With the "economic crisis" now in full swing and Manhattan RE dropping 70% will broker and agents need to work for food and clothing? comments please

I'm all for Barack Obama, but what I don't get are socialists who hate America. Ruff, why exactly should they be paid hourly?

Because, I pay my Lawyer hourly, I pay my Accountant hourly, I pay the house painter hourly.
Why not my RE agent.
I don't get your point? See, we just got rid of a gov't where we had the largest transfer of public wealth to corporations.

If I had paid hourly, I would have paid a lot of money for the apartment that I never bought, pre-streeteasy days. I think they work for free most of the time until they sell something. Also, they are really working for 3%, of which most generally only keep a percentage, like 1/2 or 80%, considering most deals are co-brokered. Seems fair to me, and I'm not a very pro-broker kind of person.

The big problem in my mind isn't the amount they earn, but that the model causes them to be so one -sided that it fosters "bubble prone environments."

Rofl. Hourly doesn't make any sense. Then it's in the agent's interest to stretch things out as long as possible.

Perhaps a flat fee contingent on sale.

but the internet, and sites like streeteasy are rapidly changing the broker landscape. i've been out w/ brokers and sometimes knew more than they did about certain places. i think commissions will continue to be pressured over time. I can see it falling from 6% to say, 3-4% within a few years. In fact, I think the nationwide average is already closer to 5%. Big brokers already offer a la carte pricing on different services. Real estate brokers commissions are going the way of stock commissions and travel agency fees...

its the model that is broken and in times of distress in the marketplace, the model will likely be changed by market forces. If Manhattan does go down big time, lets say 40-50%, (just talkin here), I seriously doubt the 6% commission model will survive.

There will be a place for flat fee consulting in the future, in my opinion. Hourly may work on buy side, but not sell side. The big problem is lack of transparency in this industry, shady practices, unethical behaviors, and having to trust that your agent is really doing their best to market and represent you when you are not there to observe. REBNY is a joke and tries to lay oversight, but nothing is really done.

I think the way real estate is transacted is kind of antiquated, but a new model has not yet come forth. In time I think it will and I think both buyers and sellers will stand to benefit.

The fee is optional. You can sell it yourself. You can use a firm and negotiate a different rate. You can make choices. However, I was happy to pay my broker the 6%. The process took time 7 months from start (photos) to finish (close) and she brought in three offers near my ask from very qualified buyers. I believe that websites like streetasy will help those who wish to sell themselves. I suspect that it would not have been as professional or smooth if I was opening the door for purchasers.

Also, your "wealth" should not soley equate to the value of your home. If so, very poor portfolio management lacking diversification.

"Just wondering why it is that RE brokers and agents feel entitled to 6% of someone's wealth."

Because:

a) It is "paid" by the seller so the buyer (mistakenly) believes it doesn't cost him anything; and
b) "Buyers' brokers" are allowed to misrepresent themselves as actually representing the buyer's interest when, in fact, they represent the interest of the person paying them (the seller); and
c) It is a cartel in Manhattan and elsewhere.

What we need is a little antitrust regulation here. Let us hope it comes.

I'm ROTF about ALL Manhattan real estate, regardless of quality and/or location, being down 70%. Now THAT'S funny....

I think the new model will involve more highly specific fee-based services such as staging a property for sale, consulting fee for pricing and staging expertise, photographing each room, describing a property in a write-up, ensuring that a property gets uploaded to the proper websites, organizing open houses and private showings, etc.

Brokers won't be able to earn a living on commissions if closing a sale comes along too infrequently.

These were all pretty good responses. Expect for the shills who would be happy to give his 6% to someone who essentially does minimum for such a amount. " dmag2020" You would pay them only when you make a deal, not for walking you into 10 different apartments where 9 never came close to meeting your criteria. Think of them as shoe salesmen. You only pay for the pair you buy, not the ones you try on. Get it? Also after they have extracted 6% from me, it does not matter to me how they cut it up amongst their other co-horts. I am still out 6%.

Yes, flat fee would be better. Parts out west have RE agents who will work with you for $500.00 in Washington State. You find the houses say on Redfin or Zipreality, decided which you would like to see or bid on and then they join in the process. Not perfect, but by far better then the extortion that is allowed to happen in the RE world.

Finally, my "weatlh" is "my wealth". Earned by me, and not liking to be pressured or extorted by others and their organizations to cut them in for a percentage of it for the right to sell it.

An hourly system would simply motivate the broker to sell the property as quickly as possible at whatever price. You're welcome to use such a broker but I'd rather have one who's interested in selling at the best possible price.

In London, the sellers broker works on 2% or even 1% in certain times whilst it can be 3% in cheaper real estate areas. The buyer will typically not use a broker although this service is available for a fee. It's also possible to construct arrangements where the sellers broker gets 1% up to a certain price and 10% on anything above. That way their interests are aligned with their client.

I should note that there is a greater proportion of property that is owned as opposed to leased and also that there is a greater churn of property as there are comparatively small tax burden on buying and selling. I bought and sold 3 in 5 years - the math made sense whilst over here a 5 year hold makes sense.

The U.S. 6% system appears to be a cartel. There is no reason why brokers need to be paid $120k for selling a $2mm property. They bring value to the process but $50k may be more reasonable.

There is also the possibility of fee-capping. For example, the brokers would get a 5% fee up to $60,000 or $80,000 and then nothing more above that regardless of the price of the apartment. This happens all the time in the recruitment industry.

waverly "There is also the possibility of fee-capping. For example, the brokers would get a 5% fee up to $60,000 or $80,000 and then nothing more above that regardless of the price of the apartment. This happens all the time in the recruitment industry."

Are you serious? Have you missed the whole point of this posting? Please explain to me where you think a RE agent is worth such money? Please, I beg you.
Waverly, what do they do that you think they would be worth anywhere near a fee of such an amount? And this would be per transaction? Are you joking?
Recruters go out and find talent, that they then bring to someone else to enhance their business. And BTW not all recruters make such high fees. How can you possibly compare or promote that a RE agent is on the same level or is at very least deserving of such an absurb payday.

Please!

All commissions are negotiable -- 6% is hardly written in stone -- but this seems an odd time to bring this up.

In the bull market, when apartments sold quickly, sellers had a reasonable argument that real estate commissions were too high -- now, as volume slows and it becomes harder to sell properties and it takes longer, brokerage services are worth more, not less.

We have already seen this nationally, as average commissions, which came down in the bull market, began to rise again last year as the housing market tanked. (this stuff is all tracked by a company called Real Trends, www.realtrends.com)

I would be happy to work for an hourly fee, but I think it would be a bad move on a seller's part to pay a broker an hourly fee on a property that might take nine months to sell.

ali r.
{downtown broker}

Because, I pay my Lawyer hourly, I pay my Accountant hourly, I pay the house painter hourly.
Why not my RE agent.

Why? Because __% is what they charge. If you don't want to pay what they charge, don't use their services.

Putting national aside for a moment and discussing Manhattan, I have a hard time believing that commissions will rise or stay at 6% as times get tough.

If prices dip 20+%, trust me, commissions are going to be negotiated way more, listings will become much more common and easier to get, and serious, ready, able and willing buyers more scarce.

I spent 12 months in a Commack LI market trying to sell my mothers house with a 'residential specialist' out there who supposedly knew everyone, and had huge list of contacts that would bring in a client. yea right. Every few weeks, 3-5 new houses would come to market, competing at slightly lower prices. Buyers were so hard to get in and when they did come in, they were lookers or low quality buyers seeking steep discounts.

We had to lower price aggressively about 6 times until we sold it 12 months later, some 25% or so below peak levels in late 2005/early2006.

Should this environment hit home here, I think sellers will bring down that commission either right away before a listing is started, OR, as the reductions come in and the seller realizes that the price they will get is lower then they thought. Just a hunch

ccdevi "Why? Because __% is what they charge. If you don't want to pay what they charge, don't use their services"

Let me guess....Your a RE agent?

"now, as volume slows and it becomes harder to sell properties and it takes longer, brokerage services are worth more, not less."

No. Brokerage services are worth what they were always worth - much less than they are.

ruff - there are RE agents (like Ali and Noah) who bring value to the process and act above-board. You can hate this all you want and just choose not to use them. But, I think shooting your mouth off like everything you say is 100% right and anyone who disagrees with you is 100% wrong is pointless and not worth any real time continuing the discussion.

waverly....I just don't throw out arbitrary figures such as (60,000 or 80,000) or as in the point of this posting "6%" and be made or expected to pay this, because of a collusion in your industry.
This board is just filled with shills for the RE industry.

ali- i agree that brokers are doing a lot more work now for each sale than before. so on the one hand, people should be more willing to pay a fee now. but i think UD's point of falling prices impacting commissions is a valid one. and we regularly see that in a soft rental market - so why not a soft sale market? i think short of doing specific a la carte consulting, staging, etc work that is fee based, that % of sale commissions make the most sense to me. but i wouldn't want to pay 6% and i wouldn't have it be a straight % of sale value. i would have escalators in there. for example, so if a broker say he can sell my place for $100 then i would say: less $100 get 2%, $100-120 3%, $120-130 4%, and over that 5%. this better aligns incentives and mitigates incentive for sell side to just get a deal done, regardless of price.

Special_K I like your idea, but good luck getting the RE industry to go along with that. One of the reasons why the "established" RE industry is dying out west has been it's reluctance of giving up it's perceived right of a fixed rate commission based on the value of property.
The west coast states have been the leaders going to a internet based sales venue.

ruff - I don't work in the RE indy and am not shilling for anyone....thanks.

Sure

Hey urbandigs, how does a buyer broker actually work? Does the buyer have to pay you by the hour? Or can you hire a buyer's broker just to negotiate for you?

ruff - "This board is just filled with shills for the RE industry."
Seriously? Those of us who actually work in real estate as brokers (rather than investors) seem to make up a minority of the posters here. And look at the abuse we take! Most of the true bulls on this site seem to be individual investors, not brokers.

That said, there are, and have been, plenty of alternatives to paying a 6% commission to a broker. Here's a pre-bubble summary from the Wall Street Journal:
http://www.realestatejournal.com/buysell/agentsandbrokers/20040518-boyd.html

And there are other flat-fee structures emerging in other real estate markets as well.

But. I think one of the reasons people in New York continue to use full-service brokers is that they value their own time. Those lawyers whom you pay hourly? They don't want to rush home in the middle of the work day to show their apartments. They don't want to spend their precious weekends hosting open houses. And they don't owe us a dime if we don't sell their homes. So...why the hate, sweetie?

for me? A buyer requests my consulting, I work with them from beginning to end, I get paid at closing by splitting commission with seller broker, which is paid by the seller. Buyer pays nothing.

yes, got many requests for flat fee or hourly rate work that I did not pursue. That will change by this time next year for me when I do something with urbandigs

> ruff - there are RE agents (like Ali and Noah) who bring value to the process and act above-board.

I agree. I don't share many of Ali's views, but she is up front and brings data.

Noah has definitely done his homework, and never drank the Kool-aid... he's one of the first to point out the idiocy of his colleagues.

Nobody is forcing you to pay anybody -- just sell it yourself.

Fees adjust to markets. Personally, if I were a seller in this market with few buyers -- I would rather motivate the broker rather than being the "cheap complaining nickle and diming pain in the neck" customer.....

nyc10022 Never in doubt that there are good people in all industries. The point of this post is obvious by the amount of defensive "because it is what it is" responses.

As for manhattanfox..LMAO

ruff - I disagree (defensively?) about the defensive "because it is what it is" responses. Most posts above indicate that you DO have other options as a seller...

ok it is confirmed
ruff is one of petrfitz' personalities.

just compare attitude, writing style, position on real estate participants vs. owners

Special K: I agree, very good idea. It would also flush out liar brokers who get the business by promising to get you a higher price than they really can.

This is done all the time in larger business arrangements, including real estate. Last time my firm was selling RE, a broker pitched the business and claimed to be able to get X for it. We said "fine, put your money where your mouth is - you get 2% up to X and 10% of everything above X" (I don't remember the numbers exactly, but it was something like that) and he agreed. Market went south, he got a bit less than X, but lived up to the agreement.

Do any current buyers (if there are any...) care to weigh in? From a seller's perspective, yes: the tiered commission Special K is proposing would incentivize brokers to go for a higher sale price. But there seems to be consensus in the market, and even here on Streeteasy, that prices should be falling and sellers should be ready to deal.

I thought y'all didn't want brokers to prop up the market. So what's it gonna be, haters?

I actually think the tiered system would encourage honesty because you'd have fewer brokers getting the seller's business by promising a sales price they can never deliver. As a result, you'll have a lot fewer ridiculously high listing prices to begin with.

As a (potential/future) buyer, I don't have any problem at all with the broker trying to get the highest price for their client - that's their job!

(current buyer) I have been watching the market and occasionally looking since February, have a house on the island and looking to buy a downtown(civic/financial area) studio to rent/live in depending on price. Went to 2 different brokers and talked to another - looked at a few places (all overpriced around 500,000 in the summer) - I asked them to call me as soon as the prices dropped, I thought it would be about October (once that first bank failed in July who didn't see the writing on the wall) everyone of them was arrogant and so sure of themselves and that the market was never lowering.

I am waiting, keeping an eye on here and on craigs, hoping for early 2005 prices (I had made a bid for 215.000 on a studio at 170 park, needed about 30,000 work, but decided to put cash in my home instead and decided against it. I don’t know if things are going that low, but my gut tells me that March 2009 should be the time to seriously start looking and visiting.

I think the prices are way overpriced still and the brokers should realize they are going to need to cut back like the rest of us and get the sellers to not expect to be making money on purchases in the last few years.

waverly
3 days ago
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ruff - I don't work in the RE indy and am not shilling for anyone....thanks.

ruff
3 days ago
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Sure

lol, what kind of morons think that the real estate industry sends people to post on streeteasy discussion topics in order to influence the market ... and influence it away from people like ruff and stevejhx who wear their anger on their sleeves?

newbuyer99
2 days ago
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Special K: I agree, very good idea. It would also flush out liar brokers who get the business by promising to get you a higher price than they really can.

someone explain how a broker can PROMISE you a higher price? Do they show up with a checkbook?

The broker does not set the price -- the owners do. The owners effectuate price cuts. You do not have to use a broker. Sell it yourself and stop complaining.

Good brokers who actually know the buyer market will do fine.

Those who just got into real estate and bring little more than hand holding to nervous people making big purchases will be the ones who suffer. Don't underestimate the value of hand holding nervous purchasers, or a warm body to be present at listings, but in tough times the hand holding gets valued less and the warm body becomes commoditized.

"someone explain how a broker can PROMISE you a higher price? Do they show up with a checkbook?"

Very simply.

Several brokers pitch the business. Broker A says "I can get you for this apartment if you list with me". Broker B says "I can get you $600K, here's some comps to prove it, blah blah". Seller chooses Broker B, who lists the the apartment at $625K, then has it sit on the market, maybe with 3-4 price chops.

Yes, the buyer is the ultimate decision-maker, but the broker is supposed to be the expert. All I am saying is that a tiered system would discourage broker B from over-promising to his/her client.

Ill make it even simpler! Brokers feed on seller stupidity! Im not saying sellers are stupid, Im saying they fall for the oldest trick in the book! AGREEING TO WORK WITH THE BROKER THAT SAYS THEIR PLACE IS WORTH MORE THAN THE OTHER BROKERS!!

Its as simple as this. I have been to top performer panel discussions before and I have heard first hand the brokers say that you have to give very aggressive price quotes when going on pitches!

'who is going to give you a listing if you quote the lowest price of 3-5+ brokers that you compete with'!

It amazes me that sellers fall for this. Honestly. But they do. Ive lost about 6 sales pitches because I dont sugar coat, but it also means I dont work for unrealistic sellers. Let the other broker waste 6 months with a listing that is severly overpriced because they wanted the listing and promised the world.

Transactions here are very simple. Look at what in building comparable trades are going for, and analyze the property at hand and see how it either should be listed at a premium or discount to the similar uit that just sold! The market dictates the price, NOT THE BROKER, but sellers feel better if a broker states that they are so amazing that they can promise an above market valuation in these difficult times.

This industry is so shady, Im telling you from first hand experience. Many know this already, but dont know the level of BS and tricks that some agents still pull off. 5 sellers called me in the past 2 months to help me see where their price should be, and they are working with other brokers and admitting messing up. One seller said their broker doesn't do Sunday open houses because they felt it was not worth their time. UNREAL!

In this environment, sellers who have to sell need to be ahead of the curve, not behind it, and going with the broker who promises the highest price and then works on reductions 3-4 weeks later, is falling for their sales tricks that are thoughtfully planned out before they even meet you. Be smart! Know that buyers set the price, and you need to know what that price may be in tough times.

> Good brokers who actually know the buyer market will do fine.

This sounds a lot like the rationalization of "yeah, the market might be tanking, but prime will hold its value".

Rising tides float all boats... hurricanes don't spare too many either.

Urbandigs, that was supposed to say Broker A says "I can get you $500K for this apartment if you list with me", but streeteasy deleted the number for some reason.

In other words, I was trying to say the same thing as you.