What does 'co-broking' mean when you're buying an apartment or a house?
- Co-broking is mandatory for agents who are members of the Real Estate Board of New York
- It means the seller's agent must share all listings with other brokers and split the commission
- Sellers benefit by getting more exposure for their listing and buyers benefit by having representation
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Co-broking is when two agents work together—one representing the buyer and the other the seller (or, in the case of a rental, the landlord)—to complete (i.e. co-broker) a deal. The commission is split between the two agents.
All New York City real estate agents who belong to NYC's real estate trade association, the Real Estate Board of New York (REBNY), are required to co-broke their listings. "Co-broking involves sharing the information and also the fee so it's a cooperative process from start to finish," says Tara King Brown, a broker at Corcoran.
Sharing the information happens through REBNY's feed, or Residential Listing Service (RLS). "All of our databases speak to each other and we can view and share listings with other clients," she explains.
Then, at closing, the listing agent shares the commission with the buy-side agent—for example, each agent would take 3 percent of a 6 percent fee.
Sellers benefit from co-broking because their property is likely to be exposed to more potential buyers. That includes exclusive listings, too, which is when a broker/firm has the exclusive right to sell a property for a dedicated period of time.
"However, as a part of that exclusive, I have the responsibility and commitment to share that listing with all other agents and ultimately share the fee with the buy-side agent," King Brown says.
Buyers, too, benefit from co-broking because their interests are protected by their agent whose loyalty lies only to them, whereas a listing agent has a fiduciary responsibility to the seller.
“For the consumer, [co-broking] really is the best thing,” says Richard Grossman, president of brokerage firm Avenue 8. “For instance, buyers can work with their own broker who has their interest in mind, show them virtually every property that is on the market for sale, and then negotiate with their interests in mind.”
Importantly, while most Manhattan real estate agents belong to REBNY and are therefore required to co-broke, membership is spottier in the other boroughs. If you're selling your place, you'll definitely want to confirm in writing that you expect your non-REBNY agent to co-broke your property.
How co-broking came to be
Interestingly, co-broking wasn’t always a practice in the NYC real estate market.
“In 1983, when I first came into the business there was very little co-broking between firms and very few exclusive listings,” Grossman says. “Sellers usually listed their properties as open listings with one or a few firms. Buyers would then call different brokers to see who had the listing.”
All that changed with the advent of REBNY, which got underway in the late 1980s and early 1990s.
“Firms saw that they could do more business by getting more exclusives and sharing listings with each other,” Grossman says. “At first, this wasn’t mandatory, and firms could pick and choose who they wanted to share their listings with. Co-broking then became mandatory but firms didn’t need to send their listings to other firms.”
Finally, in the early 2000s, sharing listings also became mandatory—and these days it's hard to fathom a world where open-source listings didn't exist. (Non-brokers can access the RLS via CitySnap by REBNY.)
How it plays out in today's market
Co-broking can be especially advantageous in NYC's current climate with limited inventory and sluggish sales.
"The more challenging the market, the more expertise and guidance on both sides of the deal is helpful," King Brown says. "Having a knowledgeable buyer's agent who can add value to the transaction is a net positive for the listing agent and seller because it produces a higher likelihood of success that the deal will come together, that it will go smoothly without pitfalls, and will actually close."
Or as Grossman sees it, "Our current market is a tale of two cities in one. Right now, some properties are selling at the snap of a finger while others that appear similar will sit there, and it's not just pricing. So as a seller, you want to get as many qualified buyers into the property as possible, and you never know where the buyer is going to come from." And because co-broking requires agents with exclusive listings to allow other brokers to show the property, you get more eyes on the prize.
What's more, he sees co-broking as expanding the buying pool beyond the traditional methods.
"More than ever, the buyers who are fueling the market today are finding their broker through different mediums such as social media or online platforms like StreetEasy or CityRealty—and that includes wealthy buyers. He knows an agent who picked up a buyer on StreetEasy who makes $15 million. "The idea is that the broker getting the buyer into your door may no longer be the usual suspects at established firms but instead be at firms you've never heard of or independent agents."
In these cases, the buyer's rep would need permission to show an exclusive property, and both Grossman and King Brown say the seller's broker would work out a fee arrangement in advance.
"Ultimately, if I am a seller, I don't care where the buyer comes from," Grossman says. "At the end of the day, co-broking gets as many people into your property as possible, and the more people who see it, the better chance you will sell it for the best price possible. And the main reason you are hiring a broker is to get access to buyers."
—Earlier versions of this article contained reporting and writing by Lambeth Hochwald.
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