is it helpful to have buyer's broker or is it just another mouth to feed?

There are many, many threads addressing this question if you poke around with the streeteasy search engine.

talk to Noah

Brokers have access to listings that you can't find in streeteasy or the nytimes. My buyer's broker found my apartment that way. The seller's agent owns a ridiculously small real estate agency, no way would I have ever found that listing. Personally I didn't want to go to open houses with my agent, that's just not my style, but I really appreciated the listings she vetted and sent along.

A good buyer's broker can often make or break a difficult deal.

Case in point--we had an accepted offer on a co-op a few months ago. But the negotiations were very difficult and frankly, our broker was just not aggressive enough to go head-to-head with the bulldogish seller's broker. It was enormously frustrating because if I had been able to handle the negotiations directly, or if we had used a cracker-jack buyer's broker, I think things might have turned out differently. Ultimately the deal fell through because we couldn't agree on terms.

Remind me to do a blog post on this so I can just point to it.

Even though the buyer's broker gets paid out of the "proceeds of the deal" -- which is usually pre-agreed upon at the time that the sales listing is taken -- they ARE getting paid. So you want one if you would like them to get paid for any/all of the following:

1) To be a personal shopper. Most of the people I rep on the buyer's side have $400K+ in annual income, so their time is fairly valuable, and they would like to outsource part of their apartment hunt. Most of the people who skip buyers' brokers and should are people who enjoy this part of the process, and can structure their lives to lavish time on it.

2) To be an advisor. I have a sell-side listing that I have shown several dozen times. Exactly THREE people have said intelligent things about the flaws of the apartment. In theory, a good buyer's broker helps you be one of those three people, and adds a level of discrimination to the purchase process which you don't have. Do you really think asking people on Internet boards about new condos whether buildings are running late is a match for hiring someone who can find out the gossip about the developer's loan structure?

The anti-buyers' broker faction would argue that this gap can be somewhat filled by a good attorney (which you need anyway).

3) To be a negotiator. Bramstar's experience notwithstanding, most people don't negotiate well for themselves -- they're too involved, and they have too many tells. Also, they don't tend to have enough broader market experience to understand what's achievable and what's not.

4) To be a closer. Your good attorney (and I'm reiterating, you really want one) will help you as your advisor, but they're not typically closers. If there is going to be bump in the deal -- say the bank is going to throw the loan into reappraisal 48 hours before closing, to take an actual example -- you want a buyer's broker who will suddenly turn into the Hulk until the papers are signed. Since there tend to be more bumps in co-op deals, bias towards using someone if you're looking at co-ops.

I have a geographic specialty -- south of 59th, centered on Tribeca/SoHo/Chelsea/Village -- and I do buy/sell/rent within that area. I think it sharpens buy-side representation to do sell-side representation, and vice-versa. Urban Digs I believe actually focuses on the buyer side of the deal, so he can comment more on the virtues of buyer representation.

ali r.
{downtown broker}

Ditto to everything Ali said. But I'll add what I consider the most valuable service a (top-notch) buyer broker provides - managing the transaction to a successful close. Beyond the research, tracking prices, scheduling appointments, showing apartments, and negotiating to an accepted offer, I probably spend 75 - 100 hours on each transaction AFTER we have an agreement in place. About half of that is dealing with the players - the listing agent, the attorneys, the lender, the appraiser, the management company, the Co-op Board, etc. There is ALWAYS something that has to be done, and there are ALWAYS issues to be addressed. The other half of that time is spent preparing a very professional purchase application / Board package. You really only have one chance to get it right, and a professionally done / edited Board package CAN make the difference.

wouldn't the seller's broker be able to do all that johnrealestate1 has just listed? wouldn't he want to bend over backwards to make it happen?

No. The seller's broker represents the interests of the seller - and as Ali R. mentions, one of the primary duties of the buyer broker is to aggressively negotiate on the buyer's behalf. After there is an accepted offer, everyone's on the same side, and of course the listing broker will (usually) do everything he / she can to facilitate the transaction. But the responsibility for managing the transaction rests with the buyer broker - things such as conveying offer terms to buyer attorney, making sure agreed to terms are in the contract, ensure that critical dates in the contract are adhered to, scheduling and attending appraisal, watching things such as commitment and rate lock expirations, securing Co-op Questionnaires for lender, and a bunch of other things that come up - but most importantly - professional preparation of (not just proof reading) the buyer's Board package.

For better or for worse, once there is a "meeting of the minds", the listing (seller's) agent is a secondary player.

At the risk of addressing first things last, as a broker who works primarily with first-time buyers, some of my clients initially don't know a Co-op from a Condo. A buyer broker can be an invaluable resource in helping prospective buyers HONESTLY evaluate their options. And - at least in the Co-op world - patiently explain the joys of minimum down payment requirements, income ratios, buyer reserves after purchase, and, of course Board package / approval. And, given the buyer(s)' financial profile - matching the needs and wants to the requirements of prospective buildings / apartments.

1) I think having a broker for coop deals is probably worth it. For condos, not so much.

2) Re: Deal making. Is there a way to test the hypothesis that people negogiate poorly for themselves?

3) As a buyer, I'm amazed that people will spend 1M+ without really understanding what they are buying and rely on brokers to tell them. I'm just not the person who will naturally trust that the buy broker will be necessarily on my side or that they are honest. Not when that kind of money is at stake.

4) Understanding the market does take considerable effort. It's become my main hobby.

My biggest concern with a buyers broker is that they seem like they are on your side, but infact, they are on the seller's side (since their incentive is to close the deal). As a buyer, you can walk away and continue to rent for a year - no broker will advise you to do that. They will insert themselves into your thinking and decision making process, and constantly remind you how great it is to own a place - the prestige, kid's IQ, appreciation potential, better sex, etc. And they will tell you all that without really actively considering a few of the greatest options you have if you go it alone:
(a) walk away and rent for a year or two
(b) explore FSBO
(c) explore neighborhoods outside their area (e.g., Westchester, CT, NJ)

hsw--

The problem with the "effectiveness" argument for brokers is that we can't do a double-blind study -- you can't buy the same apartment both with and without a broker.

So it always comes back to customer psychology and experience. All I can say from observation is

1) that lawyers -- who generally have negotiation as part of their jobs -- are terrible at it when they are principals, even though they think they are great.

And 2) when I buy again, I will also have the option of using an agent or not. Unlike non-brokers, who "theorize" that they can get the listing agent to kick back the buyer's broker part of the split, I "know" I can get the buyer's broker part of the split -- if I act as my own principal.

I am also, not to be falsely modest, a very sharp negotiator.

But I'll pass up using my own skills and taking a little of the commission split in order to have someone else from my firm act as my agent. *I* think I'll get a better financial deal that way.

As far as cartman's objections, I have buyers' broker clients who I have talked into renting, and I'm sure John has too. There are many people in our business who churn their clients, but anyone good won't. If I treat you right, you'll do three transactions with me over twenty years.

ali r.
{downtown broker}

front_porch, maybe you are right. I just have trouble trusting someone who's primary incentive is mis-aligned with mine. I'm sure there are some good guys out there, but for the most part, brokers need to make a living.

People will do what they are incentivized to do.

A buyer's broker is especially helpful if you're a first-time buyer, but make sure you get someone good who can add value to your experience, rather than someone who does little more than email you listings.

The broker I used to buy my place was very helpful. The listing agent was agressive and unethical, and very difficult when pulling together the board package (wanted to make last-minute changes, asked for information that really wasn't necessary). My broker was able to filter all of the BS.

At the end of the day, you still need to know what you want; the buyer's broker still has an incentive for the sale to go through.

cartman

I agree on the incentivized part -- it's one reason my profession has such a bad rep.

ali r.
{downtown broker}

The broker compensation system is a mixed blessing. We're only paid, of course, when there is a sale. That means, naturally, that for much / most of the work we do, we are never paid (not complaining, just stating the obvious). The logical answer would be for buyers to pay us for time spent with them, even if they decide at some point to stop looking. And charge sellers for months of effort in marketing an apartment that never sells. Somehow, I don't thing buyers and sellers would be anxious to embrace this model. One could argue that being paid only when there is a successful transaction is the ultimate "pay for performance" job.

eric_cartman -

"they seem like they are on your side, but in fact, they are on the seller's side"

Yes, the incentive is for the buyer broker to find you a suitable apartment at a fair / good / great price, but isn't that your goal, as well? Otherwise, why would you have enlisted the services of a buyer broker? While the bb wants to find you a great place and manage the transaction to a successful close, he / she has ZERO allegiance to any, ONE, particular seller.

front-porch,

I have to say, from reading your posts and visiting other sites, you seem to be a very broker. You, Noah and Doug Heddings all seem more focused on the quality of service you provide than making an extra nickel. Unfortunatley, the large majority of brokers here in NYC are not in the same league as you guys. My wife and I bought our co-op about 18 months ago and we looked for about a year. We had interactions with several brokers who were incompetent, untrustworthy and, in several instances, chose to broke the law in order to make more money for themselves.

I agree that buyer-brokers are good for first time buyers, for co-op buyers or for people who don't have a lot of time to look themselves. In our case, we had one broker who only tried to show us places $300k more than we could afford, another who couldn't even find appropriate comparables - I had to find them with 30 minutes of effort on-line with Streeteasy, PropertShark and a couple of other sites and another who actually refused to present offers to the sellers because she was trying to say that the only acceptable offer was a full-price offer.

If the real estate industry wants to charge 6% for transactions going forward, they may have to either significantly increase the quality of service that most people are receiving or lower their rates, because technology and some free time to do a little research is quickly dissipating the added-value that many of us are receiving from the average broker in NYC.

sorry, that should have said very good broker Ali...