The Worst Deal in Real Estate

By Erich Nicholas, Licensed Real Estate Salesman, NYC Commercial Realty Corp,

If you’re looking for a new home or office and a real estate broker asks you to sign an exclusive agreement so that you can only work with that broker – you should find another broker. Think about it, if you were going to buy a pair of dress shoes would you sign a contract to only buy those shoes at the Macy’s at Herald Square? So why would you limit your options when you’re searching for a new home or office?

Signing an exclusive agreement for buyer or tenant representation in no way benefits the buyer or tenant – it only benefits the broker. In short, the broker is just trying to guarantee that he gets paid – whether he finds the right place for you or not! How does that help you?

All that you want is to find the perfect place to live or work. Who gets what commission is not your problem. If a broker says he doesn’t want to waste his time searching for you out of fear of doing lots of work and not earning a dime, tell him that he’s in the wrong business.

The reality of real estate is that we work for free all the time. That’s fine. When a deal comes together we get paid handsomely for our time. As a result most worthwhile brokers are juggling several clients or listings at the same time. We know that they all won’t close, and they all won’t pay off – that’s the business.

Our customers would be wise to be just as open. You never know who is going to find the right place for you. In fact, you might even find it yourself through an advertisement that you see online or in the newspaper. And once you find that perfect place either on your own or through another broker, guess who’s going to pop up again? Your exclusive broker!

He’ll be waving the crazy contract that you signed with him looking to get paid. And if you want to get rid of him, you’ll have to cut him in on the commission agreement or maybe even pay him out of your own pocket.

Why deal with that headache and possible added expense? Especially when you’re getting no added benefit in return for your trouble? Whether you sign an exclusive agreement or not, a broker representing you as a buyer or tenant has every motivation to find the perfect place for you because finding you that new dream home or office is the only way that he’ll get paid.

This isn’t a job with hourly wages. We either close deals and cash commission checks or we starve. That alone is ample motivation.

If anything, signing an exclusive tenant representation agreement takes away some of the pressure on the broker to work for you because now he knows that he’s guaranteed a piece of the action. Don’t get me wrong – finding the right broker is almost as important as finding the right place.

A good broker is worth his weight in gold. We know the market inside out. We can help you find value, whether that’s a well priced luxury condo or a below market sublease. Plus we know all of the little things from which buildings are impeccably well run to which landlords are total slime.

True story, there’s management group that owns several buildings in Manhattan who have found a way to charge their tenants 13 months of rent per year. That’s not a typo, 13 months!!!

Surely you want to work with someone who will help you steer clear of bad deals like that. You want a buttoned up professional who takes the time to listen to you and truly understands what you’re looking for.

Yet even when you find that perfect broker, you still shouldn’t sign an exclusive agreement with him! In New York City real estate agents are a dime a dozen. There’s no magic service that one broker can provide for you that the others can’t. We’re all studying the same market and we’re generally all searching in the same databases.

So even if you meet a good broker who you really want to work with, if he wants to work with you, he’ll do it without an exclusive agreement to represent you as a buyer or tenant. And he’ll work every bit as hard to find that perfect place for you and help you close the deal. After all, that’s his job!

Plus, if you slip him truth serum he’ll admit that he’s well aware that you’re working with other brokers. That’s fine. This is all one big race to see who can find the best match for you. Signing an exclusive agreement with one broker only limits the number of people racing to find you that perfect place.

So shop wisely. After all, it’s a lot easier to buy a pair of shoes than it is to find a good deal on Manhattan real estate. Don’t limit your options. Unless of course you want to sign an exclusively tenant or buyer’s representation agreement with me. Just kidding, two of my best friends are clients of mine and I didn’t ask either of them to sign exclusives. What kind of friend would I be if I did?

It’s my job to help people find the best properties that they can afford – not to limit their options. If you meet a selfish broker who puts their interests above yours – walk away. I know that buying and renting real estate can be very stressful, but at the end of the day you’re just shopping. So remember, in Manhattan, there’s always another building, another broker, and plenty of other shoe stores.

Shop wisely.

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2 thoughts on “The Worst Deal in Real Estate

  1. This article has one big misleading premise that needs to be clarified. An exclusive broker agreement IS NOT the same as a client registration form or a fee agreement. No one should sign a form that stipulates that they can only work with one broker or a broker must be paid even when they didn’t show you the place you’re applying for.
    However there is a Fee Agreement that every broker should use that simply states if your client signs the lease on an apartment that you showed, said client will pay the commission fee if applicable. Too often we’ve seen clients try to go back behind an agent’s back to avoid paying the broker. That’s equally shady if an agent has done the work and showed the listing to a client.
    Too many blog sites are advising renters how to avoid paying broker fees and that’s leading to too many tense situations.

    1. Michael, we completely appreciate your comment and I will look closely into this article to make sure we clarify this point! – Ashley

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