INDUSTRY BOARD TO ENFORCE RULES ON SHARING LISTINGS
Brokers Could Be Subject to Fines or Loss of Their Licenses
By Julie Satow
The New York Sun
September 23, 2004
New York’s real estate trade association will begin levying heavy fines against brokers who engage in unfair tactics to increase their commissions. Amid a rash of complaints, the Real Estate Board of New York will charge brokers who refuse to share their exclusive listings with fellow brokers up to $5,000 in fines, and may lodge a complaint with the Department of State, resulting in the possible revocation of a broker’s real estate license.
The new policy, which will take effect on January 1, is the latest effort to enforce “co-brokering,” the practice of sharing exclusive listings among brokers of different firms. Real estate agents earn, on average, a 6% commission for selling an apartment, but must split that fee equally with a buyer’s broker, when there is one. While it may seem logical that a broker should be motivated to aggressively publicize a client’s listing, some brokers would rather limit the pool of buyers to those not represented by brokers. This would allow the brokers to keep the entire commission for themselves.
The new rules mean that brokers who violate the rules would be
penalized $250 for the first offense; $2,000, and a posting on every member’s Web site, for the second offense, and $5,000 plus a complaint
sent to the Department of State for the third offense. The fines must be
paid within 60 days. If not, the broker’s firm has 30 days to pay it or lose
their REBNY membership.
While most real estate markets in America have what is known as a multiple listing service, an electronic hub shared by all the brokers to post exclusive listings, New York does not. Instead, each brokerage firm has its own system to post listings and also a separate system run by the real estate board, where they share their exclusives.
Some brokers advertise their exclusives on firm Web sites and in newspapers, without posting on the board’s Web site. In this way, they try to limit the buyers to those who are represented by brokers. The next best thing to trying to get the entire commission is to limit the buyers to those represented by agents in their own firm, thereby keeping the deal in-house.
While these tactics will pad the broker’s pocket, it can often leave sellers with a lower purchase price.
“I have called brokers and asked to show my client their listing, and they tell me they are not co-broking it yet, or even worse, admit to you they are trying to sell it on their own first,” said the director of sales at Halstead, Stephen Kliegerman. “I get complaints from my brokers on a near weekly basis that they found a listing advertised in the newspaper or on some broker’s Web site that is not in the REBNY data base.”
While this is sometimes a computer glitch, nightmare stories of renegade brokers abound.
“It is the dirty underworld of real estate brokers, and most sellers have no idea it is going on,” said a broker for Fenwick-Keats, Sandra Smith.
“I think the larger firms are going to welcome this change because a few top-earners at those firms refuse to play by the rules, and until now the firms had been too scared to rein them in for fear they would go to a competitor,” said the president of Brown Harris Stevens, Hal Wilkie. “Now the firms can better control those brokers and put the blame on the REBNY rules.”
Some real estate professionals say the rules do not go far enough. Even if a broker posts an exclusive listing within the prerequisite 72 hours, they can still refuse to return phone calls from other brokers in the hopes of locking in a deal without a buyer’s broker.
“If a broker has an open house on Sunday and accepts a bid Monday morning without calling back a number of brokers who also have buyers interested, they are not doing their due diligence,” the president of Esther Muller Consultants, Esther Muller, said. “It is a broker’s fiduciary responsibility to get the best offer out there, so how do you regulate that?”
In Ms. Muller’s opinion, the best solution is through education and industry black-balling. “If a broker never calls you back when they have an exclusive, next time you have an exclusive, you’re not going to call them back.”
To ensure a broker is looking out for their client and not their own profit margin, sellers should check what type of buyer is coming in to see their apartment. “If there is a lull in the number of potential buyers within the first week, when it should be the most crowded, or if after an open house, none of the people had brokers with them, it could be suspect,” Ms. Smith said.
Sellers should also make sure their brokers are real estate board members who use a contract that stipulates that they will co-broker, said the head of brokerage services at the Heron Group, Corinne Pulitzer.
“This is an important move for the industry and will help level the playing field, allowing us to best serve our clients,” Ms. Pulitzer said.