Thursday, December 20, 2012

Topics: "Co-broke or Go Broke"

When you want a 2-Family in Crown Heights in amazing condition for under $900K, look no further than BK to the Fullest.  There's a spectacular one on Platinum Member radar that's perfect for a user, hopefully with an open house coming soon.  Sure, Corcoran will gladly take you to one well north of a million, at a price per square foot many people were afraid to pay for Park Slope this time last year, but there's more to life than Corcoran.  If you wanna see something that Corcoran hasn't gotten their hands on (yet?), you've gotta dig a little deeper.  Is your Corcoran buyer's broker digging deep?  We constantly hear people complain that all their Corcoran buyer's broker does is occasionally e-mail them Corcoran listings that are easy to find in the first place.  Just why is that anyways?  Well, it's the simplest way for them to get paid the most.  In fact, we found it ironic yesterday to see that showing clients only those listings that get you paid the most turned out to be the poster-child case in a slide on the National Association of Realtors' (NAR) course on ethics...

That's right, people: the exemplary case touted by the National Association of Realtors as an ethical no-no just so happens to be standard operating procedure in this outrageously inefficient market that is Brooklyn real estate.  And the skewed incentive in question here revolved around a "mere" $1,000 bonus.  Imagine what's at stake when brokers and agents stand to make $60K in a transaction vs. $30K!  (Or even much more!)  Ask your broker what they're in it for, but brace yourself for some stammering.  As Billy Madison showed us, it's tough to get the unethical to speak eloquently about business ethics.

Another dirty little secret about the big brokers is that most won't even submit an offer until they're assured they can co-broke at least 2% of the transaction for themselves.  Which is fine if they disclose that (and the strategic disadvantage it potentially hinders their clients with).  We've seen how this 2% requirement can repeatedly cause hiccups on deals where the exclusive listing brokers at small firms took the listing for less than 4% in the first place.  As we heard one Corcoran broker tell a small broker once (certainly a line picked up in some training course on these types of disputes), "Well, I've never been one to stand in the way of a buyer and their dream house..." which left us thinking, "Well then step out of the way!"  Last year, an Elliman buyer's broker tried to prevent her client from submitting an offer on a condo taken with a 3% commission, because the listing broker could only offer 1.5% commission instead of her company's "required" 2%.  Well, that backfired when the listing broker asked the client if they had an exclusive buyer's broker contract with the Elliman broker.  They didn't, and she was quickly out of the picture with the client submitting the offer to the listing broker directly.  If 1.5% was good enough for the listing broker, why wasn't it good enough for the Elliman broker?  These cases are more common than you'd think.  So imagine our surprise when Article 3 of the NAR's Code of Ethics mandates "cooperation" among realtors...

"This cooperation greatly benefits consumers because it is the basis for multiple listing. MLS creates tremendous efficiencies for buyers and sellers."  Yeah, precisely what we don't have in Brooklyn, and why our market is insanely inefficient.

Of course everyone should be paid for their work, from the hardest working brokers to the lowest of the bottom-feeders.  But why is 2% the minimum (other than big firms have big overhead)?  Instead, many other brokers are on their grind, uncovering more amazing deals for buyers than Corcoran is capable of, and doing it for a fraction of the commission.  Best of both worlds?  We'd say so.

If the irony wasn't thick enough already in the discord between the NAR's Code of Ethics and the daily practices here in Brooklyn, Article 11 calls for "competence", with a case study on a Realtor "who fails in her duty to be competent."

But don't even get us STARTED on that topic!

1 comment:

  1. I think REBNY seceded from NAR in 1994 so Brooklyn wouldn't really adhere to their ethics. That being said I believe NAR's code of ethics states that any information a sub-broker (buyer's broker) has must be furnished to the selling broker. Things like top purchase price etc.. Not sure this problem is really isolated to just Brooklyn. REBNY's code of ethics says much the same though.