Pros/Cons of having a buyer's broker for under $1MM co-op purchase

I would also like to know the pros of having a buyer's broker for a condo under $1 million...any thoughts from the S.E. experts would be appreciated :)

Well here are a couple pros and cons for you. This is just a short list off of the top of my head.

A buyers broker might (but not always) have access to some listings that are not on a website like street easy or other outlets that you may use to search(nyt, etc)
They are getting paid to work for you, and in that they owe you fiduciary responsibility.
They can help you get much of your leg work done and make the time that you are spending looking for an apartment a little easier. They can be in constant communication with attorney(s), lender(s), sellers agent etc. This can save you a ton of time, and help keep everyone on the same page and informed.
It doesn't really cost you anything more.
Many of them are having a hard time right now and would love to have a willing buyer, they will surely do everything they can for you(one would hope)

Cons.
If you are finding a FSBO then you may get a better price as the brokers commission is not being considered in the sale price
Sellers Brokers for apartments that are brand new to the market in some cases may delay in submitting an offer or make the offer to the seller seem not as strong as it might be in the early stages because that sellers broker might want to have the apartment sold without a cooperating broker involved.
It may take some control away from you in the process (not always a bad thing)

I know there are more points that can be made, but this is a good start. Im sure someone will add. Good Luck and hopefully you find someone that works for you.

If you are interested in finding someone to help you with your purchase, I would go out and interview a bunch of brokers and try to find someone you get along with and who will work well with you AND for you.

If you are organized, comfortable with the negotiation process (meaning you have business experience), have a good real estate attorney lined up, know the process of purchasing and how it works, and have seen a number of apartments that you really like (that is, you're not super-fussy), then in my opinion you might be better off without a buyer's broker.

I'm a small-scale real estate investor, and before I became a real estate agent I always represented myself as a buyer.

The big disadvantage of a buyer's broker for the buyer is that some--not all, some--listing brokers would much rather you didn't have a broker in tow. That's because if they can keep the sale in-house, the company keeps the entire commission (5%, say) instead of splitting it with the buyer's broker (2.5% for each side). I also agree that For Sale By Owner folks might give you a better price, although some--not all--FSBOs advertise "brokers protected" or "3% for buyer's broker."

Now, sure, listing brokers are legally obligated to immediately take your offer to the seller regardless of whether you have a broker representing you or not. But there have been reports on this board and elsewhere of buyer's brokers who have trouble getting their phone calls returned...foot-dragging. If you love a particular apartment this kind of behavior would be heartbreaking.

On the other hand, a busy listing broker might be happier working with a buyer's broker who will sweat the details and make sure the deal actually goes through--a lot of deals don't. It can also be more effective for somebody else to do your negotiating for you, you can get concessions you need or want (better closing date, that chandelier in the foyer, maybe split a fee here and there, etc.)

As a real estate license I definitely have access to listings that I don't seem to find anywhere else, and I get constant email updates about price cuts and other news. But there are SO many apartments on the market right now, I'm not convinced that's an important factor for most people.

{Manhattan real estate agent. 917. 365. 0876)

My latest buyer's broker clients (who just put in an accepted offer last week) came to me through a mutual friend. We certainly used streeteasy to identify target listings -- but you know what they're buying? Something I showed them after I saw their streeteasy favorites with them.

As a shopper you know what you like, but don't overrate your ability to find it, even as the web turns into a catalog.

Certainly buyer's brokers negotiate, and keep you away from bad purchases, and get you through co-op boards -- all things most attorneys won't even do for you -- but they also help you find what you want. You go on one home search every few years, we go on dozens.

ali r.
{downtown broker}

The listing broker will get you through the co-op board if it's a co-op and the buyer is not using a broker. The listing broker on my co-op did a fantastic job. But I do agree, there is so much out there that pawing through it could be overwhelming for some folks.

I have an anecdote to add.

I bought a bank-owned (foreclosure) property near Detroit in June. I used a buyer's agent because the listing broker's agent morphed into a buyer's agent when I contacted him as a buyer--that's how they do things in Michigan. (That is NOT how we do things in New York. Unless otherwise stated, all brokers are working for the SELLER. Important to try to remember that.)

So I told MY broker to offer $X for that particular house. He said OK, but without telling me, he offered less than X because he knew of a previous deal that fell through on that property because the buyer couldn't scrape together the financing, and therefore thought the seller (bank) would still be willing to accept less.

And MY broker was right--I got the house for his offer, bang. Happy happy!

I should add that because this was a bank-owned, the real estate company got paid a flat fee by the seller (again, the bank) regardless of the purchase price.

HOWEVER, my buyer's broker had a fiduciary responsibility to me to look out for my interests and so he did the right thing for me even though it had no effect on his own pay. Would he have done this if he had been working on a percentage of the purchase price? Yes, I believe, because I'm an investor, and investors are often repeat customers, and because this broker is an ethical cat, the company has a fine reputation.

Two points here: Buyer brokers/agents do sometimes have inside information that you don't have access to that could affect your deal in your favor. Whether that's worth the downsides discussed above is debatable.

If you do decide to work with a broker/agent, as a buyer or seller, why not have a little sit-down and ask them point blank about what they would do in such-and-such a scenario. Certainly, if you meet with a broker or agent, you want to assess not only their marketing and research resources but also their business ethics. When I was looking for a real estate brokerage to affiliate with, I interviewed brokers rather carefully on some of these points, and I found it is definitely possible to separate the sheep from the goats from the AK-47's.

{Manhattan real estate agent.}

Thanks very much

My 2 cents - I have bought/sold 4 manhattan apts. including 2 coops. One of my transactions I bought directly from the owner, no broker on either side. It was the easiest, quickest and most pleasant closing I have ever had.

Fluter – that experience is weird. You wanted to bid X. Why wouldn’t your buying broker have said, “Why don’t we start at X less 20% and see how they react?” To have your broker place a bid – even a lower one – without your authorization is inappropriate to me. I don’t know why he or she wouldn’t have simply discussed the deal with you first. This story seems shady.

Sailor – my experience is exactly like yours. I’ve only invested in NYC and I’ve always had much better experiences where no brokers were involved. I have bought (no buyers broker) and I definitely think those bids got priority (to the listing/selling broker) above bids that came with a split commission. I’ve never had a broker “get me through the board” – if you have acceptable financials, you will get through the board. Ditto – I have never had a buyers broker find me an apartment that I couldn’t find on my own – often they just push listings that I’ve already seen and rejected myself. The only time I ever wished (desperately!) for a buyers broker was when the listing broker was such a royal maniac that I hated the nonstop phone calls from him. I did frankly wish someone else was dealing with him. But that is more a testament to how many unprofessional people are in the business than a legitimate plus to using a buying broker.

All that said – if you don’t know buildings well and need some insight – I can see where a buyers broker might add some value.

In answer to Village, I think that broker might have been afraid of getting my hopes up for a lower price that the seller would no longer accept, and then disappointing me. (This is Michigan, remember. Different culture.) His behavior was appropriate, ethical, and legal, however, because do remember he was a *buyer's* broker. As such his fiduciary responsibility was to me, not to the seller.

And the story is exactly as it happened. Obviously, I told the agent what price to offer and I got an acceptance for a lower offer, then I found out the prior history.

Cons:

-Incompetent buyers broker

-Seller's broker acting in their own interest and not submitting offers

Pros

-Professional on your side to help you negotiate the lowest price
-access to more listings
-access to more market data and history
-help and advice getting through boards

With that said:

-Most sellers are not concerned with who they pay a commission, only with the final sale price.

-The sellers broker is going to try to sell for the highest price possible.

-I would want a professional to help me get the lowest price possible on my side.

If I do my own research and I'm not represented by a broker, how likely do you think the seller will shave 3% off the sales price? It seems logical that the sales broker would go along with receiving a 3% commission as there is no buyers broker to share the commission with.

Sorry for my ignorant question, but I'm new to this.

Thanks

3% is a small price to pay to lock in the historically low interest rate. Sonny Hong from BofA can close the higher limit mortgageby Oct 1, but you gotta apply by June 30... 21days.. stop dickering on the 3% and buy something... anything.. the FIRST apt you see above $750K mortgage and your $500K downpayment... Don't wait.. call NOW...These prices are INSANE!

I feel like we've gone over this 1,000 times. The sales broker doesn't dictate the commission, the seller does. In some sales agreements, the seller pays a smaller commission on non-co-brokered properties, so the broker's ability to discount is limited; in others, the broker can fully discount. Search these boards and you'll find anecdotes to support either side of the argument.

I will say, when I do seller representation, I'd rather co-broke than work directly, because I'd rather have a pro out there doing the work, but I can't claim I'm in the majority on this.

ali r.
DG Neary Realty

Ali R. Selling Brokers can and WILL reduce their commission to make a deal happen. They have LOTS of room to do so.

Village: "I’ve never had a broker “get me through the board” – if you have acceptable financials, you will get through the board."

Agree 100%. Money speaks with way more articulation and persuasion than any broker I've ever met.

As far as finding apartments that were appropriate for us, we did all the research, then gave our list to our broker. He set up the schedule and got us viewings on some of them. He also paid for the cab ride.

[insert your own 'expensive cab ride' joke here]

I'll insert an alternative;
http://theburkhardtgroup.com/services-and-fees-c14358.html

Dylan - that's what I thought too. I don't see how Ali can be right, but I guess there are a lot of illogical people out there. I mean, if the selling broker knows/expects that they will split the commission 50/50 between the buy & sell side brokers and I don't have a broker, why doesn't the seller just reduce the selling price 3% to make the deal happen if that's what I want? The selling broker will still get his 3%. What, does he think he's gonna double bag the commission?

Thanks for the link, Keith. Much appreciated!

What's illogical is the assumption that all a buyer's broker does is set up appointments (and pay for cab rides). I am especially happy to co-broke my co-op listings because the buyside workload is significant.
Tina Fallon
Realty Collective, LLC