Ever try to sell — or buy — an apartment in Manhattan without using a real estate broker? It’s sort of like that joke about lawyers who try to defend themselves: They have a fool for a client.
When dealing in the real estate jungle that is New York City, it’s pretty much essential that you have an experienced broker on your side — whether you are the seller or a prospective buyer. Many times, people in the housing market will even utilize more than one broker at a time, to maximize their chances of getting the best deal.
If you are new to all of this, then the wheeling and dealing of the city’s real estate brokers may be a little overwhelming at first, but here are some of the ins and outs that everyone who is buying or selling in New York should know.
A Broker by Any Other Name
In order to become a broker in New York State, you first have to work as what’s called a salesperson for two years and accumulate a certain number of points. After the two-year apprenticeship is over, you can take a course and an exam to get your broker’s license.
According to Richard Levine, president of the New York Real Estate Institute, “Most people in New York City incorrectly think that people are real estate agents or brokers when most are actually salespeople. If you’re a broker, you could basically have your own company – you could work for yourself or have other people work for you. Only a broker is allowed to collect the commission [from an apartment sale.] People become salespeople first, and then they have to work for a brokerage firm.”
“So everyone starts off as a salesperson, and after two years they can apply to be a broker,” says Jim Gricar, executive vice president of Brown Harris Stevens, a Manhattan-based brokerage firm. “If they work for a larger firm, often the highest broker license they can achieve is called an ‘associate’ broker’s license, because the broker is the actual firm. That’s the case at Brown Harris Stevens; everyone is either a salesperson or an associate broker. We use the term loosely in the industry — it’s what they call a ‘realtor’ in other markets.”
When dealing with buying or selling you will come across the terms broker and agent quite a bit. They basically provide the same function, but a broker is more schooled.
“To be an agent, you need to go to school and take a course and pass the test,” says Karen A. Berman, vice president of Argo Residential in Manhattan. “To be a broker, you must be licensed for a year as a sales person and you have to sell a certain amount of property,” “A broker is much more educated than a salesperson, and there’s still the required continuing education courses for both.”
Accordng to Levine, “Currently, [prospective brokers] must take a 45-hour course to get their salespersons license. After that, — and once they’ve had some sales experience — if they decide to become a broker, they come back and take another 45-hour course that includes another school-administered and another state-administered test.”
So to recap: brokers and realtors are both licensed salespeople, and the broker and salesperson are both agents. Anyone who is employed to work for you is an agent — and understanding agency and the duties that come with it is key.
Working for You
When it’s time to find a broker, there are some important things to look for. You want someone who is experienced and knows the market well.
“A broker should be familiar with the market and what the competition is selling,” says Joseph Bulfamante, an agent with Lawrence Properties in Manhattan. “They need to know what the recent sales are in that building. It’s very important that they do their homework and have a familiarity with it.”
A broker or agent should also work to educate their consumer — regardless of whether that consumer is a buyer or seller. A buyer may have focused on a given neighborhood, or street, or single building, and may have developed unrealistic expectations. Most New York City buyers and sellers are relatively astute, however, and have a feel for what market-rate prices are. By the same token, a broker must still give them realistic numbers, no matter how savvy the buyer may seem from the start.
“It depends on the sophistication level of the buyer or seller,” says Norman Ellis of the Ellis Group Ltd., a brokerage with offices in Bayside and Manhattan. “Some are very sophisticated and need a lot less from the broker in terms of orientation to the market and so forth. Frequently, a sophisticated buyer or seller will know more than even the broker does, and will just use the broker for access to he market — the buyer will essentially direct them. If you are talking about the opposite scenario — someone who has never done a real estate transaction before — that customer might need someone who can help them really quickly narrow down what’s the right neighborhood and type of apartment for them.”
“I think what sellers tend to look for are brokers who are connected, who have a buyer clientele base and who have a good relationship with co-brokers throughout the city,” says Gricar. “So when their house is marketed that they can be sure it is receiving the largest exposure and it can be handled by a broker who has good standing in the community and can represent that seller in order to bring out a transaction.”
As for the personal character traits or skills that can make a real estate student into a successful salesperson or broker, Levine says it’s all over the map.
“It’s a very broad range,” he says. “We get people who are successful with sales in other fields who go into real estate because it’s a sales job. You have to be personable, sociable. Someone who prefers to work at his desk — like an attorney who prefers to write briefs and work from a desk, or a person who likes to work with computers, for example — shouldn’t go into real estate.”
When it comes to commissions, brokers work under the guidelines set up by their professional organization — the Real Estate Board of New York (REBNY). Most major firms in New York work under general agreement with one another. The listing agent (the firm representing the seller) receives the commission, which that broker then shares equally with the selling agent (the agent who brought the buyer.)
“The standard rate for a broker’s commission is six percent,” says Berman. “If you co-broker with an outside brokerage you usually get three percent each. If you start to negotiate, you’re really hurting yourself, and you’re hurting yourself if you reduce your commission. You divide it equally if more than one is involved.”
Sometimes you may see the word “exclusive” when referring to a listing. What this means is that a broker has exclusive rights to sell the property — and even if he doesn’t, that broker will still get the commission.
“‘Exclusive’ means that the seller has signed an agreement for a period of time to utilize a particular broker and no others, and it’s up to the broker to go out to the broker community and market it,” says Bulfamante.
In these deals, the listing broker handles all negotiations and showings — all of the various aspects of marketing the apartment and closing the deal.
“‘Exclusive’ is a legal term that grants one broker the legal right to sell,” says Gricar. “It says that whatever brokerage has exclusive right to sell, the seller will pay commission to the listing broker, who can then share the commission with any co-brokers, regardless of who purchases the apartment. The listing broker is due the commission even if the seller sells to a friend without using a broker at all.”
As you might imagine, the competition between brokers to get listing is fierce in New York City. In fact, many believe that there are far more brokers than available apartment listings, and since many brokers handle multiple listings, the math isn’t that hard to figure out.
“The biggest misconception I think for some freshly-graduated [real estate students] is that they’re going to make an easy buck,” says Levine. “But it’s New York City, it’s competitive – there are tons of people making a tremendous living in real estate, but they work at it. You have to put in the hours, and you have to be willing to work. I get discouraged when a student says he wants to break into real estate to make an easy dollar. There’s no easy dollar in New York in anything – whether you’re an attorney, a doctor, or a broker. It’s the person who’s going to work hard who is going to make the money. The person who thinks he’s going to get his real estate license and go sell a $10 million apartment on Park Avenue tomorrow…it’s not happening.”
“You’re always competing with each other for listings,” says Berman. “A lot of times it’s all about who you know. If there’s a broker who has sold many units in a building that you’re in, someone interested in selling their unit will tend to find out who the broker is and just call them. Everyone knows a broker. When the market was easy everyone was a broker. Now that the market is getting a little bit tougher, I’m finding a lot of the ‘housewives’ are getting out of the market and you’ve got the more experienced brokers left. These days, it’s going to take an experienced broker to help sell a place.”
As a broker, the easiest way to obtain listings is to start with people you know. Most brokers began with listings from existing relationships before getting other properties.
“I firmly believe you start obtaining from friends and family, and after that you learn how to canvass,” says Ellis. “If you don’t have the gumption to cold-call and send letters and go after each one, you’re not going to get them. Once you have arrived or become established, you’ll get more referrals and repeat business.”
Share the Wealth
With the real estate market being what it is today, it’s important to be open to co-brokering a listing. “The idea is that the client will have a wider variety of homes to see,” Bulfamante says. “All brokers need to be willing to co-broker.”
If two brokers are showing the same listing and two people want to buy it, it can become a bidding war. “The exclusive broker holds the key,” Berman says. “Sometimes they pick the better financial statement. It could be best-and-final by a certain time — or it could be a sealed bid, and whoever comes up with best price.”
“If the listing broker and the selling broker are acting as agents of the seller and they made appropriate disclosure, there will absolutely be a bidding war,” says Ellis. “The two selling brokers will be pushing buyers to go higher in price. That’s their job — to push the price higher for the seller.”
The Big Money
When you’re talking about Manhattan and many parts of Brooklyn, you are often talking about big-money deals. Although the basic selling and buying points are the same, higher-end deals do have some differences.
“I think the mechanics are often similar,” says Gricar, “but I think each transaction differs from one to another. I think a higher-end clientele — particularly buyers — has special needs. Oftentimes, issues with privacy are greater with a high net-worth purchaser, so you have to take extra care. Sellers tend to be proud of their homes and want it handled in a professional way. There are also some technical things that come up for higher net-worth buyers and sellers.”
According to Ellis, it’s not as easy to do high-end deals now as it was even six months ago. “You have to market the property more actively now,” Ellis says. “You have to really devise some sort of marketing plan and really understand who the target audience is, and what they’re looking for. You might have to do a lot of work with the seller to get the property ready to show. A few thousand dollars’-worth of touch-ups can do wonders. There’s enough money in the commission to make it worthwhile to spend the time on it.”
Remember, with all brokers, first and foremost they should put the seller’s needs above all others — including their own.
“We represent the interests of our party,” Gricar says. “A seller looks for a professional agent who has experience, who understands the intricacies of agency law and judiciary responsibility and will do everything in their power to bring about a transaction with the highest possible price in the shortest amount of time.”
Keith Loria is a freelance writer and a frequent contributor to The Cooperator.