February 5th 2015
There are a million little tricks of the trade when it comes to getting a good sale price for your New York City apartment, but perhaps none is more important than the concept of “co-broking,” in which the seller’s broker works with a buyer’s broker to complete the sale, rather than handling the entire thing (and bringing in an unrepresented buyer) themselves.
It’s one of the most basic elements of the sales process, and as such, one of the most crucial. “It couldn’t be less complicated,” says Warburg Realty President Fred Peters. “Co-broking is simply making sure that your broker is sending out information about your property to the thousands of other brokers out there in New York who could bring in interested buyers.” To get the highest price on your place, you’ll want to reach as many prospective buyers as possible, and you’ll want to make sure that the buyer who signs a deal has a professional guiding them through the board approval process, too.
It might seem like a no-brainer for everyone involved, but then, there’s the not-so-small matter of the commission. Usually, sellers pay a 6 percent commission, which is then split equally between the seller’s broker and the buyer’s broker. But if the buyer is a “direct buyer,” meaning not working with a broker of their own, the seller’s broker can keep the entire commission, which creates a financial incentive for them not to co-broke a deal.
Brokers who belong to industry group the Real Estate Board of New York are required to share their listings with other agents shortly after signing an exclusive—effectively guaranteeing that they’ll end up co-broking. While the majority of Manhattan brokers are REBNY members—and the city’s biggest real estate firms all belong—it’s a different story once you head to the outer boroughs. “You see it more in Brooklyn and Queens, brokers who are just focused on getting the commission,” says Peters, who adds that, “there’s never a circumstance in which it’s in the seller’s best interest” for their broker not to co-broke. (When might a seller consider seeking out direct buyers? “Some homeowners are obsessed with keeping their sale completely private, or own a multi-family and don’t want tenants to know until the sale is finished,” says Steven Szczur, co-founder of off-market listings site HomeCanvasr.)
“As a seller’s agent, we’ll certainly do that deal if a direct buyer comes in, but in the interest of fairness overall, I would much rather it be that every buyer that came to the table had a broker,” adds Cooper & Cooper broker Eirik Gislason.
So how do you make sure your broker is earnestly looking to co-broke, and getting as many eyes on your listing as possible? Well, for one thing, you might want to think carefully about how much commission you’re paying. Sometimes smaller brokers will agree to take 3 or 4 percent commission instead of 6 percent, says Szczur. “But then buyers’ brokers from bigger firms might not want to show their client the listing, since they know they’ll only be making 1.5 or 2 percent commission with the split.” Gislason concurs, “I would caution on negotiating the fee down to a point where it hurts the broker’s ability to co-broke.” (Often this will be addressed directly in the listing agreement you sign with your broker.)
The surest sign of whether your agent is seriously seeking out buyers with brokers is if they’re actively shopping your listing around on major listing websites, and in an era of online apartment-hunting, it’s easy to keep an eye on your apartment’s presence—or lack thereof—on sites like StreetEasy. “I always tell people to monitor their listing,” says Gislason, who adds, “Make sure that when you are doing the vetting process, you speak with more than one broker. Ask them to bring comps to show you why they’re coming up with the price they’re coming up with, as well as where they plan to list the apartment, and where they think buyers will come from.” You can also scope out their current listings to get a sense of what kind of treatment you’ll be getting.
“Just ask the broker outright,” concurs Peters. “‘How will you make sure my listing gets into the community and reaches the largest possible group of prospective buyers?’ If they say ‘I have a great network, I know a lot of rich people,’ you’ll know they’re trying to hang on to it” to bring in a direct buyer. And if, after you bring on the broker, you suspect they’re keeping their colleagues from looking at your listing? Peters doesn’t mince words: “Fire them.”