Should I use a Broker?

If you are purchasing a for sale by owner apartment, YES YES YES do it on your own......of course you will have the upper hand in gettng a better price than giving a broker 3% to represent you.

Get yourself a good lawyer (you may already have one), and they can help you with the co-op package or pay more for this service, but 20K for this, absolutely NOT.

Wait, I'm a little confused. Isn't the commission almost always paid by the seller? If you're buying, why do you have to worry abou the 20K ? I'm actually in a similar situation. I've been looking to buy a 1-bd co-op. First home, so I have absolutely no experience whatsoever. However, I also don't know any good agents. I've asked around, and no one knows an agent that works in the area Ii'm looking at.

So, is it worse to just walk into any brokerage house and ask for a random broker/agent? Or do the whole thing and be on my own?

Thanks in advance.

The seller always pays the commission(s), if any.

I realize the seller pays the commission, but as a buyer's broker in my scenario, the broker will not be doing more then putting together the package and submitting the offer. I have done all the research myself, so I feel as if I use a broker they will be getting a 20k+ commission for doing very little. Instead I am hoping the seller's broker who will now be getting 6% will negotiate a bit more to have the deal happen. Maybe they will offer 4.5 - 5% total commission for the seller and as a buyer I can see a reduction in price. Is this not how brokers think?

What other value will a Buyer's broker provide in my situation?

You do not need a broker in your scenario. I purchased without using a broker and got the full 3% off (or rebated to me depending on how you look at things). My argument was that as a lawyer in NY, it is easy enough for me to get a real estate broker's license. All I had to do was pay a fee. This argument worked with the seller's broker. She helped with the condo package - it was in her interest to do so since she obviously wanted the deal to close so she could get her commission. This was with a smaller brokerage. My understanding is with the larger brokerage companies, they will not deduct the full 3%, but maybe 1% or 2%. If you want some assistance, but don't want to pay the full commission, urbandigs just started a fee based consult service.

a2deuce: Check out our model. Omega makes a good point, if you are an attorney you can rep. yourself and collect the fee or discount it off the final, best price you negotiate for yourself. I generally give a 60-67% rebate that is considered an adjustment to price and not taxable to you or I, the IRS has officially ruled on this after being petitioned by REDFIN.com. This happens after we negotiate your best price, so no chance of the seller playing any games with their pricing to account for the commission adjustment.

Not everyone needs or wants a buy-side broker, but our model has been quite popular. My clients have appreciated the help/buffer with the negotiation and insight into the entire buying picture.

http://www.theburkhardtgroup.com/services-and-fees-c14358.html

we also do fee-based consulting on co-op packages, but it's expensive, and it sounds like OP already has a good relationship with a broker.

The question I would ask is, "what building are you purchasing in?" The financial structure OP talked about will work for easier co-ops, not so for more restrictive ones.

ali r.
DG Neary Realty

hi a2duece,

as you know coop and condo are totally different things.
brokers knows about the board of the coop and they will help you to prepare the coop package. your (buyer's) broker will also go interview the board with you..they tell you what the board requirements are, and get you prepared for it. lots of board meeting interview is only once a month, you are not prepared and missed it and you have to wait for next month.
different coop has different standards, so knowing what the board of coop is looking at is the key.

regarding the commission....if you dont hire your own broker, sure you will save commissions.
however, dont forget you will be facing two people (seller and his broker)in this deal,and the situation will be 2 to 1, little unfair situation to negotiate price in this situation.

so if you hire your own broker, he/she will help you to get a better price. they will find out the most recent "sold" price in that coop, and compare with the aparment you want to buy to find out the best offer.
bottom line...the time you lose and the risk of losing the deal, is far bigger than the commission you saved.

tk

don't need no buyers broker

go here:

http://streeteasy.com/nyc/talk/discussion/25977-it-took-3-years-but-we-did-it

Hi a2deuce: I am a licensed real estate salesperson. The simple answer is, YES, you will have more room to negotiate. And the seller's broker will make sure you are qualified AND will help you with the board package. The broker will want your offer and will be more likely to help negotiate on your behalf because he/she will make a much higher commission. But do not mistake, the broker is working FOR the seller and not for you. I think it is very difficult to find both a broker you like and trust, and one that is knowledgeable and provides you with the qualities you are looking for. I will also say, make sure you have a good REAL ESTATE attorney. I often think this party is more important than the broker. A broker is great if you don't want to deal with the search on your own, and if you really don't have the time and energy to deal with the seller's broker and all the coop paperwork. But apart from that, you really can do it yourself, esp since you've gone through the process three times already.
- Susie C.

First and foremost, your buyer’s broker would calculate your debt to income ratio and determine your post-closing liquidity (excluding those assets in retirement accounts). These are two figures that coops look at to determine whether or not an application is to be considered for approval.

Buyer's brokers do more than just put together the board package. A good buyer's agent will then comp the property for you so you will know, within reason, if the apt will appraise at or near the sales price (very important since you are getting an 80% mortgage). Most will advise you what you should offer. My buyer clients see comps from at least three recently closed sales in the same building, at least three recently closed sales in neighboring buildings, at least three similar apartments on the market, and at least three apartments currently in contract or with an accepted offer. We determine the median and average price per sf, and adjust up or down based on renovations, the floor the apt is on, and the difference in the maintenance per sf from the average and median maintenance per sf. They basically get an appraisal.

Next, your buyer’s broker should verify that the building is approved for lending. Perhaps the listing broker did not even look into that because they were hoping for an all-cash buyer? Perhaps they are clueless of this issue? If you go to contract, in most cases your financing contingency is satisfied when your bank/lender provides you with a commitment letter. If anywhere along the way the building is no longer approved for lending and the bank decides to not lend you the money, your deposit may be at risk. A good buyer's agent will coordinate with the buyer's attorney to ensure that you are covered in the event the building is the issue. if you were to lose your job or something in your life were to change such that the bank decided to not lend you the money, then your deposit is at risk.

Lastly your buyer’s broker will help to assemble a board package that will be approved. They may provide you with sample reference letters, guarantor letters or irrevocable gift letters, if needed.

In a nutshell, a good buyer’s broker is your project manager. They should provide you with a timeline of events, and then ensure that everything is on schedule to close as indicated in your contract.

Best,
Lee Presser
Corcoran Group Real Estate

Lee - You don't need a buyer's broker to perform those functions. The seller's broker will do all that, in fact, that's some of what they're paid to do.

I recently, bought a coop without a buyer's broker and the seller's provided all those services and did them quite well.

also, the buyer can negoiate a reducted commission. And, leecube - the commission is certaily paid for by the buyer, as a reducted commission will permit the seller to lower sale price by that amount and receive same net, not difficult to understand?

Leecube - I was in your shoes the first time I tried to buy. I ended up going with a random broker, who did nothing for me. Finding apartments she sort of helped me with, but I really could have done more of that on Streeteasy. Bid strategy, etc. - she was useless. That is when I decided to go on my own when I bought last year. If you decide to get a broker, at least ask people for recommendations instead of going with a random person. To ieb's point, you lose some possibility of price flexibility as a result of having one. It means 3% more in play at the negotiating table.

Lee Presser - the OP's question was does he need a broker and will there be more room for negotiation if he does not have one. The question was not what do broker's do? But in terms of caculating his debt/income ratio - here is hoping that he has at least the ability to do that on his own. A simple Google search can tell him how if he doesn't. No need for a buyer's broker there. Comps can be found on streeteasy. Whether the building is approved for lending - his mortgage broker should be able to confirm as well as the seller's broker. The board package - again seller's broker should be able and willing to assist there.

most brokers hurt, don't help

paid by the seller or not, the buyer's broker's 3% is money paid by the buyer, not received by the seller

only a fool would call a broker once they have found on their own, without a broker, an apartment they will bid on

carefully choose a good lawyer, buyer's broker or not---in fact having a good lawyer might be more important in cases where a buyer uses a typical broker, given the bungling they usually produce

and what a joke? if i cant sort out my debt/equity/liquisity and simple crap like that--i certainly wouldnt ask a broker--id call my accountant, or ask my lawyer

a2deuce: You're assuming the listing broker will probably accept a reduced commission so you can purchase an apartment you want at a lower price without a buyer's broker. That's not necessarily true.

The seller has a legal, binding contract with the seller's brokerage firm at X% commission. The contract is not with you, the buyer, it is with the seller.

If the seller's brokerage firm is a REBNY member (likely), then the brokerage must--must--split the total commission 50/50 with a buyer's broker. In a co-op situation the buyer's broker prepares the board package (or at least does the lion's share of the work), so a busy seller's broker is often quite pleased to be in a co-broke situation.

There are certainly brokers out there who will not waiver from the contractually agreed commission rate of X%. I can say this from personal experience (and yes the apartments sold at full commission).

Your approach would work best if buyers are few for this apartment, and you are a cash buyer (ideally) or at least have your mortgage ducks in a nice row, and you are otherwise a shoo-in with the board in question. If there are other buyers around who are stronger than you, and willing to offer closer to the list price, or even list price, your not having a broker might be perceived as quite irrelevant by the other side.

The other thing that is not talked about much, but that I do think is true, is that sellers may be more confident of a buyer who is represented by a broker. The assumption is that the buyer's broker has screened this buyer and really knows that they are legit--they have the cash, the salary they say they have, the job they claim they have, etc. I met a dispirited listing agent recently who had not one, but two, buyers in a row who ultimately could not get a mortgage commitment letter, never mind board approval (this is in very solid building). She was very much in the mood to cooperate with a buyer's broker, to put it mildly.

Most of the people who hang on street easy are knee-jerk anti-broker, and it's a free country, they're entitled to their opinions. But those of us who work in this field on a day to day basis see a lot of things that those who buy only once in a while just do not and can not know about. Often there's more going on than the casual observer might think.