I Like New York

Sitting on the plane flying home from London, I am thinking about the ways the British system of selling real estate differs from ours. I met last week with a firm of high end estate agents, who do a significant amount of business in both rentals (or “lettings” as they are known in London) and sales. More than anything else, I am fascinated by the way their system apparently disadvantages buyers AND sellers, because their low commission rates lead to a lack of co-brokerage.  (Of course the same thing, minus the low commission rates, can be said about much of Brooklyn.)

In New York City, all Real Estate Board members are required to co-broke their listings with all other Board members within 24 hours of receiving a listing. This leads to an orderly marketplace. In London, by contrast, co-brokerage is voluntary. What that means is that, more often than not, an exclusive agent who has a hot property will keep it within their firm so as not to be required to share the 2% or 2.5% commission. So, as a buyer, unless you happen to be in touch with an agent from that firm, you do not see the listing.  Dual agency is not permitted, so if you go directly to the seller’s agent you have no buyer’s representation in your negotiation. And if you want a buyer’s agent, more often than not you have to pay them yourself. Unless you are willing to pay them yourself, or contact the listing agent directly, you simply do not have access to the property.

To me this system seems like the height of inefficiency. The seller has no guarantee that he is receiving the highest and best price for his property, since it is likely that many in the pool of appropriate buyers may never learn about the listing (of course the Internet has alleviated this problem somewhat).  Similarly, the buyers cannot select a trusted agent and count on that agent to show them everything, unless those buyers are prepared to pay their agent a fee.  And even then, exclusive agents often prefer not to have to deal with another real estate professional.

Our system may not be perfect, but in it I believe everyone wins. Brokers on BOTH sides of the transaction are fairly compensated for making sure their clients, be they buyers or sellers, get the broadest possible market exposure with expert professional advice before making a decision.