Editor’s note: This article is reposted with permission by The Real Deal. Click here to view the original article.
By CANDACE TAYLOR
NEW YORK CITY — For some buyer’s brokers, it’s their greatest fear come to pass. More and more apartment-hunters, armed with listing information gleaned from the Web, are representing themselves rather than using a real estate agent.
"I have buyers coming at me (at open houses), unrepresented, clutching fistfuls of paper," said Halstead Property Senior Vice President Charles Homet, who primarily works with sellers. "They pride themselves on their Internet acumen and they feel they have enough information."
This is the long-feared bogeyman of the Internet era for buyer’s brokers: the idea that buyers will no longer need them because they can find listings online and deal directly with the seller’s agent.
And while buyer’s brokers clearly have an advantage right now in the soft market, the long term is a different story. In some ways, the changes are already afoot.
Prudential Douglas Elliman Vice Chairman Dolly Lenz said she is doing "a lot more direct deals," estimating that she may be working with twice as many unrepresented buyers now as in past years.
"If you’re the exclusive agent, the buyers are calling you directly," she said. "It’s becoming the wave of the future."
Upon closer inspection, however, the shift isn’t the disaster for buyer’s brokers that it may first appear. Many buyers start out unrepresented, but quickly discover they need help navigating the complexities of the market. And experts agree that the difficulty of assembling co-op board packages, in particular, assures co-brokering a permanent place in New York City real estate.
Still, the shift has significant ramifications for the next generation of buyer’s brokers, who will have to be faster and savvier than in the past. "We have to work harder," said Klara Madlin, founder of Klara Madlin Real Estate, which often represents buyers. "If (agents) are going to be successful, they really need to be on top of this information, and it’s not easy."
That’s largely because over the last several years, real estate listing data in New York has become more plentiful and accurate on the Web, making for more educated consumers. Brokerages like the Corcoran Group, Halstead and Elliman have poured money into user-friendly Web sites, with high-resolution photos and even videos of properties for sale.
Meanwhile, sites like StreetEasy, Trulia and PropertyShark allow consumers to search nearly all of the market’s listings at once.
Consumers’ access to this information didn’t seem to make much difference to brokers during the boom, when apartments moved so quickly that they were often sold by the time consumers found them online.
"People were afraid that if they didn’t buy right then and there, someone else would outbid them," Madlin said. "They weren’t doing as much research."
In the last year, however, the once-frenetic pace of sales in New York has slowed considerably, prices have fallen and a buyer’s market has emerged. That has often given buyer’s brokers an advantage over agents working with sellers, but it’s also giving buyers the time to look for properties on their own.
Homet said many of the unrepresented buyers he sees are younger, first-time buyers. "It’s mostly first-time buyers who are in their 20s and who are very Internet-savvy," he said. "They have a lot of knowledge at their fingertips. They have confidence that they can handle the negotiations themselves." …CONTINUED
These buyers often start out by searching for listings on StreetEasy.com, he said, which shows them the contact information for the listing agents. When they find a listing they like, they call or e-mail that agent directly to ask about showings.
In the past, the number of "direct deals" — where a seller’s broker gets the whole commission rather than splitting it with a buyer’s broker — has been small, in part because the Real Estate Board of New York requires exclusive listings to be shared with all members within 24 hours.
In a recent survey of REBNY members asking how many of their recent deals had been co-brokered, 61 percent of respondents said all, 31 percent said some, and 8 percent said none, according to Steven Spinola, president of REBNY.
The increase in direct deals may not yet be showing up in the numbers, but brokers and analysts say they are seeing a noticeable difference on the ground. "I’ve definitely heard that we’re making it easier for buyers to go without the buyer’s broker," said Derrick Gross, a business analyst at StreetEasy.
Not only do do-it-yourselfers believe they don’t need help, experts say, but they often believe that they’ll save money by avoiding a broker. First-time buyers, in particular, often don’t realize that they don’t have to pay for the services of a buyer’s broker: The seller pays for both.
Others think they can cut a better deal on the commission by bringing the listing broker a direct deal. In reality, the seller usually signs an exclusive listing agreement specifying the amount of the commission, which stays the same regardless of how many brokers split it.
Direct deals are often welcomed by the listing broker, but their increasing prevalence has buyer’s brokers worried. In the past, simply having access to listings was enough to win over clients, but that’s no longer the case now that buyers have plenty of time to troll listings themselves.
Agents must scramble to earn customers’ loyalty in other ways, by accumulating in-depth building information or honing their negotiation skills. Madlin said she helps her agents gain information that consumers can’t find online, scheduling meetings with mortgage brokers to find out which banks are lending in which buildings, and what financial requirements they’re looking for.
All is not lost for buyer’s brokers, however. New virtual office Web sites, or VOWs, may help by letting clients search all of the industry’s listings without leaving the firm’s site. The change could assist brokers in retaining buyers — at least those who agree to VOWs’ mandatory sign-in requirements.
Moreover, New York City’s high number of co-ops could help because preparing a board package or acing a board interview is easier with the help of an experienced broker.
"Brokers are necessary here because of co-ops," Gross said.
Even in non-co-op transactions, many shoppers find that buying a home without representation is harder than they think. Especially in New York, "there are lots of moving parts when buying a property," said Gea Elika, the founder of Elika Real Estate, which primarily represents buyers. "(Buyers) start to get confused."
Elika recently started representing a woman who had been searching on her own for a year. "I think she really wanted somebody who was going to work for her in simplifying the process," he said.
Some buyers realize that since sellers nearly always have agents, it makes sense to have someone representing them as well.
At a recent open house, Madlin met a potential buyer who had come without an agent. When Madlin offered to represent him, he said he didn’t like brokers, adding: "What do I need you for? I have StreetEasy."
He called her later that night, having changed his mind, and Madlin’s firm helped him buy a home. "He went on StreetEasy and realized, ‘I’m going to be dealing with a broker either way,’ " Madlin said.
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