True Gotham

I just had the bittersweet experience of receiving a phone call from an on-site sales agent and colleague informing me that one of my prospective buyers just reached out to her to try to "strike a better deal without me."  The experience is sweet because the on-site had the courtesy to inform me of this client's attempt at circumventing me.  And if you don't understand the bitter part, well then, I will explain.

My client, a grandmother of 7 and the mother/ mother-in law of a couple whom I have assisted with both a sale and a purchase in the past several years called me the week after Christmas to discuss her and her husband's desire to purchase a one bedroom Manhattan condo as a pied a terre.  She spends a considerable amount of time visiting 5 of her grandchildren who are both in New York and New Jersey and thought it was time to stop throwing money away in hotels all of the time.  So after she informed me the dates that she would be able to view properties, I did a comprehensive search of all one bedroom condos between $750,000 and $1.5M and emailed them to her.  She quickly responded with a list of those she would like to see and all were below $1M (this is significant for later part of the story).  We scheduled a full day of viewing (of course I hired a car and driver) this past Friday and visited only the properties that she wanted to see in the areas that she specified.   One of the new developments resonated with her so she called her husband to discuss an offer with me.  After nailing down the details of the offer, I dropped her off to meet her daughter.  As she exited the car she stated what a successful day she felt that we had and that she was very excited about making the offer.

That happened this past Friday.  On Saturday morning, I received a call from her suggesting that she thought she may have "miscommunicated" with me and she was concerned that she wasn't seeing more properties on Saturday and Sunday.  When i explained to her that we saw everything available in her specified areas and at her price point, she indicated that she could spend up to $1.5M and that she would open up her areas to most of Manhattan.  No problem.  I and my team members did another exhaustive search and successfully gained access to another dozen or so properties for her to view over the weekend and this morning.  Nothing that she saw over the weekend tickled her fancy as much as the new development project that she bid on Friday and I received a message this morning that she wanted to cancel our appointments for today and "thank you very much."  Nothing was asked or mentioned about her bid...hmmmmm???

So back to the bittersweet phone call.  The on-site agent for the new development that we bid on just called me to inform me that this buyer just contacted her and said that she "may buy a larger apartment from the developer if he will reduce the price by my commission." Now I couldn't be more serious or honest when I say that this behavior doesn't shock me at all but what shocks me is that it came from this particular buyer (she even hugged and kissed the on-site agent before we left on Friday...she is a sweet grandmother!) 

I share stories like this with my readers not only to vent but to shed additional light on the incredible distrust that continues to exist between real estate agents and their buyers (it goes both ways).   I operate my business with the highest level of integrity and I'm hopeful that my buyers will do the same.  Perhaps it's naive but incidents like this will not change the way that I do business.  They will however keep me mindful of the fact that seller representation in the real estate industry is more trusting and profitable.  If you have the fortune of working with a seller who trusts you and will follow your professional guidance, you are much more likely to close that transaction than those with buyers who distrust and therefore run around like loose cannons. 

Property remains king!  As some anecdotal proof of that...at least 3 properties that I'm aware of that had open houses this weekend are seeing multiple bidders going to a highest, best and final offer.

wow..sad story but reality in this business. I cant tell you how many 1-3M buyers I worked my a$$ off over the past 1-2 years who decided to go at it alone, or not to buy at all even after they convinced me they are very serious and wanted my consulting before buying something.

Shame, as there is no such thing as buyer loyalty in this business. Also, just to share some sadder stories. I had 3 deals fall through in 2007 from SELLERS I represented.

1. One was a full ask bidding war with 3 bidders. I called my seller to submit the bids, discuss, and set a deadline for higherst & best. She rewarded me by taking the listing off the market only a week after she said to me "its been 3 weeks, are you going to sell my place this decade?"

2. I got $100K OVER ask for a Classic 6 at an E 96th street co-op. One bidder bidding against themselves. My seller said it was an offer they cant refuse at over $1275/sft for a co-op on E 96th! They refused the bid after 4 months of exhaustive showings of over 30+ prospective buyers and later said my company couldnt handle high end listing. That same listing now has contracts out for $300K LESS with another firm. Fun!

3. Accepted offer (3 weeks ago) and contracts out for a 1.1M condo. Buyer was going to sign and send out contracts to my client when I got a call that they decided not to sell. Deal dead.

Its a very tough business where time is sometimes wasted even with sellers who you think are serious but may get emotional and do stupid things. Everyone thinks they can get more. All my sellers were always happy with my proactive marketing and effort I put into accomodating ALL showing requests. But sometimes things like the above happen. Makes me SO MAD!

Not so sad...just wierd. Who can you trust? This type of buyer is exactly the type who has disdain for our industry. And I hear you about sellers but you must admit that the chance of being burned by a buyer is much greater than with a seller. Just evidence that brokers and agents aren't just raking in the dough the way much of the public perceives.

"but you must admit that the chance of being burned by a buyer is much greater than with a seller."

absolutely without question agree with that!

I'm starting to think a pay a retainer fee upfront is a better and better idea.

Athol,

A difficult proposition to institute but maybe you get a retainer up front that is refunded upon purchase. I doubt it works but it's an idea.

Can you expand on your comment "Property remains king!" I am a bit surprised, as what I hear in the marketplace is "gloom and doom." Do you think the market is picking up post holidays?

What I mean by "Property Is King" is that if you are an agent exclusively representing the seller of an "accurately" priced apartment that you are much more likely to make money from that transaction than you are with the above sort of buyer who has no respect for your time or energy. This has been the case for at least the past 10-12 years.

As far as the "doom and gloom," I have absolutely seen activity pick up in the past week with open houses this weekend being heavily attended (over 20 people at some) and multiple bids occurring at some attractively priced spaces. It remains to be seen as to exactly where prices are heading but again, property that is priced properly is selling.

funny Athol says that. Ive been considering it and I think I talked about that with you too Doug at some point last year, didnt I? Or maybe it was another agent.

Interesting, I have received over 10 inquiries to charge per hour or a flat fee for consulting, but let the buyer bid on their own. Things that make you go hmmmmmmmmmmmmmm, for the future!

No kidding Noah. I too have had people ask for a consulting model and I have no doubt that you will see the demand for that increase. It will indeed be interesting to see how this demand effects how business is done in the future.

which brings me to: werent we supposed to have lunch in December?

so is the sales office protecting you, or not? or do you not care, and cut your losses and move on from this kind of buyer?

Sales office is how I found out. They had the courtesy to call me and share this with me. They also wanted to assure me that I was totally protected. the on-site sales agent was more shicked than me as my buyer gave her a big hug when she left. As far as cutting losses, I'm only in the time and a car service for a day so not terrible. If they buy in this development, I will get paid. Good news is that I showed them everything available and they love this development exponentially more than any other. They either buy there and I get paid or they move on waiting for more inventory. It's just a bit sickening. No matter how long I work in this industry, people's lack of integrity is always bothersome to me.

What's wrong with a consultation fee? In some respects, I prefer it b/c there is no conflict of interest. The current way, the buyer gets paid by the seller, which I think is inherently flawed.

Nothing wrong at all with a consultation fee except that it scares the real estate industry. People resist change but in this case I think we are getting closer to a market that has a place for a consulting model to not only exist, but thrive.

I must admit that I am a buyer who just dumped their broker. They were very keen to help me, so I let them, but then they just seemed to make my life more complicated. It had only been a couple of weeks. I am assuming this is OK behaviour? I would rather pay people by the hour. It makes me more comfortable. Aren't you relying a lot on someone's integrity to get you the lowest price when they get paid as a % of the price?

It is always a buyer's perogative to "dump" their broker particularly if you feel they are complicating things. A good broker should streamiline the process for you and work in your best interest. I know it seems hard to find agents like that but trust me when i say that we do exist. What you did is completely acceptable and totally different than a buyer who makes an offer through a competent agent (ME) and then attempts to circumvent the agent to get a reduced sales price. That move totally lacks integrity and disgusts me. I would be much more appreciative if someone just simply said that they didn't feel like the relationship was beneficial to them and "cut me loose." Sometimes there just isn't chemistry or an agent is in over their head with little understanding of the market in which they are working.

How much would you be willing to pay for hourly consultation? As much as attorney fees for expert advice and guidance?

One observation I have about the consulting model is that it would be very important to establish up front what's included and where it ends. Otherwise the agent "consults" all the way through the process, including how best to bid, signals being sent, strategy etc., which is just the same as representing a buyer in a conventional way! And I say this as a recent buyer who liked his agent and felt like she earned every penny, which, after split commission with the seller's agent, was $ but not THAT much money, given NY cost of living. So I think that in a consult model you'd have to be talking about pretty big numbers to make it worth it, maybe a percentage of the purchase range, but then it's really just like conventional representation.

I have another question about an earlier post: your "I'm about to buy" post. Weren't you nervous about selling your existing home? I've always heard that buying something suddenly because you've found the ideal place, without planning to do so, in a sense, is a bad decision financially; you end up spending more, usually, sometimes more than you can afford, you never know what you'll get for your current home, you might get stuck with two mortgages (how anyone actually does that is a mystery to me).

Henry,

Thanks for your input and I agree that the consulting model is a challenging proposition. Not impossible though but I think it's true that one would have to determine at which point the consulting stops and the buyer takes over the process. Also, what motivates the "consultant" to help you get the property if they get paid regardless. It's theoretically flawed but so is the current model. that said, the current model has been around for such a long time because it works. That doesn't mean that it can't be "updated" or "upgraded."

As far as my desire to purchase...I was willing to take the leap because the current demand for my apartment is high. I would have sold it within a week or two and I was prepared to sell at a fair price quickly as opposed to being greedy. The risk was low compared to the benefits of the new place...but only if I could have gotten at it's asking price.

Do you ever use Buyer Agency Agreements? I know they are as uncommon in Manhattan as hen's teeth, but I am trying to use them as much as possible. I have a closing next month on a Brooklyn townhouse that was offered without broker cooperation -- my buyer will pay us 3% at closing and is happy about the service.

Good to see you at Beer for Bloggers before Inman last week!

Sandy

I have explored buyer's agency agreements but they aren't well received in a market that hasn't embraced the concept.

Great to finally meet you as well!

I'm still bothered by the fact that buyers in NY suffer because all the smart/savvy agents & brokers focus on the sell side. No blame rests with the pros that choose to do so; I just think it's sad really. Somehow...somewhere within this problem (which I cannot pretend to know intimately from my seat here in Boulder, Colorado), there is a HUGE business model for buyer representation. Of course, I've been wrong quite a bit in life.

Doug...great meeting you in person man. One thing that amazed me at this past Inman event was that, out of the sea of faces, I could pick out and approach every single person in that place doing video. Additionally, I kept having people come up to me that I had never laid eyes on. Did you experience this at all?

Inman was indeed fun and I did have several people introduce themselves based on their recognition of me from video. Fun stuff. I also recognized so many from their videos.

The buyer side representation is a tough one. Buyers are reluctant to sign full blown buyer agreements and so the broker has to trust his or her buyer to be loyal. We would have buyers sign (or email) a simple one line confirmation that we represented them in placing bids for property we showed them. It worked. We never had a problem and believe the simple written documentation was enough to keep everyone loyal.
When I represented rental agents, we sent email confirmation of appointments & had clients sign off on every building where they were shown apartments so that if they later went directly to the landlord to bypass the commission, there was a basis for making the claim for the commission. It also helps to have a lawyer on board to smooth out the wrinkles that always seem to arise.

Nice to see you all again at Inman-- Doug, Sandy, Noah and Christian

From a buyers perspective, I think the entire system needs revamped. When a buyer's agent makes their money off the seller, they are NEVER working for the buyer. Buyers are tired of the dishonest nature of the business. Some examples:
example 1: days on market returning to 0 when a seller pulls a home for a period of time
example 2: an agent can state that there are offers on the home you'd like to purchase or even multiple offers but won't provide the buyer with names or numbers. Hence the buyer can be bidding against fictitious people.
example 3: the scapegoats-an agent can say there are offers on the house you'd like to purchase and will blame another realtor as being dishonest if this offer is found to be fictional.
This is only my second home purchase and I've seen all of these tactics.
Realtors use your strong lobby to change the system to an honest one. It will make you look more professional and will gain respect for your industry.