A Broker’s View of Unscrupulous Real Estate Brokers

In the latest episode of the TrueGotham podcast, we delve into one of New York’s favorite topics: unscruplous real estate brokers.
The episode is a little more than eight minutes long, and covers a lot of ground. Here’s an excerpt, about how selfish or desperate brokers (The New York Times reportedly recently that the vast majority of New York brokers have no listings) can cost sellers major time and money:

Often, a broker will have multiple offers on a property, and before they present all of these offers to you, they will go through those offers and they’ll say “which one of these is going to make me the most money?” And that’s the offer that they’re going to push on you as hard as they can. And that offer may not be in your best interest.
You may have someone who comes in and says “I’ll pay you two million dollars, cash. I’ve worked at JP Morgan Chase for the last 10 years, I’m a senior vice-president, I’m a managing director, I’ll close whenever you want.” And then you have someone else over here, a struggling artist, God bless them, but they’re not making a lot of money, they need a mortgage contingency, they have to get financing and the contract has to be contingent on that… if the broker stands to make a six percent commission with that person, and only a three percent commission with the other person because they’re working with a broker–I’m not saying all brokers, but many brokers are going to steer you toward that six percent person.
And it’s not in your best interest. It’s only in the broker’s best interest. And three months, six months down the road when you’ve gone through a board process, you know, you’ve been trying to get this person approved by a co-op board and you get a rejection, you’ve lost three to four months of income, or expenses that you’ve been putting out, and worse yet, now your apartment has been on the market for four months.
Statistics show that the longer an apartment has been on the market, the less its going to sell for. So you’ve lost money. And there’s nothing you can do to salvage that.

Listen to the whole episode by clicking here.

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8 Responses to A Broker’s View of Unscrupulous Real Estate Brokers

  1. avatar Tired of the Amateurs says:

    The above excerpt is absolute crap. It demonstrates the author’s complete and total ignorance of, and lack of experience with, the sale process with a multi-million dollar co-op and real estate brokerage industry in Manhattan in general. The overwhelming majority of seasoned brokers will always take the best board candidate despite that candiadte’s represenation by another broker; many abide by the old expression “half a loaf is better than none”, to suggest otherwise is completely absurd and shows the author’s complete ignorance of the process and the business. In addition the author shows their complete ignorance of the fact that seller’s often know their boards at least as well as the broker and will not accept an offer from a candidate that appears un-qualified on paper and un-likely to pass a board.
    I suggest whoever authored that excerpt should “speak not of what they know not of”

  2. I have been in the industry for 14 years and have personally witnessed this from some of the city’s “seasoned” brokers.
    I brought it up as an example of how choosing the wrong broker can hurt sellers. I’m not at all suggesting this is a normal practice. It does, however, happen and for you to suggest it never does is absurd.
    I AM very proud to be a broker and I have the utmost respect for most of those in our industry but there is no denying that the unscrupulous brokers exist. After all, the barrier to entry is quite low. The stereotypes we fight don’t come from nowhere.

  3. avatar Tired of the Amateurs says:

    I have been in the industry since 1992 and can’t imagine the scenario where a seller would prefer, and accept based on their broker’s advice, a struggling artist who needs a mortgage contingency over a non-contingent Morgan banker for a $2 Million co-op. I do beleive standard practice in New York, particularly in that price range is offers with mortgage contingencies are routinely rejected so the broker attempting to sway their seller to the struggling artist wih a mortgage contingency, is in effect, “spitting in the wind” and making themselves look very foolish in the process. Those that would attempt this type of thing would soon be weeded out. In my tenure in the industry I have never seen, or heard of, that type of extreme scenario.
    Now if the author had constructed a scenario whereby two candidates of equal credentials with the same chance of pasing the board and one was a direct deal and the other was from a co-broker and the seller’s agent pushed their, equally qualified candidate, and possibly cut their commission to give the seller a better bottom line. That is a scenario I can see happening. However that scenario would be infrequent at best as most buyers of those qualifications in those price ranges have a broker they prefer to work with rather than going about the search on their own.

  4. avatar sean g says:

    law: all offers must be presented to buyer.
    any seller who listens to this podcast wannabe is an idiot.

  5. Brokers are obligated by law to present all offers to their owners.Professional brokers do this, reputation is all in this business. Those sales people whose primary occupation is other than real estate might play around with this rule but they don’t last in the business. More problematic for sellers are brokers who encourage their owners to accept a lesser commission by limiting the playing field to only buyers the selling broker brings in. This is not in the best interest of the seller, as it discourages co-broking and limits the possible buyers who will see the subject property. Therefore the seller leaves the closing table with a less net, despite paying a point or two less in commission.

  6. Totally agree with the fact that these practices are infrequent and your scenario of 2 equally qualified candidates is more frequent than mine. That said, I have seen both scenarios happen. For this reason, as you point out, it is imperative that a seller request to view all documentation regarding offers on every prospective purchaser before they make a decision. I’m always surprised at how many sellers will simply “trust” the broker and not request to see the offers. It is in those cases where I have witnessed a broker withold information to attempt to get the greater fee. As far as them being “weeded out,” that is absolutely one of my objectives of making our clients aware of such practices via this blog. That said, I happen to know of 2 people with more than 20 years in the business who engage in this behavior frequently.

  7. …as for it being against the law… it’s also against the law for cars not to stop for pedestrians in the crosswalk. But you still have to look both ways.

  8. avatar Bob says:

    Douglas, I know this is an old post, but it discusses something happening to a friend of mine. My friend is selling a house and she is using a broker. He found her an offer of X currently on the table. Her broker then suggested that she stop showing the house and take that, but she said she still wanted it shown in case she gets something better until the contactual process starts. One day that potential buyer brought an inspector to the house, the same day another couple showed up and wanted to see the house. My friend was there and showed it, and they made an offer of X+10k on the spot. Turns out those people’s broker was trying to contact my friend’s broker for over a week and he never returned their calls. She also found out from a second couple that he never returned their calls either. To me this seems like the broker is trying weed out potential buyers that have their own brokers. What protection does the seller have when a broker is either misbehaving or doing a bad job that could cost her thousands of dollars? He has overall done a poor job not even counting this. Can she terminate their agreement without having to pay him anything? Or can he come back and take legal action against her for a commission that I truly feel he does not deserve?

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