Is a buy-side broker necessary (or helpful) when buying a co-op?

i bought my apartment without a broker in a direct owner-to-owner transaction a few years ago. it seemed to work out fine.
as far as the seller saying "he would do the board package for" you - there are a lot of things in that package that i remember someone
else not being able to "do" for you, so make sure about that first.

have you been working with a broker during your search?

not really

I work with a lot of buyers so I guess I am biased, but i would use one if I were you. Obviously the sellers broker doesn't want to have another agent involved since he gets double the money if he is the only agent... May I ask which bldg this is in?

It seems kind of ballsy for the seller's broker to actually suggest you don't use a broker for this reason. The seller's broker has a fiduciary duty to the seller and must present ALL offers, so it seems obvious that he/she doesn't want to split the commission. And in this market, a seller should be happy with ANY qualified buyer who comes along. Usually it's understood that you'd get a price break by not using a broker, not that you'd need such leverage in this market.

So I question the ethics of this broker.

Some brokers actually PREFER working with buyers who are represented, as they have someone who understands how to make the transaction move along more smoothly.

I used a broker when I bought for the first time, found him helpful in navitating the whole coop process and to better understand the RE market. Not sure I'd use one again, though.

So to answer your question, it depends. If you feel comfortable enough in understanding the market, you'll be ok on your own. But this listing agent sounds slimy.

h_g - you can hire an an honest-to-goodness "buyer's broker" representing your interests. The bad news is you have to pay that person directly.

A number of smaller brokers (some of whom post here) are working to offer buyer's services on an a la carte basis. Basically, you could hire agent to help you through the negotiating process, who then hands the deal over to the selling agent when you reach an accepted offer. Noah Rosenblatt (UrbanDigs) at Halstead is working on a model; my company offers these services here in Brooklyn. I just did a deal in which my buyers, having reached an accepted offer on a co-op, will continue through the board process with the listing agent. It benefits everyone because the listing agent has closed several properties in the building ad knows the board process well. I receive a flat fee for the services I rendered. My clients get an awesome apartment. The sellers only pay a 3% commission. Nice, right?

The listing agent may or may not be "slimy", and may or may not be greedily trying to keep the entire commission. Personally I find it more plausible --in this day and age where deals are increasingly scarce and difficult to make--that the listing agent is either on a tiered commission structure (wherein the seller pays less of a commission to a direct deal--this could in turn make him more flexible with the price) or that the listing agent--wanting to make a deal--would negotiate a lesser commission with the owner, again allowing the seller to be more flexible with you. It might behoove people every so often to stop with the gleeful declarations of slimy brokerhood and instead use their mental energy to analyze the situation and figure out the best way to approach the situation for them. In this case it sounds like the op should negotiate hard, and NOT bring in another broker at this juncture. And btw I am a broker, and for many people I believe that (some)buyers brokers can be very helpful in many respects, but just bringing in some random one seems to be shooting yourself in the foot at this point.

h_g, if you've made it this far, I would go ahead without a broker. Have the seller's broker give you his/her firm's 'making an offer' packet, as well as ask them to make a checklist of what will be expected from you after you have a signed contract. Then you will know what to start accumulating for the board package. When we bought our first place, we did not use a buyer's broker. In retrospect, the whole process was very smooth, but still a little anxiety-producing since it was our first time through it.

I would think that the listing agent has to use full disclosure, who is he representing? the seller or the buyer? "a real estate agent cannot represent both buyer and seller in the same transaction and the broker cannot receive a commission from both without the knowledge and consent of both the buyer and seller" The way this is set up legally is that until such disclosure is made, technically the listing agent needs to have the best interest of the seller and not you. Do you have comparables? are you certain as to the value of the property? do you know everything there is to know about the building? do you have an attorney?

Hi, I have been a buyer's broker and assisted buyer's with negotiation. In this case, if you already have an agreed upon price and love the apartment, then you should move forward with the same broker as this is not an unusual circumstance. However, if you are undecided or feel that the market still has a way to go, then get someone to represent your interests as well. Commissions are shared between the brokers and will not affect the sale's final price. Most real estate investors look at brokers' commissions as the cost of doing business.

Hire a lawyer to represent your interests. You'll have to pay it out of pocket, but if your seller is willing to work give you a better price you'll come out far ahead. You should do be doing this whether you have a buyers agent or not - do you really want to risk someone with a GED representing your interests?

"if you already have an agreed upon price and love the apartment, then you should move forward with the same broker"

Bullshit. Never ever ever use the same broker. They are not acting in your interests.

"If you are undecided or feel that the market still has a way to go, then get someone to represent your interests as well. Commissions are shared between the brokers and will not affect the sale's final price."

Or you could not use a broker, hire someone who will really represent your interests, and negotiate a better price.

jgr, are you suggesting that every buyer's agent is someone who lacks higher education? I really dislike it when people make general assumptions. Some of us are highly educated -BA and MA - thanks.

In New York, lawyers are considered brokers and in many cases will share in the commission as well.

OK, just most of them then. Seriously, you tell me what percentage of the people in your firm would be there if a 4-year degree was the barrier to entry.

it is a very eclectic space, that's why it is imperative that there is due diligence, trust and understanding between people who chose to work together.

is it wrong/unethical to offer a buyer's broker a flat cash fee?

If you hire a buyer's broker to represent your interests, your broker may be able to negotiate a better price than the seller's broker is currently offering. Plus, you then have someone on your side protecting your interests. Before moving forward and making a decision on whether or not to use a buyer's broker, I'd encourage you to read the information at www.naeba.org. This is an organization of real estate professionals who only work with buyers and has been recommended by several consumer organizations including Consumer Reports.

jgr said, "Never ever ever use the same broker. They are not acting in your interests."

Not always true. Both buyer's and seller's brokers have an interest in seeing the deal go through. I once dealt w a buyer's agent who was giving me the strong sell just as I was about to sign the contract, but something came up that made me reconsider.

You have to feel comfortable w your broker.

Tina_24hr, sounds like a good plan, but how does the seller's broker benefit if the seller only pays 3%?

and nyg, it shouldn't matter to the buyer what the listing agent's commission is, an offer is an offer. And to tell a buyer outright that the price could be adjusted by suggesting he not use a buyer's broker - regardless of whether it makes sense at this point - is just crass.

uptowngal - The total commission was only 3% - their lower commissions keep their prices super competitive. Even though they are notorious for not co-broking listings, I bring my clients to their listings if they're really terrific; they will usually negotiate a finder's fee, as in this case. The agent benefits because I brought him qualified buyers in December 2008, a month that will live in real estate infamy!

Tina - where do you work? I would love to see your online profile, as a potential seller, I would be keen to check out a broker who had qualified buyers in Dec 2008!

I work in Brooklyn, and usually list properties in my neighborhood only (although I'll go anywhere with my buyers). You're not selling a 2 bedroom condo with direct river views (not on the UES or Battery Park City) by any chance, are you?

nope, thats not me. good luck to you!

A provocative question that comes up from time to time. Here's an interesting thread from a few months back:

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

inthehouse - good luck to you as well! Are you in Manhattan? I'd send you my profile but I would feel creepy doing it here on SE.

Tina - i know you are a broker and have mentioned flat fees a bunch of times before. i have posed this question a few times:

is it wrong/unethical to offer a buyer's broker a flat cash fee to bring in buyers?

and no one has answered it. is something wrong with this question?

I do not believe it is unethical as long as any fee is disclosed to everyone - buyer and seller.

If a buyer thinks that a broker is showing them places out of the goodness of the broker's heart ... thats just dumb. Brokers are professionals - they should be paid.

So as long as everyone involved in the deal is happy with the fee, I say its fine.

so if i put in my ad or on my website ( http://web.me.com/seif69/11K/HOME.html ) that i am willing to offer a flat fee to brokers who bring buyers around then that should suffice? i would think that the buyer doesn't care as long as the broker shows them a place that they end up buying - then the flat fee is really between the seller and agent.

sounds reasonable to me. as long as its disclosed, I can't see any moral issue at all.

"Commissions are shared between the brokers and will not affect the sale's final price. Most real estate investors look at brokers' commissions as the cost of doing business."

This is typical brokerspeak. If it's "just the cost of doing business", buyers shouldn't care if it's 3%, or 6%, or 10%, or 30%, right?

Of course commissions affect the final price - the reduce the pie for everyone, and the higher the commissions, the less left for the buyer and seller to divide.

Yes, the selling broker may be slimy. But unless it's a close personal friend or someone that you hire and you pay, the buyer's broker is equally likely to be slimy, and is not incentivized to have your interests in mind (yes, some brokers claim that they do even though they're not incentivized to, but if so, they're the exception). As someone else suggested, I find it quite plausible that the seller's agent may be willing to lower their commission if they don't have to share it, thus leaving more for you AND the seller, and making a deal more likely.

My vote - don't use a buyer's broker.

newbuyer99 is right. You can't look at a significant broker fee as "just the cost of doing business".

There are a zillion opinions on a bunch of threads here on what brokers bring to the table. From the seller's point of view, can s/he net more $$$ by going FSBO - assuming s/he has the time / inclination / ability to go it alone. It's really that simple. And what may have been the better option in 2005 may NOT be in the roaring buyer's market of today. Yet, people sell FSBO all the time.

On the buy side, can a buyer negotiate a better price WITHOUT a buyer broker? In theory yes, in practice, not often. The commission arrangement is between the seller and the listing broker, and it's not the norm for one commission rate to be specified if a co-broke, and another if a one firm (direct) sale, meaning the listing broker's firm pockets the entire commission. Again, it's POSSIBLE to negotiate a better price if only one firm is involved - just not very likely.

Opinion - the more a "newbie", the more one should consider a buyer broker, particularly if a Co-op is involved. I've had first-time buyers who didn't know a Condo from a Co-op. The less familiar / comfortable a buyer is with researching listings / making appointments / researching comps / negotiating / preparing offer / submitting financial statements / PREPARING THE BOARD PACKAGE, the more that person might want to consider a buyer broker.

Many of the people who particiapte on the SE Boards have a strong interest in and knowledge of Manhattan Real Estate. But believe it or not, there really are people out there who don't care to spend 20 hrs / wk on Real Estate web sites.

sniper - I think the disclosure you cite above sounds fine. You could even say something like "brokers welcome - referral fee guaranteed" if you wanted to be a little vague about it. You may not get a stampede of brokers, but who wants that anyway?

If I'm listing a similar apartment in the area, and a buyer comes to my open house but says my listing is out of his/her price range, I would send that person to you and be happy to collect a small fee..

If I'm a broker, however, who has been working for six months with some buyers I know can afford a 1M place, I might sit tight and pray they don't see your listing.

http://www.streeteasy.com/nyc/sale/372185-coop-425-east-79th-street-yorkville-new-york?email=true

the other place in my building (same apartment 4 floors lower) listed 8 days ago at $1.045M. they reduced already today to $995K.

besides the fact that they were grossly overpriced, should anything else be read into this? could they have gotten wind of my apartment http://web.me.com/seif69/11K/HOME.html (i do have a sheet in the lobby but it just got there today at 6am)? also, how does this bode for the seller?

Those sellers paid $950K in December 2007. Seems unlikely they will recoup. You said you thought the listing agent was pressured into the higher asking price - maybe your FSBO convinced the sellers. Anyway, it's not a bad thing for you. The more people come into the building, the better your chances of selling.
Also, you asked on another thread how to approach the listing agent. I would suggest calling him AND sending an email - so there is personal contact, plus a paper trail. Offer to have him stop by before his open house to check it out, and tell him in writing what the finder's fee will be.

yes, i did hear that. just seems silly that if you are the owner and you make the broker price it somewhere that you wouldn't even stick to your guns for more than a week - doesn't it?

tina - if you were this other broker, what kind of fee would you be getting from me to help me out and make this worth your while?

thanks for all the help.

I can't speak for other brokers at all, really. But it's entirely up to you. The buyers will come, with or without this broker. His fiduciary responsibility is to his sellers, of course. If he has a viable buyer for their place, he has to try to make that deal stick.
Why not ask him? If he's a creep, you'll probably know immediately. If his company won't work with you, you'll know that as well. I'm not trying to be vague, I just can't speculate.

"The commission arrangement is between the seller and the listing broker, and it's not the norm for one commission rate to be specified if a co-broke, and another if a one firm (direct) sale, meaning the listing broker's firm pockets the entire commission. Again, it's POSSIBLE to negotiate a better price if only one firm is involved - just not very likely."

This sounds like broker BS to me. I'm sure that's how the agreement is written, but I doubt its "not very likely" that the selling broker agrees to lower their own commission in order to pass savings on to the buyer, and get a sale. Its simple greed - why would a broker refuse to give up 3% to a guaranteed buyer now, when their alternative is to give up 3% to a not-yet-existing broker later?

Oh, I forgot, its a monopolistic price-fixing cartel, so maybe they do. I can't wait for that system to topple.

It is broker BS. I've written tiered commissions into listing agreements. As long as I'm not misrepresenting the buy-side commission to other brokers, I can structure the sell side as I wish. There are no legal boundaries to doing so, as far as I know.

how is this possible: same apartment, 2 different listing agents, 2 different prices

http://www.streeteasy.com/nyc/sale/232034-coop-425-east-79th-street-yorkville-new-york
http://www.streeteasy.com/nyc/sale/359540-coop-425-east-79th-street-yorkville-new-york

tech_guy / tina24 - let's not be snippy.

Nobody is commenting on what's legal / appropriate / fair. Just commenting on the reality that listing agreements typically DO NOT specify different fees for cobroke vs direct sales. All commissions being negotiable, a savvy seller can of course request that as part of the listing agreement. Some listing brokers will accommodate, others won't.

Re the listing broker agreeing to accept less than the agreed to commission, yes, that happens, too. Just not as often as you might think. As a buyer broker, I (and my firm) have given up part of the commission split due us to get the deal done, even though the listing broker wouldn't give up a nickel.

I hate to "generalize" since every listing agreement is different, but I also often take listings with a step-commission structure.

I don't know whether they're "typical" or not, but they make sense. If you think of the commission going to four places - listing broker, listing broker's firm, buyer's broker, and buyer's broker's firm --

then in the case of a direct deal the broker can argue that both the listing side and the buying side are functions that need to be compensated, but the firm doesn't need to be paid twice. It's not like they're doing twice as much brand advertising, or paying office rent more than once.

ali r.
{downtown broker}

Sorry John, I didn't mean to be snippy. I just think it's important to point out that the current system can be modified to suit varying scenarios. I have argued in other threads that while a complete reform of the "standard" commission structure in NYC may seem desirable, it's harder to implement than on might think. I don't believe we're going to see a majority of buyers voluntarily paying upfront for real estate guidance. I think most people would rather have those costs buried deeper in the transaction, and not to feel like they're "on the clock" when they are with their brokers. Instead, if we admit that the "norm" can be adapted to a buyer's/seller's needs, we can get on with our work without everyone accusing us of running "a monopolistic price-fixing cartel".

Just to take this a step further...

If we're thinking about the number of players / mouths to feed, the most likely scenario in a "direct" sale is ANOTHER agent within the firm providing the buyer, NOT the actual listing agent. This is certainly more likely among the "mega-firms" with their hundreds / thousands of agents. If a downtown Elliman agent, for example, provides the buyer for an uptown Elliman agent's listing, what would be a "fair" Real Estate fee?

Quite likely, the two agents have never met. Is a buyer brought by a Corcoran agent worth more than a buyer brought by another Elliman agent, implying a higher fee should be paid? Thoughts?

tina - that's OK, snippy's allowed.

I've surfed this Board for awhile, and it's a recurring topic. You are correct - for better or for worse, Real Estate is the ultimate "pay for performance" job. We get compensated only if we close a transaction.

The fact is - please, no violins here - like all salespeople, we're not paid for most of the work we do. But the reality is that the public - in general - will never pay upfront fees for Real Estate services that may never lead to a purchase or a sale.

I've never seen statistics on the number of Elliman deals that are done solely in-house, or the number of Corcoran deals that are, but if you have them they'd be interesting to see.

ali r.
{downtown broker}

"I've surfed this Board for awhile, and it's a recurring topic. You are correct - for better or for worse, Real Estate is the ultimate "pay for performance" job. We get compensated only if we close a transaction."

That's not "pay for performance". That's pay for quantity. Pay for performance means you'd get paid a lot for showing wonderful listings to a buyer who suddenly gets laid off and gets cold feet, and you'd be paid next to nothing for showing a stupid foreign buyer whichever cookie-cutter condo is offering you the biggest commission incentives.

Clearly neither are true.

When we bought in 2006, we went to a few open houses without a broker. After finding "the one" we placed a bid with the seller's broker. Got the apartment for $5k below asking and it was appraised for $15k above the asking price. The seller's broker prepared the co-op board package. Our lawyer walked us through contract to closing.

front_porch - not a clue. Just raising the question, what's a "fair" RE fee when there are two agents from one firm involved in a transaction.

tech_guy - the point - perhaps you missed it - is that it will be difficult to replace a commission based system with a "flat fee" one, since there is no appetite by either buyers or sellers to pay upfront for services that may never lead to a purchase or a sale.

voracious - you're fortunate to have had the seller's agent prepare the Board package for you.

Not knowing the price of the apartment or the reasonableness of the ask, $5K off doesn't seem like much of a deal. It's nice that it appraised at $15K above, but don't confuse the appraised value with the best price you could buy for.

The bottom line - you were happy working directly with the listing agent, and you feel the price was better than fair. Everyone's happy.

BY THE WAY - just to continue the topic at hand - would you happen to know if the seller paid a "full" commission to the listing broker?

I worked for big firms for many years and have been on my own for the last 8 months trying to do things a little differently. So far so good and I hope to expand in 2009 but may need a partner. Just the rental side of things is keeping me pretty busy.

http://theburkhardtgroup.com/about.php

You pay for what you get, if you want 1% services, then you find someone who provides you with limited resources, if you want exposure, top comps, data, services, time ...then you pay the 5% or 6% or 7% or whatever percent. The broker of the firm sets the tone. Some agents in some firms cannot take listings for a certain amount, why? Because it doesn't pay, you work 24/7 for a penny, as much as you may love the field and the work, you can't live on peanuts. Pay for the services that you need. There are options out there for people; nobody is forcing anyone to do this or that.

Johnrealestate1 - Great question regarding whether or not the seller paid a "full" commission to the listing broker. I have no idea. I do know that during negotiations we mentioned since we weren't involving another broker that the seller's broker should be more negotiable. I don't think that made one iota of a difference. Similarly, when I was selling another property years ago, my broker wouldn't budge on her commission. The bottom line in both examples is that "the deed" was done and both times whether I was a buyer or seller, I was pleased with the transactions.

Your statement regarding whether or not I paid the best price vs. the appraised value is a rhetorical statement that really cannot be evaluated. At the end of the day one makes their "best offer" and lets the chips fall where they may. I recall while looking for my second home making my "best offer" and the seller ended up taking the property off the market for a year and later sold the house to someone else for the amount I had previously offered. The point is is that sometimes there are elusive things going on that are difficult to factor into the bid.

One final thought with a little background. This apartment was a studio for my oldest son in which my husband and I were going to be his guarantors. He looked at many properties on his own and when he finally found the apartment, he waited a month before bringing me to see it. I had told him always to keep a "poker face" while looking. At the closing the seller's broker told us she would have never betted that he was the one who would ultimately be the purchaser. Since another deal had fallen through with the apartment, there was a tremendous eagerness on her part to make sure this time the deal would be consumated. While I think she was a tough cookie while negotiating with my son, considering the horror stories I've read on this board regarding brokers, I would consider using her when it's time to sell. Could our "best offer" have been a few thousand dollars less? Perhaps. But at the end of the day my son got the apartment and is happy.

tina24hour said, "I don't believe we're going to see a majority of buyers voluntarily paying upfront for real estate guidance."

What sucks for the broker is that it can be a lot of effort w a lower chance of payback than for the seller's broker. But I agree w tina24, especially in this market. In any market a buyer's broker needs to show how he/she can add value to the client beyond sending out listings and making appointments. And a smart broker would see this as an opportunity to build a long-term relationship, as this buyer may some day turn into a seller.

That brings up another FSBO story - In 2006, I had some buyer clients who I'd been working with for several months. They were in a time crunch (had to move out of rental with evil, litigious landlord), and we hadn't found anything quite right for their specific needs. I found a FSBO on craigslist and sent them to the open house. They bought the place, and I didn't make a dime. But when they had to relocate for work 18 months later, they gave me the listing.

Another way FSBOs give back - since their place had been so well-priced in 2006, they actually made a (small) profit, despite going on the market in August 2008.

before i bought my place that i am selling now (http://web.me.com/seif69/11K/HOME.html) i worked with a broker for quite a few months looking at homes outside the city. she worked hard for us but in the end we decided to buy in NYC. 5 years later we are looking to move and she was the first call I made. we are working together again and she will sell me my next home. the relationship makes all the difference.