Buyer's broker - good, bad or indifferent?

The old expression, "co-broke or go broke," certainly applies in this market. If you're a serious, well-qualified buyer, having a good buyer's agent should be an asset rather than a hindrance. I like working with other agents from other companies, and feel they bring a lot to the table. We understand each other, and can cut through a lot of b.s. when negotiating an agreement.

As far as negotiating a lower price is concerned, I have often obtained a greater discount off asking price than my buyers thought possible, and have never represented a buyer who failed to close a deal. On the other hand, I have represented the sell-side of several deals that failed to close due to the (unrepresented) buyers' overstatement of their qualifications.

On the other hand, there are - especially here in Brooklyn - agencies who refuse to co-broke. If they are not members of REBNY, they are under no obligation to do so. Warren Lewis, Aguayo and Huebener, and Vespa, to name a few, will often refuse to work with buyer's agents. As a result, your agent may not send you those listings to consider. That's the only case in which I think you might really miss out on an opportunity.

I work for a small REBNY member company, and I make a point of sharing all available properties with my buyer clients - even those that refuse to co-broke. In most cases, I can negotiate a small "finder's fee" from the listing agent in lieu of a commission split. If the listing agent seems like he/she will take care of my clients, I am happy to hand over the baton once we have arrived at an accepted offer. I try to educate my buyers about the full spectrum of the market. At any rate, I know that my client doesn't feel she has to keep checking craigslist and the nytimes for listings I have overlooked.

Tina
(Brooklyn broker)

On the buy side if you are comfortable i think it is an asset to yourself not to have a broker between you and the other broker, one broker is hard enough. I always feel that no matter what they may say they are negotiating both sides and could just decide for whatever reason not to ever seriously discuss an offer. I have had a conversation with someone who was looking to buy and the buyers broker told him the offer was to low or something to that effect, he later on ran into the seller and asked directly to find out the offer was never even mentioned. I realize this is an isolated incident, however i just don't buy that a buyers broker could somehow get you a lower price. At the end of the day the sellers broker has more flexibility especially if they want a deal done to play with their own full commission when no other broker is involved which will help cause the potential to have a lower price. Not to mention you are making a direct offer and not relying on a broker.

I will tell you from my own experience that my broker most definately lied to me. I almost put in an offer on an apartment and he told me that there was an offer close to ask. When i asked what that meant he told me at most 2-3% off. Which from my perspective was way overpriced, this was last summer. But he gave me the crap about the market picking up and the price range i was looking at there was not to much, meanwhile when i saw it hit ACRIS it was 7% off the price, which was about another $30-40k. while that is only $2400 in commmissions, it is the more especially when less transactions are going on.

In addition at the end of the day i bought a new condo and he knew i put in an offer, he then asked to represent me after the fact so he could get a piece of the commission. Had this guy actually done any work for me on this transaction or even really helped me look i would have thought about it, but he tried to sell me on he could get me a better deal, when in the end i got a better deal because there was no additional brokers fee. And i do know this because i saw how other apartments were discounted and knowing my other incentives.

Newbuyer 99, first of all you are on the right track..... I can't say this clear enough....anyone you ask who has money riding on the answer (for example- a broker who if people stop using loses business) it is definitely going to say an answer on that. They have to.

you are real, here's the reality: it depends. Anyone that says you need a broker is lying. The real situation is a sellers broker makes double! What they make if you are yourself. Double. 3 to 6%! Now sometimes it is just to 5% because of their deal with seller, but bottomline that means on a 500k apt they make 30k vs 15k. Now that 15k is like catnip to a broker, they flip pver it. Why wouldn't you. You would now get paid 15k more fr doing the same thing! Where in the world can that happen!!!! The key is how to take advantage, because brokers obviously don't want to give any of that back, so at minimum you will get that seller broker to push you ahead of all others assuming no major differences between you and anyone. Better is they will always put in something to sweeten the deal at the end. Why wouldn't they. The whole they can't because they have a contract and company won't allow is not true. Don't believe me, try it on anyone! Period. Now, you might get 1k dollars or you might get them to put 3% in and save 15k in this case or 36k on a 1.2 mil place. Getting that amount out of them is up to you as a negotiator, same as the apartment price. That is a whole different part on how to do. They lesson is you have to know this is your ability.

Now if you don't want to, don't think you would like to negotiate, or don't have time then the key is how do you find a broker that you really can trust. Its not should I get a broker. Its where is a qualified broker I can trust to deliver me this apartment at a rock bottom price, in 2 weeks, with no hassel, or what ever you really want them to do. It depends first on of you can do the top part, or have things that matter elsewhwhere. i

newbuyer99- There are almost no apartments you can't find on your own without a buyers broker.

Do you really want 2 brokers negotiating your deal on the buy and sell side, and you are not really privy to all that is said.

Why would you think a buyers broker could do better than you on your own?

Unless you are green to NYC, and lack confidence to see what's out there on the market, I don't know why you would want to complicate the process. Any broker will be delighted to take a potential client to see an apartment- it's how they make their living, I don't blame them. But is it necessary, I hardly think so.

I have talked to at least 3 brokers (depending on the agency) that would lower the commission rate or work with you as they won't have to split the commission. That's more money in the selling brokers pocket and less out of yours due to more flexibility.

Others may disagree,(especially a broker), but buying an apartment without a broker is SIMPLE, EASY, AND UNCOMPLICATED, if you qualify and can do basic negotiations. Once you qualify and the title is clean on what your buying it really isn't a great mystery.

Good luck!

Just my two cents. In contract now because of the reasons I gave above. If broker, no way I'd be, but I negotiated well. With reading things,etc. You can get what you want if want to. Some people don't want to negotiate

Gl

As an overview, customers tend to enjoy having a buyer's broker in direct proportion to the skill of their buyer's broker -- you will find long-time posters here who swear by their buyer's brokers and will use them again, and long-time posters who say that their buyer's brokers added nothing to the deal because they were idiots (or as MikeV, asserts, active liars).

I will tell you that when I am on the sell side (I work Manhattan, generally downtown) I fight very hard to keep from giving my commission away. I would generally prefer working with a buyer's broker -- and making less money on a given deal, but taking less time to do it -- then doing a direct deal even though I get more commission.

Some of it is psychology -- I went in to real estate because I like putting people in apartments, and I find the psychology of the buyer who goes direct because "one broker is hard enough" and it's "simple, easy and uncomplicated" to buy an apartment (ho ho ho) to be very tiring.

ali r.
DG Neary Realty

"I went in to real estate because I like putting people in apartments" - and cash in my pocket!!!

The new Rachel Uchitel of Real Estate!!!!

"and I find the psychology of the buyer who goes direct because "one broker is hard enough" and it's "simple, easy and uncomplicated" to buy an apartment (ho ho ho) to be very tiring."

and we find your constant pitching on this site very tiring!!!

Who's "we"?

thanks, NWT. Apt_Boy, OP asked a question and I answered it... if you don't like my answers, you don't need to resort to name-calling; there's a hide button.

ali r.
DG Neary Realty

I think a lot depends on the broker and also on the buyer's own experience (or lack thereof). A person who knows the market well, is experienced with negotiating and knows how to prepare a board package may do better on their own. Some brokers simply aren't up to the job.

We lost a deal a couple of years ago because we were working with a buy-side broker who simply wasn't experienced enough with negotiating. Even after my coaching her on exactly what to say and how to respond to the opposing broker she just could not get it right. It was extremely frustrating to have to basically sit back while she tried to muddle her way through the process.

There ARE brokers out there who know their stuff and can be very beneficial on the buy-side (Noah Rosenblatt comes to mind). But you really need to search them out because, in my experience at least, they are not the norm.

I think it really depends on the buyer's broker. Some are good, some are bad, some are indifferent. If you find a really good one (knowledgeable, honest, reliable, intelligent), it's an asset. Most contracts negotiate a smaller percentage in case the purchaser has no representation, 4% commission instead of 6%, so the difference between co-broke (3%) and direct deal (4%) is not large enough to sway things one way or another. A smart, knowledgeable broker will save you more than 1% by getting you of troubled properties and negotiating a fair market price; a bad one, disorganized and dishonest can scuttle a deal.

Hi Ali,

Explain to all of us how difficult it is to buy an apartment on your own? I have done it twice and most of my friends have bought on their own also.

I'm not being sarcastic, I just don't understand how you can twist my comment about it being "simple, easy, and uncomplicated" to make it more that what it really is.

Maybe I was lucky and so were my friends? We didn't find anything that impossible to do as long as you are working with a good lawyer....that my friends I think is what is very key in the transaction.

So, kindly tell us what could go so wrong that I would need a buyers broker to do a transaction when I am an intelligent man and work in a business where negotiation is part of my daily practice?

Thank you....

This is getting like the buy/rent thread (:
I do like how Ali gets in there and defends us brokers though...lol

You absolutely don't need a broker.

That said I think many people benefit by having a good team in their corner, broker, mortgage person and attorney, especially if everyone is working together, it can make for a very effective front. I find my clients seem to appreciate my input and collaboration and the fact that I have developed a model that also compensates them financially. I have been doing all kinds of creative deals with buyers from simply presenting their offers to a full consultation. To each his/her own.

Keith (broker)
http://ubivoletaudentunicornium.blogspot.com/

If you are savvy enough to put the question to this board you don't need a buyer's broker.

In every instance when I has asked for a reduced commission the seller's broker have complied. They sometimes say that it is up to the seller but disregard that.

You will get better more direct info than what you will receive filtered thru another party.

Seller's broker will help you prepare board package same as if you had a broker. They want to do the deal.

Never sign one of the new agency agreement where the broker has checked off dual agency. The broker should work only for the seller. The big agencies pushed this thru as a way to limit their liability and their lawyers are all getting off on it. One big agency (you know who You are) has instructed their brokers to demand that sellers agree to dual agency or they can't represent them

All posters here that say you need a buyer's brokers are either brokers or have a horse in the race.

There, that's my two cents.

take a shill pill

Stuff it

freakonomics has a simple take on how RE brokers are incented to misrepresent their clients

ieb- Why do you say never sign the dual agent agreement? I was presented one of those by a Corcoran agent recently when we bit an offer on a place without a buyer's broker.

Daimler, I always hate telling my stories at length because they always get cannibalized by other real estate sites who make money off them (Brick Underground, you know who you are.) So the short version is this -- I "bought on my own" the last time I bought -- our co-op two years ago. The apartment was an unadvertised FSBO we literally saw on a flyer.

There were negotiation problems, there were mortgage problems (this was summer of 2009, and rates whipsawed), and there were appraisal problems. It was the first purchase my husband and I had made together, and we didn't want to sell our pre-existing property, and that made life more difficult. There was an estate factor; the seller had problems with his subsequent purchase, and the cherry on top was that the managing agent (subsequently fired) lost half our board package.

I couldn't have got through any of that without the assistance of a skilled agent, who in this case was me, but if I hadn't been in the biz would have been Gil Neary. There were just too many twists and turns -- and I have a fantastic real estate atty I have used for 15 years.

If you had an easier transaction, bless you, but they can be very very tough.

ali r.
DG Neary Realty

The core meaning of dual agency means two things. First, it means that before the broker asks you for dual agency they have obtained it from the seller. Meaning that the broker no longer has the same fiduciary responsabiity to the seller because he one also represents interests of the buyer. Why would a seller agree to this?

It's not so ad for the buyer but the buyer may feel that there is some commitment on their part to use this broker for all trasactions.

Net is that broker has reduced liability and the seller has lost some legal protection. Lawyers for the agencies lobbied hard for this.

Would any of you brokers care to comment?

>Others may disagree,(especially a broker), but buying an apartment without a broker is SIMPLE, EASY, AND UNCOMPLICATED, if you qualify and can do basic negotiations.

Except you were the person who wanted to sell FBSO and fail to disclose material information on the finances of your building, unless explicitly asked.

>Daimler, I always hate telling my stories at length because they always get cannibalized by other real estate sites who make money off them (Brick Underground, you know who you are.)

Interesting, but not surprising. Doesn't Brick Underground have an employee who goes on to a competing real estate web site, and without disclosing the employees' affiliation, harangues developers who aren't advertisers on Brick Underground. Is this planned or just accidental?

i don't know, ali, one BU story doesn't seem to have slowed you down much. although our previous interchange still stands. and thanks, btw, sorry i haven't sent an e-mail earlier.

interchange?

Here's how I feel: it's complicated. I find NYS agency law to be confusing to everyone involved. But it is a necessary evil. Dual agency is the most confounding of the lot, as evidenced by this conversation!

Let's say I have a property for sale. You show up at the open house and sign in, but keep to yourself. Maybe you've done a ton of research and know that this is the right place for you - I don't know that, though, and respect your privacy and let you walk through unmolested. I certainly don't ask you to sign a dual agency disclosure - that would be like putting on a condom for a handshake. But it turns out you like the place, call me back to talk about making an offer. You give me your highest and best number. I know that the seller likes a little give and take in his deals, so I suggest you start with a lower offer and see what happens. I call the seller with the offer and he counters. I call you back and you counter. The seller comes back with his absolute bottom line, which is the same number as your highest and best. Lawyers will speak in the morning and an inspector sent to the property forthwith. You are thrilled. The seller is thrilled. That's dual agency in action.

But wait! You still haven't signed an agency disclosure form. Grrrrrrr. Now when was I supposed to get you to sign that?

Is it a trick question? Ask him for e-mail addy when he calls to make the offer, send the disclosure form and request he makes his offer via e-mail with the name of his lawyer. Browbeat your client to accept the offer with as many games as he likes, job done, the right way.

I haven't been following this whole 'dual agency' thing, because I don't care, but in other states, offers must be submitted on standardized forms with all the legal mumbo-jumbo anyone would dare include at offer stage. So perhaps that's the best way to handle the disclosure form. Perhaps REBNY should come up with a standardized offer procedure that's a little more "real" than haggling over a figurine at a rummage sale.

Tina -- in the hypothetical you gave above, I can't see how you represented the buyer. You relayed the offers and counter-offers, which you would have done anyway as the seller's agent. You did suggest to the buyer that she start with a lower offer, but you might have done that anyway in order to get a deal for your client, the seller. The buyer found the listing herself, saw the apartment without input from you, left the open house and then called you to make an offer. She looks like any buyer who is buying without a buy-side agent.

Appreciate all the responses. I understand that I don't "need" an agent, and am certainly happy to go without one. However, I know one that I think is honest and skillful, so the question I am trying to understand better is "why not". Thus my question about the reality of selling brokers lowering their fees when they don't have to share to get deals done and other related questions.

Ali, your comments are always helpful and I know you try to be as objective as possible. But I am not quite sure I understand this one:

"I will tell you that when I am on the sell side (I work Manhattan, generally downtown) I fight very hard to keep from giving my commission away. I would generally prefer working with a buyer's broker -- and making less money on a given deal, but taking less time to do it -- then doing a direct deal even though I get more commission."

You say you don't want to give your commission away, but then you say you prefer to work with a buyer's broker - isn't that the definition of giving your money away?

ieb - your comment "In every instance when I has asked for a reduced commission the seller's broker have complied. They sometimes say that it is up to the seller but disregard that." was exactly what I was looking for. Have many others had the same experience? Or the opposite experience?

Thank you all again.

NB- I just went into contract without a buyers broker and the sellers broker put in almost 1% of the commission. It happens everytime. maybe not 1% but...SOMETHING THAT THAT YOU WOULDNT GET OTHERWISE WITH A BUYERS BROKER!!!!!!!

The key thing to consider is Ali said " I fight very hard to keep from giving my commission away". So did my sellers broker, before she gave it away! Notice Ali did not say I do not give my comission away. Of course shes going to fight not to, thats a given! Point is why would she lose a deal by not giving something up and landing still at or above where she would be with a buyers broker.

The other thing that could be even more important of an advantage is if the sellers broker lowers their commission from 6 to 4% or 5% for a deal without a buyers broker than the seller now has a HUGE incentive to take your offer!!!!! If the drop is to 4%, and if you offer 500k, someone with a buyers broker (or if you had a broker) would have to offer 510 to give the seller the same offer. So your money goes a lot longer on both sides. You can get some from the sellers broker GIVEN EVERYTIME. PLEASE ONE BROKER SAY A SPECIFIC WHEN YOU WOULDNT GIVE ANYTHING, and you dont have to bid as high because the effective amount to the seller is already 1-2% higher than with a broker!

Those two reasons are why buyers brokers hurt you.

also, to be honest, your biggest advantage now is that there still are less indepentent buyers, as if it continues to rise, the sellers broker can wait for another independent buyer to come. Now you are rare and they want it, NO MATTER WHAT THEY SAY. I love that someone says they do it to put people in
apartments, but the majority of brokers need money actually, and that motivate them.

so do it now and laugh all the way to the bank. In a few years I am sorry but the broker world will be dramatically different. I like Keith who changes his options. That is the way of the future. The old model existed because of a monopoly on access. With that gone, the model makes no sense in NYC. The quicker people change the better, it happend in all fields. My advice to brokers, be like Netflix, not like Blockbuster or Barnes and Nobles. Good luck, I feel for you. You can do IT!

maly - it was a bit of a trick question, and of course you send the agency disclosure form with the rest of the paperwork. I was merely pointing out a hypothetical scenario in which a portion of the meaningful interaction among the parties has occurred without that document having been signed (as required by law).

alanhart - of course there's a standardized procedure. Every agency has a different official "submit offer" form, but most contain the same basic information. But sometimes you're fighting against a clock of some kind - the buyer is leaving the country the next day, there is another offer on the table, the buyer wants to submit an offer with a 24-hour "take it or leave it" clause, etc; in those cases, a lot of the negotiation happens verbally. It may seem like "haggling over a figurine" to you, but it's only one portion of a complicated process.

generalogoun - in that hypothetical, I represented the buyer by not disclosing to the seller what the "highest and best" number was. Please keep in mind that when a buyer says "highest and best" they usually mean "and I can come up a bit from there, in a pinch" (unless it's a sealed bid auction). My fiduciary duty as a seller's agent would be to squeeze the buyer for every possible penny, with no regard to the buyer privacy. My job would be to disclose all relevant information to the seller. In the hypothetical above, I did not do so. Does that mean I was acting as a buyer's agent? Absolutely not. That's what dual agency is.

ieb, shill pill prescription not for you--you seem anti-shill, in fact.

It's the tough transactions where i would most want to represent myself directly, with the backup of my lawyer--to have a buyer's broker, whose interests by definiton differ from mine (see freakonimics), filtering negotiation on a sensitive deal, is obviously not desireable--and negotiating all these deals; even coops, divorcing sellers, whatever; is simply not rocket science--and we know well that RE brokers are anything but rocket scientists--

buying brokers are largely useless and often an impedimant at every stage of the buying process--with streeteasy, Urban Digs, ACRIS, and a good lawyer, I am equally well eqipped to better research timing and properties--my aunt bought a major apt, using a reputable, very successful, buyer's broker---she bought a place the listing for which i provided from SE, along with history, comps and ACRIS on the building--2/3 of the apts he looked at she had to tell her broker about, most of which she found on SE/ACRIS after I spent 10 minutes showing her around the sites---and several times her broker expounded on history, comps etc that were easily debunked via ACRIS--it's possible that a broker can be as good as any buyer willing to spend a few hours on the process, but why?? and why have someone frequently less-intelligent than the buyer, whose interests arent aligned, handlong the negotiation?

also, we buy apts often (unless super wealthy) that corresond with out nets worth--so the commission that may be save by not using a buyers broker is usually meaningful--ie one can say a big banker/trader couple is too busy doing deals/trading to research and arrange viewings--but given that that power-couple is buying an 8mm dollar place--the 240k 3% that could be saved does mean something to them--and both in the couple likely have ass'ts who could arrange appts with selling brokers, without having to coordinat a third, useless party, the buyer's broker--further, i refuse to hear that ANY RE broker could negotiate a deal as simple as an apt purchase better than a successful IB

Wbottom - agreed!
But you might be surprised to discover how many people out there lack the experience and skill set you cite above. Particularly first time buyers, out-of-town parents buying for children, people with complicated credit histories. Not everyone has a nephew like you! It's not rocket science, no - neither is changing a flat tire. But lots of people have AAA coverage so they can avoid doing it themselves.

Really awkward analogy. For $75, let someone else get their hands dirty.

j & W obviously won't be using a buyer-broker on their next purchase. However wbottom if you read anything about what I offer, you could have referred your Aunt to me and she would have received a check for 2% of the final sale price(along with on average 5% off the ask price) at the closing, along with an independent analysis of what I thought of the property before asking you any questions about price etc... That's one way I reward the "real estate quants" out there that are doing a lot of the work involved in a purchase.

I do work very hard to help my clients achieve the best possible price, then the offer is super charged with the commission rebate. It is a true collaboration, clients are cc'ed on all emails with listing broker and all decisions regarding the strategy,price etc are discussed thoroughly, along with support as to why I am thinking a particular way. Two heads can be better than one (: Like I said previously a good team working on your behalf includes not only a buyer broker, but a lawyer and good finance person in some cases a good CPA.

I also start off by researching the unit and sending my client a price range that I think would be acceptable with talking points before asking them what they would like to pay. I would also say at least 40% of the time I have advised clients not to bid at all or else have strongly advocated they not bid beyond a certain range. We are a very small firm, with NO advertising, my reputation is all I have so I work hard to keep it, which in turn rewards me with a significant referral base.

So if you do decide to use a broker to assist you I just want to make the point that there are choices and many honest, well qualified agents across the various firms. Or else don't use one, you're right, you don't need to.

Keith (broker)
http://theburkhardtgroup.com/services-and-fees-c14358.html

hahaha 3% brokerage for changing a freaking flat--dig you deeper tina

my selling broker of my last 3 sales has been excellent--didnt use a buyer's brok in any of the three

yours may be the model that evolves--the legacy buyer's broker model wont last, another victim of the internet

The argument citing the travel industry and stock brokers is a compelling one, that I agree with. It's an interesting topic to discus, and I'm a bit of a nerd. But you can make the same argument regarding the listing brokers role, really you should be able to "list and they shall come". I tend to think the buyer-broker relationship is more important,more personal, but as you point out it needs to evolve.There is a lot of room to get creative,more efficient and slowly it is happening. The elephant in the room is the "firm" spending millions on high rent office space and marketing aimed at branding, not necessarily selling.

jstreetdream: You make several good points, and I mostly agree with you. One minor clarification, though: I think your "two reasons why buyers' brokers hurt you" overlap to the point where they are very nearly one reason. In another words, I think you are counting some of the money twice.

Consider a hypothetical buyer who is prepared to pay $2MM for an apartment that is listed with a 6% commission and a 50-50 split between listing and selling agents (a.k.a. "seller's broker" and "buyer's broker"). For simplicity, we can disregard other closing costs. In the usual scenario, with brokers on both sides, the buyer will pay $2MM, of which $120K in commissions is divided evenly between the brokers.

For this discussion, assume that the listing agent will work for 4% if the buyer is unrepresented. The other 2%, or $40K, is money the unrepped buyer can either take off the table to reduce his price or leave on the table for a competitive edge over buyers who are represented by brokers. Either use is equally valid, but the trade-off between them is zero-sum. Each dollar that comes out of the commission can be banked, or it can be used to win, but not both.

I deal with this issue a lot in my work with Keith, although the context is different. In our case, a buyer working with us can anticipate a rebate of up to 2% of the purchase price. So the same strategic question arises: how best to deploy that money. In the scenario described above, the client would expect a rebate of around $30K. (That figure is based on my standard deal with clients; YMMV with other agents.) The client can offer $2MM and treat the rebate as a discount off the price she was willing to pay, or she can increase her maximum bid to 2.03MM, knowing that she has $30K coming back, or she can split the difference somewhere between the two numbers. Alternatively, we can use some of the money that would go into the rebate to reduce our gross commission, in exchange for a lower price or the seller picking up closing costs like Mansion Tax that are customarily paid by the buyer.

Our goal is to give our buyer clients the best of both worlds: the financial edge enjoyed by an unrepped buyer, and the broker services they consider useful. As I have mentioned elsewhere, the model works very well on our current small scale. I think jstreetdream's Netflix analogy is a stretch in our case; we're a niche player, not a category-killer.

Jstreet, you're absolutely right, my commission is always flexible, and I'm not going to say that I've never thrown half a point on the table, because I have. Still, a buyer approaching a seller's broker with that attitude has to be very sure of their sense of pricing, because I think to go into a deal unrepresented with the idea that you're going to get 0.5% -- or let's say other brokers are different, 1% -- while giving up everything else is a big big tradeoff.

newbuyer, if I make less money but I'm doing less work, I don't see that as giving money away, I see that as freeing up time to do more business. Especially since new business tends to come in by referral, most agents would rather do 20 deals than ten, even if it's the same $$ in the end.

And West81, you know I adore you, but I still don't understand your business model. Other discount firms typically provide lower service; if you're offering full service for half-price, you'd have to work at even higher volume to make a living, which then should circle back to cut into the service you can offer your customers. I think some of the "savings" you're positing includes not having an office, but agents have to work from somewhere -- and like Rutenberg, I think this model just pushes that cost from the firm onto the agents; it doesn't remove it.

ali r.
DG Neary Realty

@Ali I offer brokers a 95% split. I have next to nothing as far as overhead and I work as well. So at the end of the day we make close to what you may make, what your firm would traditionally receive from you, goes to our clients.

I'm on my way out, so thats a quicky explanation, w81st may want to elaborate.

It's not just about the money, it's about a model that benefits everyone involved and that I believe to be sustainable going forward. So far (3 years) it's been working quite well and West81 has been quite successful (: as have I.

We almost exclusively represent buyers, not much fixed overhead involved in researching listing via an internet connection.

Ali, I respect your opinions, but your comment really shows how you believe that a broker is more important then a lot of professions out there. How much do you really believe in terms of money and value that a broker should earn when selling a home or even helping someone buy?

I still do not understand how a broker still feels that grossing $300-400 per hour is justified. And really this value goes up as the price of an apartment increases. I can not stomach the point of that is what the brokerage takes in and i only get 50% or less of that amount. It is not the point, the model is brokerage takes in balance and you get paid for your time.

Then you have the argument you can not live on say $100 per hour, meaning each deal 40 hours or so, so $4000. Well this is only because of the amount of brokers out there. Since everyone has their own hand out claiming that they need to be at 6% otherwise they can not live for the year, because they only close a certain amount of deals a year. Well let me tell you that is why there should be less of you. The problem is every tom, dick and jane, decide when there is no other jobs to become agents. they then create more of an overcapacity of agents which means you need the high commissions just to live.

Well less brokers and you could live on one or two commisions a month of $5000 per month each lets say. Make two sales get $10k per month and it is $120k per year. Is that a lot, depends on how you look at it. I feel it is more than fair considering the level of education and experience necessary to earn that commission.

Just think of how the business model works. You have Elliman, corcoran, etc, they have large office space where they put agent after agent. The only cost to them is admin staff. Eveyrone else is trying to sell to earn a commission, which the brokerage then gets 50% of. It is more a less a no lose situation for them, but the brokers get killed because they do not really care about you. That is unless you are doing the high end expensive stuff.

So just realize that you sound greedy in this case, especially when someone like Keith has a model where he actually tries to work with a buyer or seller and keep their costs down. And your comment to them was why would you offer full service and make less money for it, then you need to work more to earn more. So more or less you are saying you are good with in theory overcharging sellers so that you don't have to work so hard?

I am not a broker, but as a buyer, I believe having a buyer's broker is helpful. Of course, I do not need a buyer's broker, however, when it comes to negotiation, sometimes it will be helpful if it's done through a third person. Also, assuming a buyer's broker has seen hundreds of places, he/she should be helpful in determining price of an apartment when the building has light transaction volume (It's actually not that uncommon, e.g. 3-bedrooms in a building usually have very light transaction volumes, 1-bedrooms are easier to get comps. Sq ft. calculations will not work, since the 3's have a premium over the 1's). In addition, he/she might know how a "good" layout should be. Moreover, the broker can help me to gauge the premiums/discounts of certain characteristics, e.g. balcony, city/brick-wall/park view, floor, etc. I understand past transactions on SE certainly helps, but often (in fact, not very rare) you can see some out-lier transactions. On top of these, knowing the neighborhood counts a lot too, e.g. meth clinic, shelter, hospital, supermarket, church, etc. nearby? What about a building's history?

I understand a person can do all the above on his/her own, but it takes time and depending on circumstances, it could mean a lot of time. IMHO, I think there will be some significant changes in the RE world, since bringing clients to see properties and relaying offers alone will not make the cut. However, a good, experienced and specialized agent could definitely save time and headache. And yes, specialization and experiences, I believe, are the future keys.

Mike, I have a very different business model than Keith does. I work with high-net-worth clients who save money by outsourcing to me -- my time alone is cheaper than theirs -- yet they also prefer me to a "run-of-the-mill" broker (and I'm not putting Keith here; let's say one of those other brokers you say there are too many of) and they therefore want my education, expertise, etc.

I'm not claiming that "every" broker is worth what I make. Not every broker has the Ivy league education I have, the knowledge of the entire city that I have from my time as a real estate editor, the personal finance expertise I have from writing for CBS and others, and the resources and inventory knowledge that my firm has from having worked downtown for two decades. I'm just claiming that I'm worth it -- and my clients seem to agree with me.

ali r.
DG Neary Realty

Ali:

Keith just posted the one element of the Burkhardt model that might qualify as a trade secret: a house "cut" in the single digits. The other pillars are just common sense:

1) Low overhead: home offices with high-speed Internet (which most people have anyway, so there's no incremental cost there); minimal brick-and-mortar; no assistants; no receptionists; no mail room; no internal systems; the local copy shop instead of a corporate print center; Starbucks instead of conference rooms; etc. RSM321 calls this "kitchen-table" brokerage. It's an old-fashioned approach that becomes more competitive as the kitchen table gains wireless Internet and a smart phone with converged communication capabilities.

2) Narrow focus: I can't cover the range of properties and neighborhoods your team does, and I can't pay other people for their expertise the way you effectively pay Mr. Neary and 30yrs. (Keith is great, but how many calls can I expect him to take for 5 or 10% of 1.5%?) So I stick to my comfort zone: family-size pre-war apartments in a two-square-mile swath of the Upper West Side. Carving out a market niche is another aspect of the "kitchen-table" approach. Clearly, discounted commission rates work best if the niche is a fairly pricey one (meaning we take a smaller percentage of bigger deals).

3) Ruthless triage of clients: Non-transacting buyers eat time, and that cost is built into the 3% commission split. At lower rates, it's critical to work with clients who are serious about transacting, and who have a reasonable idea of what they want (which, in my case, needs to be in the comfort zone mentioned above). Sometimes I guess wrong, and it costs me; if I guess wrong too often, the model fails. Either way, our services are priced on the assumption that I will either screen well or pay for my mistakes by working harder and longer (or earning less).

I think that covers the basics. It's too early to tell whether the model has legs. Anyway, The Burkhardt Group is a tiny gnat in the real estate ecosystem. Within those caveats, I think the model is pretty easy to understand.

Ali G...who is this Matthew Bank that is your co-broker on your listings and why does he only have a gmail email address? looks a little bush league

Ali: "let's say one of those other brokers"
... Name names.

I used a buyer's broker - she knew what i wanted and used that + her knowledge of the business to take me to a building that wasn't on the market yet. The building sold out immediately, and I got the apt I wanted. Did it cost me extra? Extra from what? I'd still be looking for a place, instead of happy in a place I love.

>I still do not understand how a broker still feels that grossing $300-400 per hour is justified. And really this value goes up as the price of an apartment increases. I can not stomach the point of that is what the brokerage takes in and i only get 50% or less of that amount. It is not the point, the model is brokerage takes in balance and you get paid for your time.

Get paid for time? You could end up with an idiot representing you, getting you a low price for your property for sale, or a higher than optimal price when you are looking to buy, and spend way too much time to get your deal done if at all. Why would anyone want to pay by the hour when results are what matters and results are based on expertise?

Keith B and W81st KUDOS~!!!!!!!!!! You are AWESOME. I mean it. I mean you are being fair to buyers and providing an excellent, excellent service from what I see here, BUT in NYC realeastate that makes you stand out BIG TIME. HUGE. Thanks. Keep it up.

ROOM Realty also has an excellent model for sellers, only charging 2% instead of 6%.

The whole problem arises with the 6% fee being based on a presumed split when these days the split is so much less common! Its on sellers to not list with brokers that will charge you more than 3% if its an unrepresented seller.

Front_Porch, would you like to explicate for us how it is exactly that your Ivy League education makes you more valuable as a broker? Would Summa Cum Laude make you more talented than Magna Cum Laude, and what about Junior Phi Bete? Do you wear your key when you meet with your high net worth clients? Do you have one?
You do not add value to your image by bringing up your IVY education. OK, I've always liked your posts.
.

Ya kno, there's Home Depot for the DIY'ers and fancy contractors for those who want the service.
Follow your bliss, but don't knock those who work hard to make a living and those who choose a way other than yours.

Again, helpful. Now, a follow-up question. If I have an option of using KeithB with their rebate, then "why not"? Thanks to all.

Anyone?

A good buyer broker can get inside info such as recent contract signed prices that show where the market is right now. Plus having a working relationship with the seller's broker can be used to get a great deal of information, A buyer on their own is at the mercy of the seller's broker who is obligated to get the most money they can for the seller. The buyer's broker has an obligation to the buyer to get them the apartment they want at the best possible price. And there is so much more to it that negotiating a price. I just had an offer accepted and the seller took my buyer's initial offer. I had made the buyer look very impressive in the offer form and the seller did not want to lose this buyer. And on it goes through the many small steps that are involved from contract signing to appraisal to board application to board interview to closing.

"Again, helpful. Now, a follow-up question. If I have an option of using KeithB with their rebate, then "why not"? Thanks to all."

If I ever decide to buy, the Keith option is at the top of my list by far. I think it is preferable to going it alone. Suppose the fee is 6%. If you go it alone, maybe it's reduced to 5% by contract from the seller, and maybe if you fight hard (as FP indicates is required), you get it down to 4%. You go with Keith, you get 4% with no fighting (save your bullets for some other negotiation point), and you have someone in your corner who is like-minded and open (e.g., will keep you abreast of all communications).

Pretty much a no-brainer IMO. Bad news for Keith: I have no interest in buying right now....

Inonada: I didn't see how the Burkhardt Group model reduces the fee to 4%. If I understand it correctly, the fee to the seller is still 6%, with 50% of that going to Keith & Co, who then refund some portion of that back to the buyer.
Am I misreading that?
Tina
(Brooklyn broker)

@tina24hour You should be our rep in Brooklyn (:

Right, and if he refunds 2/3 of his 3%, the total fees paid become 4%. You might argue about the fact that the fee was 6% still, and it was paid by the seller, etc., but I'll give you a little hint as to my response there: the buyer is the only one bringing money to the transaction. In the end, 3% goes to the seller's broker & firm, and 1% goes to Keith.

Keith, I was about to say just that myself! She'll net pretty much the same on each transaction, she'll probably do less work per transaction, and given her reputation on SE, she'll have more customers.

Whaddayasay, Tina?

" but am interested in current opinions of people (buyers, sellers and brokers)"

http://www.youtube.com/watch?v=TgK6dBefpu8

(only the first part, though)

Keith B, W81st I think that the tides are shifting pretty strongly when you have the NYT jumping on... http://urbandigs.com/2011/01/nyt_you_dont_have_to_pay_6_bro.html

kravath---you are just the kind of moron i wouldnt want involved with my purchase of a pair of shoes, let alone a piece of real estate--your post makes it all very clear

Ok, so I have a related question. The listing broker knows that we don't have a buyer broker, and is happy about that. How do I make sure the sellers also know, so that they can put some pressure on the listing broker to reduce their commission to close the bid/ask gap?

Assuming the apartment is their residence, it's easy enough to get a note to the sellers. Think a bit before doing it, though. Currently, you are the listing agent's favorite bidder. Going around her to negotiate directly with her client - and reduce her commission - might diminish her affection.

West, I totally agree (although I am not sure why you assume it's a she). I have absolutely no intention of going around the listing broker. At the same time, I think the sellers have a right to know the facts. Is there a way I can make sure the sellers know that we don't have a buyer's broker without going around the listing broker?

There's no way to guarantee that the broker will convey your message exactly as you intend. One possibility is to submit your offer as a formal letter and include all the pertinent information, including a polite request that the actual written offer be conveyed to the sellers in its original form.

As for the use of "she", I grew up in a household full of women. "She" was the preferred, gender-neutral pronoun.

Funny, especially in light of the discussions a while back about whether West81st was a man or a woman.

Thanks, that makes sense.