True Gotham

There is a reason that the majority of my business has always been representing sellers.  Just as the used car salesman reputation of real estate agents doesn't come from space, so too is true of the "buyers are liars" mantra.  Before you go getting all up in arms about what I just said, please hear me out.  It is my belief that most of my colleagues are not just better than used car salesman (why they get such a bad rap would be an interesting discussion) but their are exponentially better and truly bring value to the transactions in which they are involved.  It's the minority of agents who are uninformed, dishonest, and generally lack integrity that tarnish the industry reputation.  Similarly, most buyers seem to appreciate the value that an excellent agent brings to the mix but unfortunately they seem to have a difficult time finding those excellent agents or they don't realize it when they have found them. The inability to find an agent that one "clicks with" and trusts is the foundation of the "buyer are liars" mantra that many in my industry live by.  This circle of distrust snowballs to a point where, regardless of the competence of the agent, neither the buyer nor the agent trusts what the other is telling them during the course of a transaction.  Some examples:

• A MANHATTAN buyer and agent work together for 6 months or more (often times for 1-2 years) all the while the buyer assures the diligent agent that they are the only person that the buyer is working with.  6 months or so into the transaction, the buyer either "vanishes" or simply calls and says, "I found an apartment in Brooklyn through such and such agent.  Thanks for all of your help."  The agent was not only unaware of a Brooklyn search but more surprised that the buyer was working with someone else.  6 months of hard work with absolutely zero payout...how many other professions would settle for that?
• Another Manhattan buyer tells the agent how much they value his/her participation in their search because of the agent's experience and knowledge of the marketplace only to cut the agent out of the transaction thinking that they can do better by directly negotiating with the seller's agent.
• A third Manhattan buyer is working with his/her agent for more than a year and finally locates a perfect property for his buyer.  The buyer convinces the agent to let him speak directly to the seller.  The buyer's agent asks the seller's agent if this is possible and they all agree only to have the buyer attempt to cut both agents out of the transaction when he speaks with the seller.
• And the most frequent offense by buyers is the statement  "we're not working with a broker" which almost always implies that they think they can strike a better deal because no one is being paid on their side of the transaction.  Trust me...more often than not, the seller is still paying a full commission so you aren't doing any better without an agent.  In fact, I would argue that a transaction with two educated, knowledgeable, and professional agents with integrity will be more fairly negotiated to a better end than a transaction with only one agent or none. Don't forget where fiduciary responsibility lies and also keep in mind that sometimes that fiduciary responsibility is to the agent's own pocket.

I could go on.  These aren't scenarios that I made up.  They are incidents in which I was one of the players.  In addition to these examples of less than scrupulous buyers, the "buyers are liars" mantra also comes from the fact that although many buyers think they know exactly what they want, the buying process is just that, a process.  In my 16 years, I can't tell you how many "prewar" buyers bought new developments, how many Downtown buyers bought Uptown, how many "view" buyers chose more space, and how many "doorman" buyers bought townhouses. 

So you see, the distrust in this industry goes both ways.  The only way that we can change that is by raising our level of service to the consumer and proving to the public that we can be trusted.  Only then will they disarm and allow us to truly help them with the process of finding a home.  Until then, many continue to play the game.

I wonder if its a negative reinforcement cycle. Good brokers stick with sellers, which means buyers have more bad broker experiences. This devalues the industry in the minds of the buyers, who are less likely to treat brokers well. Good brokers get bad experiences with buyers, and the cycle continues.

Anyway, I'm just a lurking future-first-time-buyer, getting a feel for the short term market, and unsure if I want to use a broker. I've had awful experiences with rental brokers. On the plus side, your blog has improved my view of the industry.

".. more often than not, the seller is still paying a full commission so you aren't doing any better without an agent."

True that the seller pays regardless but the reality is that the buyer has to go through the agent, and unfortunately some of them will recommend a buyer for whom they don't have to split the commission.

Until there's a way to guarantee accountability, that the agent is presenting ALL offers to the seller, this will continue to go on, unfortunately.

My idealism often gets in the way, but I have to wonder why there aren't more mechanisms for buyers' agents to collect fees before the transaction occurs. It seems like financial loyalty is only declared when a buyer actually finds what they are looking for, and this this is what leaves the door open to sketchy happenings. If buyers have to pay someone to help them buy a place, wouldn't they be hugely diligent/cautious in their selection, and more loyal based on their investment? It would take me two seconds to come to the conclusion that I should just pay Doug Heddings to get me through my hunt without a blemish. If you got more money at closing, great! Who cares...I worked with someone that navigated what could have been a chaotic experience.

Additionally, you mention a fact that is perpetuating the problem that you mention: the smart agents are sticking the sell side because they've gotten burned representing buyers. Does this mean there are less solid agents representing buyers?

Steve,

I like the negative cycle description. I think the good brokers/agents need to do a better job informing their clients of how the market works but I'm at a bit of a loss on how to improve upon that. Thanks for the kind words regarding TrueGotham. Nice to hear my mission is being carried out. And if you ever want to discuss your search or lack of search, feel free to drop me a line or give a call.

newbie,

Thanks as always for your insightful comments. Any ideas from you on how we hold agents accountable? Fact is, I think most agents do in fact submit all offers. Again, I think it's the mistrust by the consumer (some warranted by the bad seeds in my industry) that has led to the belief that a broker/agent will look out for his/her own interest before that of their seller.

Maybe some sort of offer sheet that must be signed by a seller and returned to the buyer or buyer's agent would allay people's fears that their offers aren't being submitted.

Christian,

Some excellent points. Too monetize what an agent does for a buyer could be helpful but I suspect it would take a lot of getting used to by the buying community. I have always thought that each party in a transaction should have equal representation with the buyer and seller splitting the cost of the commission. It would guarantee that an agent working with a buyer would have to provide superior service or the buyer wouldn't be incentivized to pay for their service.

You, like nebie also point out that many good agents refuse to work with buyers. That may be true but I know some incredible agents who hate working with sellers and are amazing with buyers.

I feel obliged to post something about buyers after going off on brokers in the last post. :-)

Doug, I have heard all of your complaints about buyers from other brokers too. I've also heard of buyers lying about their financial situation and not having nearly enough cash or income for the price range they are looking at. I know some people who have gone with brokers to see several apartments when they knowingly had no intention of buying anything!

In the last post I said I couldn't understand why buyers pick and stay with crappy brokers. I would think the reverse is also true. Doesn't it eventually click with the broker that a client is wasting their time or something seems 'off'?

All this business of trying to circumvent the brokers after an introduction and working with multiple brokers is real amateur hour stuff. I don't understand why buyers would want to do anything other than compensate their broker appropriately if the guy was worth keeping around 'til the end. Either fire him or pay him. People still have some kind of problem paying for professional services. They can't see it as a real economic quantity like coal or lead.

I think part of the problem is that everybody needs a house at some point so you literally have everyone coming through the system at some point. The vast majority of people aren't professional about anything they do in their lives so these types of problems are to be expected.

If you ask 10 co-op owners what they actually own you'll get 10 different answers. Usually some mumbo jumbo about shares but rarely any comment about the proprietary lease or anything else. You just made the biggest financial transaction of your life and you don't know what you bought. Well done.

Thanks for sharing JC! I think there is validity to your comments about buyers AND brokers. You made me realize how lucky I am to have an accountant, financial planner, mortgage broker, and wife :-D that I can trust. Trusting relationships in business, particularly real estate, seem to be hard to come by.

Off to St. Thomas. Happy Thanksgiving!

Agents should be up front with buyers about expectations - this can avoid headaches on both ends.

As a first-time buyer I had no idea what the unwritten protocol was for using a buyer's broker. When I first started looking, albeit not seriously, I asked an agent I knew for some ideas and he was helpful in showing me some apts, giving me a feel for the local market, coops, etc.

Soon after a friend recommended another agent so I worked with her to get another viewpoint. Long story short, both found out I was working with another agent, and the first guy called me up and chewed me for using another broker, how dare I, he can't do business like this, accused me of playing a 'game', blah blah. He must have had some bad experiences with former clients but I was really put off by his attitude and decided I didn't want someone like this representing me.

I did end up using a buyer's agent for my sale, someone I felt truly added value to my experience and someone I'd consider using if I decide to sell.

Bottom line: attitude is everything. One day it's a seller's market, next it's a buyer's. And don't project one bad experience onto another potential client.

Thanks newbie. I hear ya and I appreciate both sides of that conversation as I have been involved in that conversation. Ultimately it seems to come down to the buyer's agent doing such a top notch job for the buyer that loyalty becomes a non-issue? That would be great if it was indeed the case but all too often I have seen colleagues who are committed and excellent at what they do get burned by a buyer who doesn't "get it." How would you as a buyer suggest the best way to educate the consumer and gain their trust and loyalty? I'm asking because I completely respect your opinions.

Doug, I suggest being up front with a (potential) buyer client right off the bat. Find out what their expectations are and then let them know how it 'works'. Ask if they're using another agent. Say that you'd like the client to work with you exclusively and how doing so can benefit him/her. Explain that all brokers pull their listings from the same database, so using another agent wouldn't nec. help in 'covering more ground'. And that by using you exclusively you can ensure you'll be committed to providing the best service to them.

Above all, make sure your tone is professional and positive (state what you CAN do, not what they SHOULDN'T do).

In some cases it might make sense for a buyer to go with one agent for diff geo areas they're considering, as one might know Brooklyn brownstones better then another who may be an expert on UWS coops.

I'm not an agent but I'd think that after 2-3 contacts (phone, meetings) you may get a sense abt how serious the buyer is. Sort of like dating.

All excellent points newbie! Thanks.

I think it's necessary to place both the buyer and the agent within the context of the current market. It's extremely difficult for the broker who has a fiduciary duty to the seller to placate the potential buyer who (unless endowed with a wall street salary and bonus) would just like a reasonable place to live at a reasonable price. Things seem insane, and they are. When doctors and most attorneys can't afford to buy a two-bedroom 1100 sf condo something's got to give.

I truly like my broker (I've posted before on this issue) and for the first time recently I was actually able to discuss the market with him freely (I'm not looking to buy for 2-3 years so I felt more comfortable sharing some thoughts with him).

We should all be professional, buyers, sellers, developers, brokers, but it's a business and one that has recently encouraged massive speculation. That makes it hard for the average person to trust (and by average, I mean less than fairly wealthy in the Manhattan market).

Totally agree with you that a seller's agent who's fiduciary responsibility is to a seller has a challenging task before them to provide any value to a buyer. That said, I think a sophisticated and knowledgeable buyer's agent does add value and can provide a considerable service to a buyer who allows them to do so.

I'm curious as to why you feel "more comfortable" speaking "freely" with your broker now that you're not in the market? You like him but you still don't trust him? That puzzles me. What are you afraid of in sharing honestly with your broker?

Lastly, I'm not sure I see the connection between acting as professionals in a business transaction and how that would be adversely affected by "speculation?" Trusting someone and expecting them to have a crystal ball are two very different things. I trust my finacial planner implicitly and don't get upset when my portfolio loses money. It's a risk I take.

I can ask my broker for many things as a buyer (he has also sold two of my apartments, I truly do trust him). If there is a fact-based answer, he can and will give it. But how about "is this market insane or what?" What can he say? And if I'm looking, I don't want to waste his time but I do want a place to own and looking is research. He knows that. We're in this for the long haul.
I don't expect someone to have a crystal ball, but I also did not expect someone who may or may not have concluded what I felt in 2004 (construction plans were excessive for income and infrastructure, schools, etc.) to come out and tell me so when it was so clear that there was (and still is) a "Manhattan is different" attitude. He has his job, as an investor I have mine. The problem with your scenario is that my broker can't be my investment advisor.
I adore my broker, but I expect something different than MOST people expect from their brokers. He is a facillitator, not an advisor. Most people want advisors, which is why they are not so happy.

Thank you Brenda for expounding. I really appreciate intelligent comments!

I would respectfully disagree however that your agent is a facilitator only. If that's it then he is making WAY too much money. I think the recent housing boom has changed people's perspective of housing, perhaps incorrectly so, in that most now seem to think of a home as an investment first and many even see it as being liquid (in the form of being able to "withdraw" money via HELOCs etc). I still believe it's a shelter first and is NEVER a liquid "ATM-like" mechanism. I bet you don't either, but many do.

So with all of these people viewing real estate as primarily an investment vehicle, they are also demanding more than facilitation from their agents. More and more people are turning to savvy and knowledgeable real estate agents to provide insight into current market conditions as well as assist with the facilitation of the transaction.

What I'm saying is that the real estate profession is evolving right before our eyes into a more specialized and intelligent corps of agents who will do most of the business because they bring more to the table.

If you asked me if this market was insane, I would say yes and then elaborate as to why I thought so with factual data to support my opinion. After all, that's all anyone gives is an opinion and I would suggest that an informed opinion is quite valuable.