Negotiating Commissions

Thanks, Ali.

The question I have is are Manhattan brokers equally willing to negotiate commissions as national brokers?

In general, I wonder if it's easier or harder for sellers to get discounts than it was a year ago. On the one hand, agents are probably hungrier for business, so it makes sense that they would take less profit, but on the other hand properties are sitting on the market longer, so an agent knows going in that he/she is going to spend more money on advertising and more time on marketing.

In particular, I can't speak for anyone but myself -- every deal is different, and I negotiate all of 'em.

ali r.
{downtown broker}

Thanks, Ali.

Ali, I've heard that if I am a buyer without a broker, that I could potentially get preferential treatment from a seller broker because he/she will get the full commission. Is that true and if so, in what ways would it benefit me (i.e., lower price, win a tie breaker, etc)?

If there's only one bidder trying to buy, it really depends on what the original listing contract looked like. Sometimes the contract provides for a lower commission -- so the unrepresented buyer could save money -- and at other times, it's just that the listing agent sweeps both halves of the commission into his or her pocket.

If there are multiple bidders, then NY State rules say there must be commission disclosure -- in other words, the listing broker has to tell ALL the parties what the playing field looks like.

So if the seller's broker has negotiated a step commission -- let's say "X% if there's a co-broker, and X-1% if there's no co-broker" --

then the listing broker has to say, "hey, everybody, we're moving into a new round of bids, and Bidder A with the co-broker is facing an X% commission, while Bidder B without the co-broker is facing an X-1% commission."

So in theory, in a multiple bid situation, Bidder B without the co-broker might face a reduced commission advantage, but Bidder A with the co-broker would now what the size of the advantage was, and could account for that.

this is assuming that there is another round of bids. I don't know how other people do it -- and I guess every situation is different -- but if I faced a tie I would generally counsel my seller todo that, to have one more round of bidding, to see if there's one more dollar to be gotten somewhere.

the obligation to get the best deal for the seller is supposed to supercede (sp?) the broker's desire for a slightly higher commission.

ali r.
{downtown broker}

thanks ali, very helpful insight

Good question, Special_K and good answer Ali.

I'm more familiar with Connecticut real estate dealings and I believe I've heard of situations where when the buyer is not represented by a broker the selling broker has voluntarily reduced his/her commission in order to make the transaction happen. Narrowing the bid-offer spread to the point that the transaction actually takes place.

I've generally found that I don't particularly need a selling broker to get me to see Manhattan listings that fit my criteria. There are plenty of sites - particularly The New York Times - that allow me to contact the selling broker directly.

I'm generally of the view that the fewer middlemen involved the better. I know there are exceptions, of course. But it can help to make the transaction more of a win-win for both the buyer and the seller.

But if I'm missing something important - please let me know!

The buyer's broker case has been made in other threads --

The lazy buyer's broker case is "hey, the commission is already predetermined, so the buyer's broker is free." While that's true in some cases, it seems like a weak argument to me.

Basically, I would say that a transaction has three big parts -- shopping/negotiating/closing.

If you WANT to do the shopping/negotiating/closing yourself, you might not need a buyer's broker. If you want someone else to do any of those -- say you're busy and you don't want to wade through all the NY Times listings, or you want someone else to negotiate the price, or you think you're dealing with a unit or building where the closing might be sticky -- then a buyer's broker is worth it. As new development closings get increasingly more problematic, I think the general case is swinging toward using a buyer's broker -- but a lot of it is about how much customers want to pay for service and advice versus wanting to do it themselves.

ali r.
{downtown broker}

While most buyers should benefit from having a buyer broker, a "newbie" is the one who benefits most, particularly when it comes to NY Real Estate. A complicating factor is the fact that Manhattan is largely a Co-op market, and some first-timers don't know a Co-op from a condo, yet alone things like income ratios, reserves, Board package, etc.

But as Ali aludes to, much of it comes down to the time and effort a buyer wants to put in, and the comfort level he / she has for all stages of the process. Believe it or not, there are some people who DON'T want to spend 40 hrs / wk on the NY Times, Craigslist, and StreetEasy websites. A good buyer agent will manage your transaction from beginning to end. And while a listing agent is required to be "honest" with you, a buyer agent is required to represent your best interests.

If you don't have a buyer broker, the listing agent will love you, and you'll have a friend for life. I don't know how prevalent fee reduction is when there's no buyer broker, but I would bet it would be like pulling teeth. The listing broker's argument would be that the fee agreement is between him and the seller - not the buyer. Does it happen? Sure. I just think it's a relatively minor factor in coming to a meeting of the minds on price.

Interesting concept -- Why would you want to cut your broker's fee? I sold my apartment in November 2007 for a record price/sq. ft . in my building. I was thrilled with my broker. She broke her tush for me. Why would you not want to INCENTIVIZE your broker rather than stiff them in this market? Seems penny wise - pound foolish...

I sold my apartment via FSBO last December for an ALMOST record price/sq. ft. in my building.

Thanks Ali