Making It Exclusive: Signing With an Agent
SEPT. 14, 2012
By JIM RENDON
CHOOSING a real estate agent for selling a home may seem simple, but there is much to understand about the role of the agent and how the relationship works. And the stakes are high — the sale of what is likely the owner’s most valuable asset.
In New York City, when a seller agrees to work with a real estate agent, the seller is giving that agent’s company an exclusive right to sell the home, typically for a six-month period. Potential buyers must go through the agent to see the home and the agent is guaranteed a commission if it sells.
The agent often pays for professional photographs, copywriting or videos. The agent’s duties include advertising the property, fielding offers, handling negotiations and working with prospective buyers to gain approval from the co-op board.
“Agents want some assurance that at the end of the process they will be compensated for their work,” said Jeremy Cooper, a partner at Cooper & Cooper Real Estate, a Manhattan firm.
Before signing a contract, sellers must first sign a disclosure form that explains the various relationships between buyer, seller and agent. It also gives consent for dual agency, which means that one firm or even one agent may wind up representing both the buyer and seller.
That can be an odd situation. The agent must advocate for both the seller and the buyer without benefiting one party over the other, said Neil Garfinkel, legal counsel for the Real Estate Board of New York and a partner at the law firm Abrams, Garfinkel, Margolis, Bergson. If, for example, the seller is getting divorced and needs to sell quickly, the agent cannot disclose that information to the buyer even though it could work to the buyer’s advantage, he said. Some brokers have noted that in such circumstances, neither the seller nor the buyer really has the full allegiance of the broker.
Exclusive agreements can have exceptions, Mr. Garfinkel said. If someone has expressed interest in an apartment before an agent comes on board, the seller can exclude that person from the exclusive agreement. This means that if that person buys within an agreed-upon period of time, the seller either does not have to pay a commission or the commission is reduced.
In addition, if the home has not sold at the end of an exclusive period and the seller chooses a new firm, the first agent can submit a list of up to six people who expressed interest in the property during the time of the exclusive. If anyone on the list signs a contract on the apartment within a given period of time — usually about 90 days — then the first broker gets the commission. If a seller decides to use the new agent for the deal, he or she may have to pay commissions to both brokers.
When drafting a contract, some buyers ask for a detailed marketing plan. Harold Kobner, an agent with Argo Real Estate in Manhattan, said that his contracts state that he will produce floor plans, hire professional photographers and list where the home will be advertised. “Whatever I tell the person I will do, I put it in my exclusive,” he said.
A commission of 6 percent of the purchase price is standard, but sellers can also try to negotiate a lower amount. With the market bouncing back, brokers these days are less likely to compromise, said Eric Benaim, chief executive of Modern Spaces, which focuses on Long Island City. One strategy is to offer to pay 6 percent if the buyer has his or her own broker. But if the buyer is unrepresented, the seller can offer to pay 5 percent to the exclusive broker who acts as a dual agent, said David Maundrell, the president of the Brooklyn firm Aptsandlofts.com.
Because these relationships can be difficult to get out of, it is important to choose a broker carefully. Micki Lazar says she learned this lesson the hard way. At the beginning of 2010, Ms. Lazar and her husband decided to sell her Greenwich Village studio apartment. They wanted to sell quickly because Ms. Lazar was expecting her first child. She chose an agent with the Corcoran Group because she felt that the well-known firm’s highly trafficked Web site would increase her chances of a speedy sale.
But problems ensued. Ms. Lazar said the agent, Beau Nova, promised to hold midweek open houses but held only one, and was late for another, leaving Ms. Lazar to greet prospective buyers. She said buyers who saw that she was pregnant were tipped off that she needed to sell quickly. Ms. Lazar said Mr. Nova pushed her to accept a low offer and to lower her $400,000 asking price. “He was fighting me about the price, the open houses; we just argued and I wanted out,” she said.
Corcoran let Ms. Lazar out of her agreement two months early. Mr. Nova sent an exclusion list to Ms. Lazar’s new agent and shortly afterward one of the buyers on the list made an offer. Because of her history with her previous agent and because the buyer was also represented by a Corcoran agent, Ms. Lazar said she wanted her new broker, who was from a different agency, to represent her. Ms. Lazar could have been liable for a 12 percent commission