As sales slow, brokers play nice

http://ny.therealdeal.com/articles/as-sales-slow-brokers-play-nice-2 August 2008 As sales slow, brokers play nice Competitors return calls, cooperate more on co-brokes in order to close deals By Vanessa Weiman If there is a silver lining to be found in the current slower real estate market, it lies within the brokerage community, which is experiencing a kinder, gentler working environment as of... [more]

http://ny.therealdeal.com/articles/as-sales-slow-brokers-play-nice-2 August 2008 As sales slow, brokers play nice Competitors return calls, cooperate more on co-brokes in order to close deals By Vanessa Weiman If there is a silver lining to be found in the current slower real estate market, it lies within the brokerage community, which is experiencing a kinder, gentler working environment as of late. Many brokers have noted that interactions with their competitors are noticeably less cutthroat than during the boom times of the past few years. Instead, brokers report they are cooperating far more on co-brokes, returning calls and accommodating each other's schedules. In other words, playing nice. Also spreading the sunshine, developers are showering brokers with attention, as well as prizes and increased commission incentives, a distinct departure from the past. "It's a time in the market to be nice," said Mary Jo Griner, a senior vice president of Barak Realty who, along with her business partner Robert Kravath, recently decided that they would not require a customer's broker to be at an initial sign-in for an open house. The current climate makes bending the rules not only welcome, but also necessary. Griner said previously, exclusives would fly out the door within a week or two, but now properties take longer to sell, and brokers need to attend every open house, leaving them little time to take out buyers. So buyers can just list their broker's information at sign-in and it will be honored, Griner said. "Our manager said we're being too nice, but developers are thrilled because we're going the extra mile, and it's karma." She added, "This is the kind of market where we need to do it." "[In new development,] the on-site broker and the outside broker are anxious to make deals happen. It behooves them both to work well together in the sandbox, and that's what you're seeing," said Jeffrey Levine, chairman of Douglaston Development and Levine Builders. Douglas Heddings, senior vice president at Prudential Douglas Elliman, noted the positive shift in broker-to-broker communications on a recent post on his blog, truegotham.com. "I much prefer the current serene interaction with my colleagues than the fervent and tumultuous one of the housing boom," wrote Heddings. Calls are returned more promptly, Heddings observed, and schedules — including last-minute appointments — are politely accommodated, putting a positive spin on an otherwise down time. Jeffrey Tanenbaum, vice president at Barak Realty, recounted an experience that would most likely never have taken place a year ago. "I was selling a magnificent Carnegie Hill co-op," said Tanenbaum. "The apartment had one buyer, but as soon as Bear Stearns folded I couldn't find him with a private investigator. I did have a backup buyer, who started to call me directly and initially said, 'I want to work with you.' Then he asked if would I mind if he brought in his agent to make the deal, and I said fine. But the buyer repeatedly called me instead of his own agent, and I worked the entire deal for him while still engaging the other agent. When we were close to contract, I finally told his agent that I need her to take care of her client. "But despite her lack of participation, I made sure it was a co-broker deal," he said. While the market is quieter, brokers find themselves working as hard — or harder — than during the boom in order to keep their commissions coming in. "I am extremely busy," said Christine Toes, vice president and associate broker at Citi Habitats. "Whereas last year I had eight buyers who were very serious, this year I have 14 buyers who don't have as much of a sense of urgency, and instead of looking at 15 apartments they're looking at 30 to make sure they're making the right decision. So to make the amount of money I was making last year, I'm working more." And many potential buyers are wary, so more forbearance from brokers is now a key factor in closing deals. "Previously, the average cycle for buyers was about four weeks, but now it's taking up to three months, so we're working twice as hard to get the same outcome," said Griner. "We're very patient with our exclusives, and we have to be very patient with our buyers because they're skittish about the market." Another aspect of brokering in New York City that has shifted into higher gear is developers' courting of brokers. During the boom times, developers didn't need to do much more than put a sign out in front of their project to attract buyers; brokers were not crucial to making a sale. But that is now changing. The volume of invitations that brokers receive for parties and events has been ratcheted up recently, and more developers are offering higher commissions and even "door prizes" — like gift certificates and flat-screen TVs — for sales. Beyond that, buyers are now much more demanding of information, such as numbers on comparable sales. Most developers simply do not have time to provide that information, so involving brokers has become more crucial to the sales process. "In the old days, it was so easy for developers just to get the walk-in traffic and they wouldn't have to pay the commission," says Griner. "Now buyers are unwilling to go forth on sales without a lot of information, and developers don't have time for the handholding and education that we have to give the buyers. We've always valued the developer, and now they value us equally." "Developers are definitely trying to reach out to the broker community by doing previews and cocktail receptions," said Mitchell Lawrence, senior managing director of the Corcoran Group. "It's hard for developers to get recognized among the cacophony of invitations." Commission incentives are one way for developers to stand out. "So many new buildings offer the same amenities, so the one thing besides the neighborhood that has to stand out is commission," said Marc Windheuser, associate broker and group manager at the Windheuser Group at Prudential Douglas Elliman, citing 25 Broad Street, a luxury Financial District building, as one development that began offering a 4 percent commission last year. Brad Meadow, director of sales for Greenwich Club Residences at 88 Greenwich Street, said that after an agent sells their third apartment in the building, they receive a 4 percent commission. Though Meadow said that policy had been in place since 2007 when the building was converted to condos, it does help to pull in brokers and "give them motivation to keep frequenting the building with their clients." At the sales office for the Edge on Kent Avenue in Williamsburg, where there are regular luncheons for brokers, they are also paid an increasing fee for multiple sales. Levine, whose company is putting up the project, said that they are also "considering making partial prepayments to brokers, and then paying in full upon closing." Lunches and parties are regular offerings from the Moinian Group too, but they have also upped the ante by offering "a 6 percent commission across the board to brokers until the end of summer" for the Atelier condominiums at 635 West 42nd Street, said Elad Dror, the group's director of residential sales. "There are a lot more commission incentives going on now than in the past — 4 and 5 percent commissions, when it used to be more like 2.5 or 3 percent," said Toes. "With some buildings, there are Amex gift cards or reimbursements for cab fare when you come to see the buildings. Last year we had two or three developers inviting us to come see their buildings every week, and this year it's more like six. "And the number of parties and events has doubled," she said. Some developers are also offering to pay New York City and State transfer taxes, which the buyer is usually responsible for. "On a $1 million apartment with transfer taxes at 1.8 percent, that would amount to $18,000," said Toes. Still, even with sizable commissions being offered in the midst of a slowdown, many brokers are — nicely — primarily interested in getting their clients a good deal. "Bells and whistles, like TVs, are not really relevant," said Windheuser. "Substantial price reduction — offering brokers a 3 percent commission instead of 4 percent and taking 1 percent off the price — might help the purchaser make the decision." "I don't know how to explain to buyers that we're going to see one apartment instead of another so I can get an Amex gift card," added Griner. "Commission structure is one thing, but I'm working for the buyer, and I would rather see the buyer get a solid deal." [less]