Curbed University is our new NYC real estate how-to section. If you just added the class, you're not too late. We're a half-dozen classes in and the lectures are online. Today's subject: real estate brokers!
Among the pressing questions to be answered in today’s lesson: Is your broker a salesperson? Do you need a buyer’s broker? Who's going to pay for all of this? Much of this makes us dizzy, so we’re going to go slow.
1. Is your broker a salesperson or is it the other way around?
The term “broker” has become shorthand for “person who helps me buy or sell my apartment and occasionally throws around terms like ‘sun-drenched.’”
Technically, however, your “broker” is probably a “salesperson.” Per the State of New York:
A real estate broker is responsible for the supervision and conduct of the real estate brokerage business. He or she applies for and holds the license on behalf of the brokerage. This person is known as the "representative broker." A real estate salesperson works for and is supervised by the representative broker. The salesperson acts as the representative broker's agent. All listings, although perhaps negotiated by a salesperson, are accepted by the representative broker. Both parties are required to spend some time in the classroom?75 hours for the salesperson and an additional 45 (plus two years’ experience as a salesperson) for the broker. There are licensing tests, too, though we cannot vouch for their difficulty. (Sample questions, anyone?)
All of this said, we’re going to continue tossing around the term “broker” with abandon in order to give the above time to sink in.
2. Do you need a buyer’s broker?
No, but it might not be a bad idea. First, the basic difference: A seller’s broker lists the property and has a fiduciary duty to the seller. They get paid a commission of the sales price by the seller. The buyer’s broker helps the buyer find the apartment and negotiate the sale. They're duty-bound to the buyer and get paid either a flat rate or, more commonly, a portion of the seller’s commission.
The commission-based payment structure can pose problems: First, the buyer's broker is getting paid by the seller. Good, honest brokers won't let that get in the way of getting their clients the best price, but results may vary, so choose wisely. Second, some seller's brokers will reduce the total commission (usually 6%) if there's no buyer's broker (because they get the whole nut to themselves). The seller may, in turn, pass some of those savings to you, the brokerless buyer. Of course, the question to ask yourself here is whether you could have negotiated a lower price in the first place if you had a broker representing you at the table.
An effective buyer’s broker may also save you some pain and suffering along the way. They can do your listings legwork, hook you up with a lawyer and mortgage broker, help inspect the property, and, for co-op buyers, get your board package in order. A recent buyer put it thusly: “Find a broker you like and trust. They will get all kinds of shit done for you and better to email them a list of questions rather than you running around finding all the info yourself.“ Further reading on the merits of buyer’s brokers, albeit from the horses' mouths, here and here.
3. What's co-brokering (or is it co-broking)?
Co-brokering occurs when the listing broker, who usually has an "exclusive" on the sale of the listing, invites other firms to bring in potential buyers in exchange for a split commission. The term is a little awkward, and, frankly, we're not sure whether the cool kids are saying co-broked or co-brokered these days, but the details are usually in plain English in the contract. The Real Estate Board of New York, a trade group that counts most New York firms as members, requires that its members co-broker all exclusive listings within 24-hours from the listing's live date and that commissions be split equally. That means that your buyer's broker will likely have access to most listings in the city.
This is a relatively new development in NYC, which has long favored a fractured listings system in which each broker lists and promotes their properties themselves. Most other, more congenial cities have a multiple listings service (MLS), which operates as the publicly accessible repository for all listings and an enforced, mandatory co-broking system. Despite several attempts to develop a central listings database in New York, nobody's delivered the whole package as of yet. In any case, the trend is toward sharing in New York, which means you're not going to have to limit yourself to one's firms listings.
Okay, we're a little light-headed, so we're going to pass the mic. Amplifications and explications in the comments, please.
· Curbed University [Curbed]