New York City's Real Estate Brokers
Making it in a Crowded Field
When Harris Scher was listening to his instructors in class last year, he took a good look at the jam-packed room filled with 300 students who had the same aspirations as he had — to have a successful career as a licensed real estate salesperson. He speculated about his chances. Scher was about to become one in an already congested field of more than 27,000 brokers and real estate agents operating in Manhattan — according to New York State records — competing for only about 10,000 real estate transactions per year (not including co-op sales).
“I wondered how many people I would run into once the course was over,” says Scher, a 29-year-old native New Yorker who earned his license and has been with Century 21 Kevin B. Brown & Associates for several months. “So far, I haven’t run into many of them.”
Although some pursue a career as a broker because of their passion for real estate, others are lured by the opportunity to close multi-million dollar real estate deals and earn seriously lucrative commissions. Scher did what many up-and-comers do — he turned to the real estate market after dabbling in another career.
“I was in finance, but I had also moved many times and had used brokers in the past,” says Scher. “I enjoyed the process of looking for a house, and realized that this was something I could be doing myself.”
“When you read these stories about how great the market is and how we’re breaking records in price, it sounds easy,” says Steven Spinola, president of the Real Estate Board of New York (REBNY), the trade organization representing the city’s real estate brokers. “But it’s not an easy business. It’s hard work, and you may get lucky once in while, but you’re working a long time on one particular sale.”
Spinola explains that there’s more to the industry than just showing houses. “You have to make sure the financing will be in place, or that the co-op will approve the client, or that the seller will actually sell the home they were living in. This can create delays and blow deals up. It’s not easy.”
Roberta Benzilio, chief operating officer of Century 21 Kevin B. Brown & Associates in Brooklyn has seen a marked increase in the amount of real estate agents today compared to when she started in the business a quarter century ago.
“The number of agents has increased because real estate has become a more desirable profession,” says Benzilio. “It’s an exciting business, and it can be very lucrative. It’s also one of the only professionals that you can get into with little training and money.”
That said, according to Barry Hersh, academic director of the Steven L. Newman Real Estate Institute at Baruch College, “I think fewer people are changing careers and that there’s a perception that the market may have topped out, which I think may be true. We saw a big, big boom and it’s leveled off [over last five years.]”
Learning the Ropes
According to the New York State Department of State, you need to be at least 18 at the time you apply to become a licensed real estate salesperson — someone who works for and is supervised by a representative broker. You also must have successfully completed a department-approved, 45-hour qualifying course, must be sponsored by a New York state licensed real estate broker, and pass the one-hour state exam to be certified. The cost of the course can vary, but averages around a few hundred dollars.
One such course, “Real Estate Salesperson’s Class,” offered by the Learning Annex in New York City costs $225 plus a $50 materials fee. The course covers licensing law and regulations, laws of agency, estates and interests, liens and easements, real estate mathematics, and more. The course has been offered for years, and there is almost always a waiting list to join.
Another option for those wishing to get into the business is Baruch’s Real Estate Institute, which has a wide array of courses covering every aspect of the unique real estate environment that is New York City.
“New York City is a little bit different,” says Hersh. “You have to understand co-ops and condos versus houses. I think [the required] sales course in particular is like the opening ante in a poker game. In New York, it’s only 45 hours long, and it’s more legalistic. By contrast, both Florida and New Jersey have 72-hour courses. The New York course is good on terminology — kind of the rules of the road — but it doesn’t teach you much about the business. And if you don’t understand real estate finance, if you don’t understand how co-ops and condos really work, if you don’t understand building operations…I’m not sure how effective you can be as a broker. I think it’s very difficult [to just take the sales course] and start your career. That traditional approach is harder now. The job has become much more sophisticated, and you need to understand more.”
New York Real Estate Institute also offers a wide range of course offerings for those interested in jumping into the somewhat crowded pool of new brokers. The institute, which began in 1987, and is one of the city’s largest schools, has graduated some 50,000 brokers and salespeople over the years, according to Richard Levine, the institute president. “What I found is our enrollment has steadily increased all of last year and this year. In 2004, we used to get 40 to 50 people per week taking our course; last year it began to reach the point of being more than 100 people per week,” adds Levine.
The Power of Exclusivity
An actual real estate broker is responsible for the supervision and conduct of the real estate brokerage business — as opposed to a realtor or salesperson, who works for the broker or the brokerage firm — and he applies for and holds the license on behalf of himself and/or the brokerage. This person is known as the “representative broker,” and brokers require additional training and licensing above and beyond that of real estate salespeople.
But a few hundred bucks and a salesperson certification does not guarantee industry success; Scher, for example, knew that he would have to work extremely hard.
“I was a salesperson in finance before becoming a real estate agent,” says Scher. “I knew what it took to become successful as a salesperson. I knew I would have to differentiate myself from others by working harder and longer, putting in more than a 40-hour workweek. The hardest part of the job is the competition for the listings.”
Unlike other cities and states, New York City does not have a comprehensive multiple listing service (MLS) where all firms can see and share all available listings. The Manhattan Association of Realtors (MANAR) has been operating the Manhattan MLS since October 2002, and REBNY, according to Spinola, has its own listing service. More than 280 firms contribute listings to REBNY—listings, which must be co-brokered and shared for 72 hours with all REBNY member firms.
“If I wanted to sell my home on Park Avenue, I could make the decision to sell it myself, or put in a call to the brokerage houses. If anybody [from a brokerage] brings me a buyer, I’ll give a commission [to that broker] but it is not an exclusive listing,” says Spinola. “Or I call up a firm and have them come in and tell me what they will do to market and sell my property and I give the listing specifically to them — that’s an exclusive.”
According to Spinola, at the time of this writing there were just 9,300 exclusive listings in New York City. “Most brokers in Manhattan will share an exclusive listing with other firms, so that there will be a quicker sale process,” he says. “They will then share that commission with the broker who finds the buyer.”
However, says Spinola, the competition for listings is stiff among both real estate rookies and veterans (with veterans often winning out due to experience) and both can often go months without having a property to sell at all.
A commission is determined before the house is listed. Generally, the market rate is around six percent of the sale price, but according to Spinola, “a commission is negotiable. It’s whatever the seller of the property agrees to pay for the sale of that apartment or home — it can range from four to eight percent, but there’s no set number in the beginning. That’s one of the first things that you are taught.”
If multiple salespeople or brokers are involved in the transaction, the commission needs to be split. In addition, the seller’s brokerage also keeps a percentage. On top of all that, there are marketing and advertising costs that need to be recouped once the ink is dry.
“I tell our new people that if you aren’t making $60,000 to $70,000 per year, you’re in the wrong business,” says Benzilio. “And there are a lot of people who aren’t making it — it really takes about six months to a year before you start earning money. It’s not like most new jobs where you start and then get a paycheck right away. You have to get acclimated and learn the business.”
Real Estate Rookies
To break juniors in and help them learn the ropes, many firms are creating real estate “teams” to work on listings. “We have a mentoring program where junior brokers and agents work with senior brokers,” says Benzilio. “You’re instantly in the field and in the action. This can be good if you can’t generate your own income, because you can be lucrative while being on a team. Some assistants are paid a salary and others are paid a commission of the deal, depending on the team.”
In addition to mentoring programs, many firms offer training classes and continuing education for all industry members. “Customers are savvier than ever before and you need to stay on top of your game, because you want to do more for them,” says Benzilio.
Scher is depending on his large network of friends and family, and the fact that he was born and raised in the city, to kick-start his career. “I’m in real estate and I have friends who are in, say, landscaping and we try to help each other out by listening to what our customers are looking for,” he says. “Hopefully I’ve planted a seed with people that will pay off later and all of a sudden I’ll get responses from people I’ve talked to and networked with who are ready to list properties with me.”
It has been slow out of the gate, but Scher’s career has started to move forward. After about five months of hard work, long hours and no pay (yes, no commissions) he has finally scored his first exclusive — a home with an approximate listing of $410,000. His commission, if the property sells, could be something like $20,000, depending on the commission arrangements that are made.
“Yes, some agents are making in the millions each year,” says Benzilio, “but there are so many variables to how much money you make. The average broker makes about 10 deals a year. It’s not really about how many people are in the business — it’s about who you know.”
“The rule used to be that you shouldn’t expect to see any commission money in the first six months,” says Hersh, “but I think it’s even harder now. That’s why we offer more courses, and why many brokerage firms offer in-house training. It’s very difficult when you don’t have enough knowledge.”
Spinola suggests that newbies work under a successful agent or broker and soak up as much knowledge from them as possible. “Really successful brokers are good at it because they get repeat business and referrals. Learn from them — in some cases that means working for them, or being where they are and meeting them to open the door for future opportunities.”
Brokering the Future
No matter how tough it’s been, a study of the 2004 market by the National Association of Realtors (NAR), showed that turnover of salespersons is fairly modest, and that salespeople tend to stay with their firms. However, the study didn’t show how much income these salespeople were generating and how many hours they were dedicating to make that income.
Scher is confident about his future, but knows that his hard work and dedication needs to continue. “Once I start working with more customers, I’m hoping they’ll feel that I was good enough to refer me to someone else, and my business will evolve through those referrals.”
“If you want to do well, you have to do this full-time and eat, breathe and dream real estate,” says Benzilio. “That’s the key to being a good broker.”
To test drive your abilities and see if a real estate career is for you, visit Century 21’s special broker quiz at www.c21nyc.com. They will send you results and let you know if you’re broker material.
Lisa Iannucci is a freelance writer and a frequent contributor to The Cooperator.