Bohemia Blog by Agent John Ruocco
As a StreetEasy Expert, a recent advancement in StreetEasy technology, I have been excited to hear from more buyers in my market. Since getting my expert status my call volume has increased and I have received several inquiries ranging from availability and status reports on certain properties to random safety concerns from Mid-Western mothers with children moving to their first apartments in uptown Manhattan.
What has been particularly interesting are the inquiries from savvy internet shoppers who have identified properties via their own efforts and who are looking for specific details or explanations about the listings. The general consensus from these potential clients is that since they located the properties themselves, they have no use for a buyer’s broker. They don’t want to waste their money on an agent whose only job is to open doors and schedule appointments. The ability to identify potential properties via the internet has for some negated the value of a broker from the unrepresented buyer’s point of view. Is the writing is on the wall? Are buyer’s brokers are dinosaurs on the brink of extinction? Potentially sobering news for a real estate agent with a fresh pair of twin girls poised to spend all of his hard earned money. What stops the panic is the reality of what a buyer’s broker actually does to ensure the buyer’s experience is the most diplomatic and secure process. You are about to make the largest purchase of your life!
Some history…as most do, I started in real estate as a rental agent. Before I became a real estate agent, I would laugh at my friends who paid what I considered to be exorbitant fees to secure their rental apartments. The fact that they had better apartments then I did and their landlord actually returned their phone calls didn’t matter to me. I saved a boatload of cash up front and the endless hours accosting supers and walking the streets seeking FOR RENT signs generated a fair priced albeit dark, small and occasionally infested apartment. I learned to settle—and I did “save” some money (I paid for the darkness and bugs though).
When I decided to take the plunge into real estate after a 25-year career in the theater and academia, I quickly learned the value of a good agent and realized what I had been sacrificing in the name of savings. Bottom line is that people with good agents got good apartments.
When it comes to home ownership and a buying process where the stakes are considerably higher, the same holds true. In a competitive market like Upper Manhattan, offers from unrepresented buyers rarely get off the ground. Chances are, if you don’t use an agent, you won’t close the deal.
There. I said it.
Like I said at the top of this entry — most buyers have the resources and wherewithal to locate a property. With sites like StreetEasy - the shopping is not difficult. Truth is nowadays we can all shop for everything online. No guarantee you will pay the right price or see all the options though. The real work starts after you decide you want to buy a property that you view. You will not just need to have someone in your court keeping everything on track and moving forward, but without representation your risk of losing the property while in the 3-6 month process goes up exponentially.
The most recent statistics according to NAR (national association of realtors) show:
At 35 percent, buyers 35 years and younger continue to be the largest generational group of homebuyers with a median age of 30 years old.
** First-time buyers made up 32 percent of all homebuyers.
** Sixty-seven percent of buyers 35 years and younger were first-time buyers, followed by buyers 36 to 50 years at 26 percent.
** Eighty-nine percent of Millennials, 87 percent of Gen X buyers, and 85 percent of Younger Boomers purchased their home through an agent.
As I have been representing buyers I can see how much I matter to them when they thank me profusely for handling their transaction. Here is a sample of what I do for them:
** Take them to properties they haven’t considered. Most people don’t know what types of properties they can buy, co-op/condo/townhouse. I illuminate their potential and often exceed it.
** Explain the financial merits of a property they are interested in buying. I provide stats for the unit selling, recent sales in the building and area. I have access to non-consumer sites with more information that is helpful to buyers.
** Negotiate! This is how I really protect buyers from sellers and listing brokers alike. As a listing broker there is no mal intent, but you do represent the seller and their best interests…meaning you want to get the highest price for the seller at all times. An unrepresented buyer will end up paying what the seller wants, the negotiation is not a fair process. When I represent you my presence is an automatic protection against that and then on top of that I am your voice and know creative ways to negotiate a deal to make your offer as attractive as possible to a seller. This is an art that is learned from experience, buyers do not have this training. Would you choose to defend yourself against the prosecution without representation in a legal case? No! Why? Because you are guaranteed to give up something and potentially and most often lose your case.
** Board packages….need I say more? You give me the paperwork, I do the work so you pass the board process every single time.
** If you are buying a home, you are working and if you are living in NYC you are working more hours than most. So, why would you like to add work to your busy schedule? I handle all communications on your team, which includes: attorneys, lenders, managing agents, other real estate agents, appraisers, supers, contractors, etc.
** Getting you to closing…this is the biggest test of patience for buyers. You sign the contracts, you wait for a board meeting, you wait, wait and wait. Without me you wait with all kinds of ideas in your head, with me I hold your hand and educate, reassure, and when needed go above and beyond the call of duty to ensure you stay on track to close.
USING A BUYERS BROKER IS FREE
Well — not exactly, but it won’t cost you money out of pocket. Commission fees are paid by the seller. The going rate for a seller putting their property on the market is 6% of the sales price. In the majority of the cases, that 6% is split between the seller’s agent and the buyer’s agent at 3% each. For a direct deal — meaning that the seller’s agent represents both the seller and the buyer — that commission is usually 6 or 5%. These fees are paid by the seller and are negotiated prior to the listing coming on the market. Some unrepresented buyers think they can write an offer that excludes the buyer agent’s brokerage fee and use this as leverage to negotiate a price reduction. However, since these fees were pre-negotiated before the listing went live, there is already a contract in place protecting the seller’s agent. What in fact happens, is that the seller’s agent receives the entire commission. When sellers list their property they have a multitude of closing costs to pay before they get to their net, the brokerage service fee is one of many costs associated with selling a property. Regardless of closing costs to a seller, properties are priced at market value as the number one reason properties don’t sell is price.
UNREPRESENTED BUYERS ARE VULNERABLE
When you do not get representation in a sales transaction, the seller’s agent receives the entirety of the commission. What many people fail to realize however is that not only does a direct deal NOT save you money, but it also engages the buyer in a dual agency relationship with the seller’s agent, creating an environment RIPE for conflict of interest issues. Bottom line here is that the seller’s agent now represents both parties in the transaction, which has the potential to compromise your fiduciary relationship. The case studies are fascinating. Oklahoma Supreme Court, SNIDER v. OKLAHOMA REAL ESTATE COMMISSION, June 1, 1999. Google it.
REAL ESTATE IS A PEOPLE BUSINESS
In New York real estate, relationships matter. A good agent will have a team of pros who know how to navigate the choppy co-op board-managing-agent-loan officer infested waters. A real estate transaction will often involve up to a dozen players and keeping all those personalities and schedules aligned is a full time job. A dropped ball is often the end of what could have been an easy deal. Your agent is invested and committed to your interests and tasked to make sure everyone is on the same page at the same time. Your agent keeps the end in sight and is trained to anticipate and head off the inevitable obstacles along the way.
A WELL-WRITTEN OFFER GETS THE WORM
There actually is an art to writing a successful offer. Presumably, you are working with an agent who knows the market and knows the neighborhood. He has done the research, is abreast of latest market factors, has relationships with co-operating brokers and real estate professionals, and has real world experience. (His name is John Ruocco by the way). Your agent will give you the information to make the most considered decision possible when deciding what to offer. They will not give you an exact figure; you will decide what you want to pay based on all the information you receive. Knowledge is power and experience trumps knowledge.
I highly suggest interviewing a few brokers even if you have a referral (add me to your list). This is a relationship that will last up to 6 months, sometimes longer…you don’t want to get into bed with a one-night stand…choose someone you want to go the distance with.