Justice Department goes after RE Brokers

DOJ has targeted this before and put out excellent guidance consistent with @burhardtgroup's business model. The "going rate" for brokers exists only because those in the industry fear going it alone. This is where I applaud Keith. He is fully transparent.

For brokers to discussion commissions in general, even on a public internet board, might be seen as collusive, so the statement is that "commissions are always negotiable." That said, it varies not only with every deal, but with the market and I have met brokers (from states outside New York) that charge more than 6%. The idea is simply to price expertise and labor in a way that makes everyone happy, or at least not miserable.

ali r.
{upstairs realty}

It should be noted that there is no "standard commission." I've had banks which paid 10% commission where the split was 4% for me and 6% for agents who brought buyer. I've taken listings at 4% total with 1.5% to me and 2.5% to selling agent.

Keith is hardly the only one who offers creative solutions.

RE industry flexibility after the DOJ gets ahold of brokers: https://www.youtube.com/watch?v=CXDxNCzUspM

The realtor cartel should have been broken a long time ago. This makes me even giddier than the end of rent control, and this has more than a snowball's chance

I have always been shocked that more in NYC have not adopted Keith's model. It was literally the DOJ's prescription and obviously worked well for Keith. It will be interesting to see how the current prosecution goes.

I get why smaller and more concentrated markets haven't adopted the buyer's rebate model; tacit collusion is much easier when you see your competitors around town and regularly at closings, but I just don't get why it hasn't taken NYC by storm. Honestly, I love window shopping so much, I actually contemplated at one point getting my RE license in NY (because attorneys can) and getting into the game for the sheer joy of checking out cool apartments by offering the rebate model. Clearly you would only come to somebody like me if I was effectively paying you to use me, but it is a no-brainer for people who don't value what agents bring to the table. I wouldn't be bringing anything to the table beyond my own curiosity at the layout and decor of any listing anyone wanted me to show, so it would be a win/win for the prospective buyer and me.

P.S. - @30yrs, I like your creative fee structure to sellers, but I am telling you, being a buyer's agent with the rebate model seems like shooting fish in a barrel. Why not adopt it?

I got rebates in two states that are not NYC, on all my purchases. One of those states has a law that prohibits such rebates, so it was instead a “thank you gift” in the form of a Home Depot gift card.
Outside NYC realtors bring a log more to the table and are paid less dues to lower property values. And still 3 out of 4 agents will discuss and negotiate a rebate with you.

@krolik - interesting. We did not use buyer's agents in NY, SF or Columbus, but our buyer's agent in DC was amazing and we were more than happy for her to get her full commission. She brought everything to to the table and even refused to represent us when we wanted to bid over what she thought a property was worth because she valued her reputation and did not want others to think she would ever let one of her clients pay more than a property was worth. Sadly she has since retired, but she came to us via referral from someone who was as diligent as you and the others on this board. Mr. MCR's philosophy, which I have since adopted, is to ask those who we know are like you and others on this board for their service providers in any area. All of our NYC friends of that ilk advised us that in our sub-$1M market we needed to go direct, so that is what we did.

I learned about rebates from discussions on this forum, asked agents outside NYC, and found they were very willing to negotiate, more willing in fact than agents in NYC, despite smaller $ value of commissions.

Keith does not work on purchases below a certain $ value, so one cannot use his services to purchase, say a 1-br coop, or a studio (even though a 1-br coop in Manhattan costs easily twice a median house nationwide).

I give rebates to some buyer clients (commissions are always negotiable; every day a different day, etc.) But the two problems that I run into with rebates-as-a-model are :

1) you don't know how much work buyer's brokerage is going to be until the deal is done, so you're pricing a black box -- presumably if things go normally you're making what, to you, is acceptable money, but what if they go pear-shaped? Maybe lots of people don't value what buyer's brokers bring to the table as a matter of course, but if a wheel comes off the cart, then they might see the value of the skills and expertise and labor ... that they're not paying for.

and 2) often, not always, but often, the people who want rebates are people who are in highly paid professions who make a lot of money because their barriers to entry are high, but then they convince themselves it's because of their "hard work," and as a side effect, they spend much of their time denigrating the value of everyone else's labor -- and who, as a service provider, wants to hear that? MCR, don't you already spend enough of your time listening to people with the same background and education as you being snobs and worse -- why set up a business that actually attracts those people?

Come on, Ali, most of the posters on this forum value brokerage services at close to zero because they actually know more about everything than any/all brokers. The only thing they care about is getting the biggest discount possible.

@Ali and @30yrs - I hear you. You guys actually do work and add value for your clients, and I am guessing you would have a hard time turning that off. Were I acting as a buyer's broker under the rebate model, I wouldn't do anything except show up at the apartment with the buyer to see ogle it and show up at the closing to give them their rebate check. I think of it as a given that anybody attracted to the rebate model as a buyer does not value the broker's services, and I would act accordingly. You get what you pay for.

Wait, so you either don't ever dare to negotiate the fee (as is typical per DOJ complaint), or you don't value the services?

I think the reason people don't value buyer broker services in Manhattan is because those services are often really shitty, especially below a certain $ value of the apartment. See the other thread where a poster was advised to go direct.

I could not do a deal without a buyer broker in the two other states I made purchases. They wrote contracts(!!!), advised on comps and bidding strategy, did showings (no seller broker present), and coordinated with all the other service providers (home inspection, termite inspection, etc). I value their services super highly. At the beginning, I did ask them if I could get a rebate, and both immediately said yes, but haggled over the amount (which in the end was small and in one case was in a form of a gift card to Home Depot). Was I not supposed to ask?

It's disappointing to read that many folks equate quality of work with compensation. Guess that's just not how I'm wired. Perhaps it was the example set by my first generation Dutch and Swiss grandfather's. They were the kind of guys that painted the inside of the box, because they would know. And they also performed their jobs to the absolute highest level they were able to.

And thanks for the kind words, MCR. Can you believe it's been 14 years since I started TBG!? I'm going to guess if you decided to work at the legal aid society, the passion and the quality of the work you provided for your clients would be the same level you provide for your high paying corporate clients.

And in the spirit of transparency, the last few years I've been making $500-800,000. I think it's pretty good compensation. FYI we also list homes, maximum commission is 3.75%, we've sold 90% of the homes we've listed. You can have a look at some of this on our website along with some of the things clients have said about us.

If it were me and somebody that was working for me told me the quality of their service would go down significantly if I wasn't paying them more, I'd find somebody else. I totally understand not taking a job if you don't feel like you're being compensated enough.

I started this company to fill a gap, one that I learned about here on streeteasy. It would appear that many consumers are not happy with the real estate brokerage industry. So we addressed some of their concerns and built it into our brokerage model. What makes New York City different is the exorbitantly priced real estate, and then you have the commission structure that remains pretty sticky. That opened up a window of opportunity.

Keith Burkhardt
www.theburkhardtgroup.com

Krolik,
I will point out that before the current situation of having the vast majority of transactions as exclusive listings but instead almost all "open listings" it was EXTREMELY common to negotiate commissions. I think since it's never talked about people don't realize how common it still is to negotiate commissions. Perhaps in the larger firms they discourage it, but in smaller firms if buyers above the bare minimum price levels simply asked a buyer's broker for some rebate they would get one. I can't remember in the last decade refusing such a request personally. So when you write:
"so you either don't ever dare to negotiate the fee (as is typical per DOJ complaint), or you don't value the services?"
What I spoke of, which is fairly readily apparent if your a reader here, is that the majority of posters here use a large discount as pretty much the ONLY factor because they believe that all agents are the same and they are all useless. And that is just patently untrue. But if buyers keep choosing their agents based on reality TV shows, or TicTok dance videos rather than interviewing them or other methods of determining skill levels, and then complaining that ALL agents are useless I will continue to point out that it's on them.

https://www.wsj.com/real-estate/jury-finds-realtors-conspired-to-keep-commissions-high-awards-nearly-1-8-billion-in-damages-b26f9c2f?gaa_at=la&gaa_n=AYRtylbaxfR3Rw-oNvyihnBCuhcQbr_5eoHqu2ddB_mmU9ocYDLLRFsv-O-FLcxpNvo%3D&utm_source=newsshowcase&utm_medium=discover&utm_campaign=CCwqGAgwKg8IACoHCAow1tzJATDnyxUw9qjkATDBj4AC&utm_content=bullets&gaa_ts=6541717d&gaa_sig=FPCcNiqtwwgU7qgx79423oEH_7SImwW6OzA1--bKCkehKfO2z3Lb8ExXKXGiidKTg4QgeQYEkw4NOHd1iuK2Ow%3D%3D

https://www.nytimes.com/2023/10/31/realestate/nar-antitrust-lawsuit.html

>> many folks equate quality of work with compensation. Guess that's just not how I'm wired

Agreed. I have worked very highly compensated jobs, and not highly compensated. The effort from me was pretty similar. That's how I am wired (though I am willing to work more hours when I know that's what I am explicitly paid to do). The trick is to find job/company/industry/occupation that compensates for one's skill and effort.

https://therealdeal.com/national/2023/10/31/compass-elliman-redfin-sued-in-wake-of-guilty-verdict/

@krolik One thing I can assure you after almost 35 years in this business, 'you don't get what you pay for' when it comes to the real estate industry. Regardless of what firm you're working with or how much you're paying them. Everybody takes the same 75 hours of classroom time and they are off to the races....

When you're hiring a real estate broker to assist you with a sale or purchase you've got to take a deep dive in due diligence. And ask them exactly what they're going to do for you, and how they're going to add value to your transaction.

Happy Halloween!

What would be a good checklist of questions to ask a prospective NYC buyer's broker?

In 1974, May Day ended the Wall Street collusion of brokerage fees.
It's amazing, that roughly 50 years later , Real Estate is still 6%

https://www.reuters.com/legal/litigation/dc-sues-tech-company-realpage-landlords-over-rental-prices-2023-11-01/

Not sure I understand this lawsuit against realpage. There are a lot of situations where market participants provide and use collective data from specialist providers: credit scores, insurance stats, used car sale prices, zestimates, etc. What makes realpage’s data different and why does it amount to “collusion” while other data services do not?

I think because Real age uses the combined information to Actually set rents for the landlords.

Over a year ago I consulted with a good friend who is a very well respected antitrust attorney regarding this and the various rental apartment warehousing schemes that are going on. He basically told me that while he agrees that a lot of what is going on is extra legal that the current antitrust laws won't really punish anyone

I wonder if this will change anything about the way business is transacted, for whom and how. It sounds like it could protect buyer's brokers primarily:

https://www.rebny.com/articles/decoupling-commissions-faq/

Clever and quick move by REBNY.

At present, if buyer is unrepresented, seller broker often collects the entire commission (rather than half), unless negotiated otherwise (often it is not). As a result, seller brokers often prefer unrepresented buyers. Based on my understanding of the info at the above link, under the new rules, sellers would see direct savings in this situation.

Seller paying buyer broker commission (instead of buyer directly) is preferable for buyers with mortgage, so that commissions can be baked into the value and mortgage rather than increasing closing cost.

https://finance.yahoo.com/news/commission-lawsuits-spread-manhattan-211422406.html

TRD is all up in arms about a 1% commission. I say, bring it on.

https://therealdeal.com/national/2023/11/10/sitzer-burnett-verdict-could-end-mls-exclusive-listings/

As I've said before, it's difficult for a large brokerage to accept reduced commissions due to their structure. 30 to 50% of the commission that an agent collects goes to their firm.

That's where I saw opportunity. instead of giving my broker a big chunk of the commission, that goes to my sellers/ buyers. I've never had an issue with traditional firms and still don't, I just saw an opportunity to create a different brokerage model to appeal to a different segment of the buying/ selling community.

There's a lot I've learned over the last 14 years, and it's not anecdotal, it's based on transactions. I absolutely know what works, and what doesn't work. And you'd also be surprised at the number of buyers/ sellers who also don't want to venture off the traditional path. However, When you're getting eight offers after one open house, why is the seller paying a 6% commission? At the very least, there should be a rational conversation about this with your client. Some agents will say it's because perhaps they work very easy on one deal, but another deal bleeds them... I always thought why should an easy deal have to subsidize the difficult deals?

We've done very well with a model that begins with the notion that everything is always negotiable. We also happen to start at a pricing base that's significantly lower than what has been known as "standard practice." I've never been anchored to this false narrative of a standard 6% commission, it's basically just a number somebody made up. So I've never felt less worthy or like I was selling myself cheap when I receive 1 or 2% on a multi-million dollar deal. And I can tell you the clients that we work with respect our model, contrary to what some try to say. We're not exactly working for peanuts... We're taking in $2M+ in commissions most years.

At the end of the day I've always been a believer in free markets and competition. I've never felt like I want to limit competition, I'd rather out innovate and out compete. And the bottom line is most industries not only compete on service, but also compete on price.

Anyway, there's a lot I could add to this subject, probably a book's worth...

Keith Burkhardt
www.theburkhardtgroup.com

oh Keith, you've practically written the book here

Let's go back to open listings.
https://www.urbandigs.com/forum/index.php?threads/brokers-behaving-badly.646/#post-5650

>However, When you're getting eight offers after one open house, why is the seller paying a 6% commission?

seller is highly satisfied, why should the broker be punished with a lower commission?

Punished?

Here is the page from the DOJ explaining their position/concerns on what might be described as alternative business models within the real estate industry. Reading this is what helped me understand that commission rebates were legal and not prohibited by the NY DOS as many thought at the time. DOS modified their website with the correct language.

https://www.justice.gov/atr/how-rebate-bans-discriminatory-mls-listing-policies-and-minimum-service-requirements-can-reduce

I also just participated in a REBNY class discussing the changes they are making (effective 1/1/2024) to their Universal cobrokerage agreement (UCBA) that all members must abide by. One interesting point is now the brokerage commission will be paid by the seller, rather than by the listing firm. Also the exclusive agreement must delineate what % the sellers agent receives and what % (if any) the buyer's agent receives. I wonder if that now means that if there is no buyer agent, does the listing firm only keep the commission % outlined in the agreement being allocated to the listing firm? I have an email out to REBNY asking for clarification. Previously the total commission being offered was paid to the listing firm who was then obligated to share 50% of that with the rebny member buyer firm according to the UCBA.

I don't think going back to all open listings is necessarily the answer, this was quite inefficient. I think that the changes that REBNY has made are a step in the right direction.

Keith Burkhardt
TBG

There were all sorts of benefits to open listings. One example:
When the buyer and the seller were $5,000 or $10,000 apart and they deal wasn't going to happen brokers would routinely throw in the balance to make the deal happen, benefiting both the buyer and the seller. I rarely see that these days.

There were all sorts of benefits to open listings. One example:
When the buyer and the seller were $5,000 or $10,000 apart and they deal wasn't going to happen brokers would routinely throw in the balance to make the deal happen, benefiting both the buyer and the seller. I rarely see that these days.

Another benefit is that it eliminates brokers overpricing listings on purpose to "buy" listings, a practice which happens way too often these days.

Around 1990 there was a meeting of the now defunct Downton Brokers Association to discuss the new practice of taking exclusives
Someone asked Barbara Corcoran "what if the unit is overpriced?"

Her answer was something like " just make sure you take a really long exclusive so when they need to sell you will still have it."

To have the right perspective on this really requires experience working under both models. For those whose business model absolutely depends on exclusives, of course they're going to have a certain opinion.

@30 actually, my first job in real estate in New York City was in 1986 or 87? Honestly not very memorable, just giving it a try after hearing a professor at City college discuss it. I wouldn't be surprised if maybe you knew the firm that I worked at, they were called spectrum equities and I believe our office was on like 85th and lex? I know before opening up the brokerage he was slipping flyers under people's doors in buildings that were getting ready to convert the co-op to purchase insider rights.

My comment about inefficiency was more rooted in my personal experience looking for apartments in Brooklyn. I remember having to walk up and down Court Street and check into each individual mom and pop brokerage to see various listings. In Brooklyn they weren't co-broking at all. I don't recall if the various firms in Manhattan at the time where co-broking with each other?

Today the difference between exclusives and open listings would be when you went on StreetEasy rather than the contact info on the listings being the Exclusive Broker it would be the owner.

I'm curious how many here would find that a horrible, inefficient inconvenience to contact the owners directly rather than brokers?

And I am willing to bet that I am the only one in this conversation who has regularly collected flat fee payments directly from buyers because there was no commission at all being paid by sellers (to be clear these were almost all foreclosure auction sales where the buyers had absolutely no way of doing the necessary due diligence and in the vast majority of cases bought the properties without having viewed them in person).

>And I am willing to bet that I am the only one in this conversation who ...

There's only 3 RE professionals in this conversation.

And at least one total idiot.

One idea: a flat rate for buyers' brokers paid by buyers with a list of services for a predetermined time (1 mo, 2 mos, etc).

I have a question for the brokers here.

Without blaming any individual broker, I look at the numbers in the US and the system appears deeply broken. Depending on the exact numbers one uses, 500-1000 employable RE agent hours go into each transaction in the US (counting both sides).

Does this seem excessive / broken to you? Or does it seem like a good system?

Again, I am not blaming individual brokers for what it takes to operate within the system. I’m just asking about brokers’ views about a system that leads to that sort of operational inefficiency.

'nada: What's your data source?

500-1000 hrs/transaction seems unlikely for all but the biggest/ most complicated deals -- 40 hrs/wk x 52 weeks is only 2080 hrs. an gent is spending 1/2 a year, full time, on a deal? (commercial, maybe).

I'm an extremely high-touch, personal service agent -- to reverse a board turndown, I ended up essentially doing the same co-op application three times -- and those numbers seem too high to me.

However, there is a lot of operational inefficiency in that, very often, one person's tech "solution" simply skips over work that does need to be done*, and then somebody else has to do that work. We generally worked less on each deal before the tech arms race.

*Example: In ye olden times, when we had an accepted offer, the brokers used to call the managing agent to get a copy of the current purchase application. Now, applications are "portalized" -- look, it's so much easier to fill out forms online!

But as a result, you can't just get a copy of the current purchase application. You get a copy of a "sample" application, which is assembled from modular bits.

So then you have to call the managing agent, who doesn't have anyone to answer the phone because they reduced staff when the portals came, and then they say, "just use that application" and you think, "oh, it's me, I must not be technological enough," so you fill it in, and then during someone-or-other's review, it becomes pretty clear that this is NOT the current application, and either the managing agent or the board asks you for additional/different material, and so you end re-doing some to all of the portalized application because ... tech is great!

I think Nada is working backwards from how many transactions does a real estate close on an average per year and assuming they have 2000 hours allocated whether they actuall use that time or not. Essentially making a case that real estate agent's time on an average is under utilized. Of course, there are agents which may close 50 transactions per year with an assistant and some perhaps no transactions.

Many of them work part time.

@Ali, in NYC, the portals are so bad. I used boardpackager for the latest application and it is very, very bad with terrible interface. Would have been faster to use PDFs and assemble the package myself.
I also don’t get why contracts are a photocopy of a photocopy, and why so few papers can be filled out or signed electronically.
But outside NYC, the agents i dealt with had much better tech, all signatures are electronic, etc.

Closing outside NYC was amazing.
We wired our lawyer an amount covering all the estimated closing costs, sat down at the table, and they wired / cut checks to all the parties needing payment. We were then wired back the sub-1% difference. Whole thing was less than an hour.

My NYC closing not only did I sign 3x the paper, but I had multiple cashiers checks plus my personal checkbook to write random checks on the spot for all sorts of incidental fees. I think it took three hours.

Re: hours, agree with Krolik there are a tremendous amount of part timers and hobbyists which are going to throw off the numbers. Or how about in vacation areas where the RE transaction season is even shorter, so no one is really working 12 months per year.

Also some clients are low touch vs high touch, decisive vs indecisive.

My wife & I are not very picky about certain things and so for us, we saw in total less than 10 apartments in person ever before buying one. Within a given age/price/size/neighborhood range, it all started to look the same, I just didn't need to see 100 iterations of a theme.

I'm sure more work went on behind the scenes, but theres just no way our buyers broker spent more than 100 hours on the deal, and I'm rounding up a lot. Could have been as little as 20-40 hours. First contact to putting in offer was about a month, then 2 months to close. We saw open houses together on 2 consecutive Saturdays lined up in an afternoon each.

On the other hand I'm sure you have people see 100 apartments and buy nothing, or want tons of hand holding.

I think the hours per deal discussion ignored that the majority of agent's time is spent prospecting.

Imagine if relators didn't have to prospect bc there weren't too many of them bc they were paid 1% and did 30 transactions a year not two. Imagine if buildings were banned from asking more than basic info like name, rank, and serial number. Imagine if there were a standard contract that had just some blanks to fill. Imagine if closing were handled by a notary for a standard fee of $800 and there was no need to insure title.

This is, of course, how resi real estate works in many other parts of the world. It's impossible to argue that the US system is better. We need 1/4 the realtors that we have, none of the lawyers, none of the title agents, and none of the racist coops and condos that think they're coops.

George, Do you mean you are happy paying mortgage tax and transfer tax as you didn't add it to the above list? To me, mortgage tax is the biggest officially sanctioned theft.

@George this is how resi real estate works in many parts of the US, just not in New York. In two different states, real estate agents prepared standard contracts and I did remote closings that took 15 minutes of my time as I signed some papers in front of a notary who came to my house and mailed the papers afterwards.

Aaron2>> 'nada: What's your data source?

Basically what 300 said. 4-6M home sales per year, depending on activity in the market, divided by 1.5M Realtors (TM) or 2-3M agents, depending on source.

I get that many are part-time, but still…. I feel they could be doing something more productive with all those employable hours. Even high-touch agents like FP find the stats excessive.

30yrs>> I think the hours per deal discussion ignored that the majority of agent's time is spent prospecting.

That’s my sentiment.

George>> Imagine if relators didn't have to prospect bc there weren't too many of them bc they were paid 1% and did 30 transactions a year not two.

And this too.

Except I the wonder if I’m being too harsh as an outsider, and genuine folk in the industry (like those here) find the system defensible or not. It’s easy to criticize from the outside when you don’t understand the inner workings.

OTOH, I look at my industry and find myself highly critical of the value produced for the price paid in aggregate and am broadly disappointed by the industry.

Krolik>> I used boardpackager for the latest application and it is very, very bad with terrible interface.

I just used boardpackager for the second time (for a lease, of course), and I was (again) pretty impressed by the level of functionality given the tiny market they serve. Basically, every building has their rando set of docs & forms, and they are able to generalize their submissions to each buildings specific requirements kinda well . You have to look at the number of clients they serve, what they charge, etc. I look at it and am impressed that anybody would bother serving the market and am very thankful.

And FTR, I (personally) banged out ~35 pages of boardpackager material (excluding the lease) in a single evening, in about 2-3 hours. Few things in life as fun as an excuse to to crack open the piggy bank to count all the coins. The remaining 5 pages of references took about a day. It just wasn’t that bad, I don’t get all the hand-wringing over it.

Took me a couple of days (a lot more than 35 pages) and was not too bad, but could be a lot better, and i am also under the impression that something better would not be terribly hard to implement. Most of the application could be easily done via docusign for example. Agreed about size of market though. Some years ago i wondered if buildinglink made sense as a business… they grew a lot since then and are now PE-backed.

>> To me, mortgage tax is the biggest officially sanctioned theft.

This tax is so backwards. Punishing middle/lower class people for not being able to pay cash, as well as making them think twice about refi. Why?

I agree that mortgage tax is utterly ridiculous. Being independently wealthy, I don't think about such matters that only affect the poors. Let them lay cash, I say.

Mortgage tax is almost as stupid as calling a tax on 1BR apartments a "mortgage tax". Nonetheless, it is common in many parts of the world to pay a stamp duty or similar conveyance tax.

Ha. While the other countries do have stamp tax etc, their real estate taxes are far lower. But in NYC, they cut you every which way in real estate.

Some interesting data across states. Not that many states with mortgage recording tax.

https://www.propertyshark.com/info/real-estate-transfer-taxes-by-state/

Very nice work by PropertyShark in putting this together.

4% in Delaware

@nada this is a bit long perhaps, but this is how we work;

I take a very simple approach to the residential real estate business, it's fairly uncomplicated and straightforward. I didn't try to reinvent the wheel, just wanted to make it a better experience and a lot of it was based on feedback from this forum. Seems like some of my ideas are now going to make their way into the mainstream in a more meaningful way.

First I simply lowered the base from which commissions started for sellers and offered commission rebates to buyers. For the buyer, this is a way to offset the commission. Easy enough to do when you have very low overhead and a large chunk of the commission is not going to the ‘brokerage’, so it can be allocated in other ways. We also keep the process 100% transparent.

I would say we're ‘focused high touch’, when it's important and required we're 150% on task. For buyers, we're not involved with searching for properties or suggesting properties. We will transact on anything regardless of commission. We only communicate with clients when necessary, no follow-up emails after showings unless requested by the listing agent. Our clients know that if they have any questions regarding any particular property they can contact us to discuss. When a client finds a property they're interested in bidding on, that's when we kick it into high gear.

With our listings we're full service. We can do this for two reasons, purchase prices are very high in New York City. We have very low overhead. Also, because of our efficiency, we're able to handle a large number of transactions. 3.75% is the maximum commission you pay with 2.5% of that going to the buy side agent, typically. When there's no buyer agent involved, the seller pays 2.5%. Of course this is also up for negotiation.

Board packages are certainly a pain in the rear, but it's not rocket science. We have a very efficient system for handling this part of the deal. In the 14 years that I've been doing TBG I think we've had three board turn downs, and one of those we reversed by submitting a revised higher bid/package. Not bad considering we're coming up on close to a billion dollars in sales. Boardpackager is okay especially once you figure out some of the quirks that go along with it.

We handle a lot of transactions for a three-person team. It's been running 40+ to a high of approximately 75+ deals in 2021. This year has been challenging with approximately 30 deals to date. So obviously we figured out how to run things effectively and seamlessly. Certainly our price/ service packages are attractive, which provides a very good pipeline of new clients. And if they weren't happy, they wouldn't keep referring us.

No one has to sign a buyers agreement with us and our listing agreements are cancelable at any time. If you don't like working with us, we don't want you to be locked into any sort of contractual agreement. This is simply how we do business. I don't know if it's the best way, It's certainly not the only way ,but it works well for us and our clients.

Keith Burkhardt
TBG

Considering the ENORMOUS tax savings that mortgage holders get, complaining about mortgage tax is the typical whining you see in Real Estate where if people don't win every single aspect it's unfair or "a taking" or other such bullshit. Just like the big property owners complaining about Rent Stabilization.

Keith,
It also helps that you aren't even in New York so you don't spend a minute of your time on showings. But since you never actually see a single unit in person, it's impossible to give the same council to purchasers on certain aspects. But you're a little opaque on that part.

Regarding taxes in general. Every state has a budget and all of it needs to be paid for. New York *could* become one of those states where poor people receive close to zero healthcare and save a lot of money but I wouldn't consider that an improvement. It's one thing to have rednecks in Appalachia get poor education, healthcare, etc because they tend to segregated in rural areas away from the rest of the population. But in big cities, those things result in higher crime rates, almost this etc. Which effects the rest of the population.

"almost this"=homelessness

For example a major driver to incidents like subway pushings has been "deinstitutionalization." 50 years ago there were over half a million inpatient beds. That number has been reduced by over 75% and while there has been money savings, there is a social cost.

Personally, I liked New York better in the 1980s. But if you want to keep NYC the current low crime, high standard of living, expensive, etc you're going to have to stop whining and pay for that expensive dinner you ordered. Michael Bloomberg wanted more billionaires because he is one of them. Now whenever anyone proposes taxing them, the answer is but they'll move. I say who cares because if they're not paying for the system then who the fuck needs them? People are complaining rich people pay the majority of the taxes. Well they also receive the majority of benefits like being protected from the mobs who would love to kill them. I think we need a little age of enlightenment/ French revolution/heads being locked off.

As an example, if 2 million people lose their homes because we do away with Rent Stabilization don't be surprised if they run around killing people. Yet right on forum we see a lot of people advocating for that.

@30 don’t we see you whining about congestion tax in another thread? Do you only complain about taxes that affect you personally? I also think you missed the actual point of the mortgage tax complaint: it is not progressive enough as it primarily affects those that cannot pay cash, which is only half the buyers, and certainly not actual “rich people needing protection from mob”. If you want to raise government revenues, there are better ways to do it (potentially, the congestion tax, LOL or asking BK townhouse owners to pay their fair share of property taxes).

Think about the French Revolution

And the current Populist movement.

Keith, thanks for sharing your thoughts. Your team obviously has the capacity to close 1-2 deals per month under your model. That’s the sort of efficiency that seems missing from most of the industry.

>> If you want to raise government revenues, there are better ways to do it

How about removing the mortgage interest deduction as 30yrs suggests? That seems pretty regressive.

As 30yrs points out, it is funny to hear complaints about a one-time 1.8% mortgage tax when the deduction benefit is higher _annually_.

I looked up the history of the mortgage recording tax, and the state version dates to 1906 with no change in the rate ever. I guess back then, you had to be rich for anyone to even offer you a mortgage.

I suppose a “purpose” of this tax could be to distribute the cost of foreclosure proceedings, etc. onto users of the system?

Sure, get rid of it. Mortgage deduction is not that large a benefit anyway. Many folks with 3% mortgages don’t even itemize deductions, so there is no benefit! Mortgage interest deduction is designed to help regular middle class folks that couldn’t pay cash for their home. There is a cap on how much can be deducted, so it does not benefit those with luxury properties. On the other hand the recording tax increases transaction costs, contributing to illiquidity of the market. It looks like properties in NYC trade less often than in rest of the country and various taxes that contribute to the friction are likely at least partially to blame for the situation where people transact less than would be optimal.

The mortgage deduction is a third rail. Forget about its merits or drawbacks for a minute, millions of Americans have built their life plans around it so whoever voted to repeal it wouldn't win reelection. That isn't an argument for engineering a system where people build and pass on wealth through real estate but it is what exists now and changing it would be very, very unpopular.

Nada, What do you think rental properties owners being able to deduct the full real estate taxes and mortgage interest from the gross income and the individuals owners not being able to do that?

"Keith, thanks for sharing your thoughts. Your team obviously has the capacity to close 1-2 deals per month under your model. That’s the sort of efficiency that seems missing from most of the industry."

When I was more involved in straight brokerage work in the 1990s I was closing 5 to 10 deals a month with my "team" of me. I'm not sure how 1-2 deals a month shows any efficiency at all. In 2021 the 48th ranked team in NYC did 73 deals.

>> Nada, What do you think rental properties owners being able to deduct the full real estate taxes and mortgage interest from the gross income and the individuals owners not being able to do that?

Seems like run-of-the-mill taxation of business income in an economy on the side of the owner. On the side of the individual owner, seems like run-of-the-mill treatment of spending, although there’s no sales tax on it.

>> I'm not sure how 1-2 deals a month shows any efficiency at all. In 2021 the 48th ranked team in NYC did 73 deals.

Good on you, and good on no. 48. I’m more talking about the remaining tens of thousands.

What is you say below is the general taxation logic.

To equalize the rental and buying dynamics, mortgage interest and real estate taxes used to be deductible to a larger extent for both rental property owner as well as individual user/owner. However, that is not the not the case due to SALT cap and reduction of mortgae interest deduction cap. How does it change buying vs renting cost due to taxation treatment? Does it mean that renters are bring subsidized for real estate taxes deduction beyond salt cap and mortgage deduction beyond individual mortgage deduction cap?
---------
Seems like run-of-the-mill taxation of business income in an economy on the side of the owner. On the side of the individual owner, seems like run-of-the-mill treatment of spending, although there’s no sales tax on it.

inonada,
Then I guess I would like a clarification of what you mean by "efficiency."

>> Then I guess I would like a clarification of what you mean by "efficiency."

As currently structured, the industry’s participants broker 2-3 home sales per year. If that were increased to even 4-6 home sales per year, that’s be greater efficiency.

Perhaps I should be using the word “productivity”. More output per unit of time of labor.

I don't close 1-2 deals a month not because I can't "handle" that much work, but because I don't have that kind of lead generation. My very business model of trying to find my clients apartments that are terrific for them instead of just alright works against me, because my buyer clients don't sell very often.

Except the majority of agents work part time, so we don't have any idea what the denominator is. I personally think we need much higher education/training requirements and greater barriers to entry. There are way too many agents currently in the business. When I first got my license in 1986, I was competing with 1,500 in a relatively small geographic area. Now I am competing against about 70,000 city wide for everything. This shift to agents trying to work on every kind of deal, in every area of the city, rather than at least trying to be experts in one or two, smaller things only contributes to the dilution of expertise. Also, these agents who work very few deals which are low hanging fruit for them (like sélling the apartments of family, close friends, etc) doesn't provide those agents with a living, but dilutes the earnings of those agents who are experts in the area that they snatch deals away from the pool and hinders professional agents earnings capacity. So then those agents are forced to work outside of their true area of expertise.

We need Broker Season.
https://youtu.be/17ocaZb-bGg?feature=shared

Here in NYC starting about 3 decades ago the big firms started a "shelf space" market share capture strategy. Firms like Douglas Elliman were buying up smaller firms and then not folding them in, but letting them run under their old name with all their old agents. This was so that they can occupy as much "shelf space" (just like cereal manufacturers do in supermarkets).

The brokerage houses have so many agents because they don't care which agent brings a deal in as long as something is brought into the brokerage house. So they can have a million agents bringing in a quarter of a deal a year a piece and it's fine with them. But individual agents starve

>dilutes the earnings of those agents who are experts in the area that they snatch deals away from the pool and hinders professional agents earnings capacity.

Wow

^^ the above "don't care which agent brings a deal in" certainly does seem to be the Compass model, which isn't even profitable for them

@Ali - compass really stands out as the craziest one of the last cycle
ZIRP driven VC funded growth at all costs, recruiting agents with commission splits that make the overall business uneconomic. Imagine a brokerage managing to lose money in 2021!?

Claimed to be "tech" somehow, and then laid off 50% of their tech within a year of IPO.

>> I don't close 1-2 deals a month not because I can't "handle" that much work, but because I don't have that kind of lead generation.

This issue seems endemic to the industry. Neither the industry’s embracing of a low barrier to entry nor their collusion maintaining a high fee structure help.

>> I personally think we need much higher education/training requirements and greater barriers to entry. There are way too many agents currently in the business.

What kind of training? Maybe there’s a world in which greater training is needed to provide services greater than what RE agents currently provide. But right now, they are RE salespeople. This may not be the industry you want, but this is the industry you have. And when the industry colludes to maintain the promise of $250K pay for ~100 hours of work selling a single $5M home, is it any wonder there’s an oversupply of labor relative to the amount of work?

It seems to me that if you want to cull the herd as you say, you probably need to reduce the food supply. The job of a RE agent is whatever it is today, and perhaps one can increase the 77 hours of training requirements to 150 hours or whatever. But is there any chance the job can be transformed into something requiring (say) a specialized 4-year college degree? And what would you do with the 2M people who are in the profession, a fraction of them part-time as you say? “Sorry, in order to do the work you’ve always been doing, you now need to acquire a skillset you have no capacity for.”

Most RE Sale people in NYC couldn't tell you what the elements of a contract are.

Not part of the 77 hour training:

https://dos.ny.gov/system/files/documents/2022/12/sales-77-hours.pdf