This weekend, the NY Times took an emphatic position against do-it-yourself buying, in which buyers manage their own apartment search and deal directly with the broker representing the seller.
While a "dual" agent--one who represents both the buyer and the seller--might (might) behave ethically by "not disclosing to the seller that the buyer just received a big bonus check, or by not telling the buyer that the sellers are divorcing and want a quick sale," a lawyer for the Real Estate Board of New York tells the Times, "things get murky when it comes to negotiating a price or discussing a home's flaws."
We have heard buyers who fly solo argue that they can save money by persuading the listing broker (who now doesn’t have to split a 5- or 6% commission with the buyer’s broker) to kick in a percentage point of the commission toward the purchase price. Whether most buyers successfully wrangle that extra percentage point is unclear.
It's apparently even less likely that sellers--many of whom pay a smaller commission (5% instead of 6%) if their broker doesn't have to split that commission with a buyer's broker--wind up favoring offers from unrepresented buyers.
With financing tight and qualified buyers scarce, it's highly unusual that a seller would "receive two very similar offers, with similar terms and financing conditions, and...similar appeal to a co-op board....It happens, but the stars do not align that perfectly often enough that it’s something buyers should be paranoid over," broker Noah Rosenblatt tells the Times.
In addition to reducing potential conflicts of interest, we would like to point out some other circumstances under which it would behoove you to work with your own broker:
- You don’t have the time or inclination to manage your search, including researching available properties and comparables or set up appointments with agents
- You are a first-time buyer
- You are new to New York City
- You are unfamiliar with the neighborhood in which you are looking
- There are special issues about your qualifications, circumstances or desired apartment that will make your search particularly challenging.
- You are buying in a difficult co-op: A good broker will be able to determine the likelihood that you will pass the board before you ever make an offer, which will save everyone substantial time, money and heartache. Also, a good broker will be able to help you craft an application package that caters to the whims of the board so that your chances of being approved are higher
- You are buying for investment: A good broker with a solid understanding of investment properties should be able to help you develop your pro forma to model anticipated cash flows, cap rates, internal rates of return, and expected net profits. They will also be able to put you in touch with lenders and property managers that specialize in investment property and help you determine the market value of rents.
- You are buying from a developer: Because this can be much more complicated than the resale process, the sponsor/developer drafts their own purchase agreements (unlike the boilerplate contracts typically used for resales). That often leaves more issues to be protected against and negotiated that are largely unfamiliar to the typical purchaser. Also, a good broker should be able to provide you with some industry insight into the building before you submit an offer.