay then for their services? I'm currently putting something together to offer buyers in expectation of these changes.

Keith Burkhardt
The Burkhardt Group