Ethics Of Real Estate Agents

Tuesday, May 10, 2005

May 5, 2005

Realty Agents Add Elastic to Their Ethics


THE white gloves have come off.

Even by the cutthroat standards of the real estate industry, brokers are reporting a decrease in civility. Residential sales agents are following strangers into open houses in hopes of grabbing half the commission. Some brokers are posting exclusive listings from other firms on their own Web sites. Others try to poach rivals’ clients by offering to slash their commissions or by maligning their peers.

"The better the market, the worse the brokers," said Michele Kleier, chairwoman of Gumley Haft Kleier, a Manhattan real estate brokerage firm. "It’s like a war zone. You need bulletproof vests to survive in this market." When Sabrina Kleier, Ms. Kleier’s daughter and herself a broker, called a friendly rival to tell her about a new $3 million-plus listing on the Upper East Side two months ago, she was shocked to learn later that the agent then approached the seller to try to steal her exclusive listing, which gave her the right to market the property and earn at least half the commission. (The owner refused and stayed with Ms. Kleier.)

"People are fighting so hard for exclusives because it’s like money in the bank in this type of market," Sabrina Kleier said. "It makes you feel like you can’t trust anybody, even your friends in the business."

That brokers behave badly is not news, of course. But in frenzied markets like those in New York, Miami and Los Angeles, where inventories are low, a growing number of brokers are scrambling for a limited number of deals. For those lucky enough to get one, there is a lot of money to be made. In Manhattan, said Pamela Liebman, the chief executive of the Corcoran Group, a good broker can clear $200,000 annually, while the very top ones clear over $2 million. In Southern California, about 75 agents made $1 million to $3.5 million each last year, said Malcolm MacEwen, a sales manager for Coldwell Banker in Beverly Hills.

The competition in a business where commissions are typically 6 percent (split among the brokers and their firms) is made even more fierce by a flood of novice agents.

"In the last five years it seems like everyone wants to be a broker," said Diane Saatchi, a senior vice president for Corcoran in the Hamptons, where the most successful brokers earn more than $1 million a year. "There’s not enough time on the part of the senior brokers to really do the proper training because many of us are too busy making money."

The National Association of Realtors says its membership has swelled to 1.1 million now from 766,560 in 2000, a rise of 46 percent. In Manhattan the number of brokers and sales agents has jumped 42 percent, to 26,220, in the same period.

That means too many agents are chasing the same deals. Dennis Pantano, a broker in Belmont, Calif., said 45 percent of the agents in Silicon Valley "sold no houses last year."

A crowded market can inspire some brokers to fudge the rules. Stephen G. Kliegerman, an executive director of sales at Halstead Property in Manhattan, said some agents take exclusive listings from Web sites of real estate firms and repost them – without crediting the listing agency – on their own Web pages or on Craigslist, the online bulletin board, a violation of industry rules.

At one open house last fall, "we couldn’t understand why this guy brought 20 buyers to one listing in one day," Mr. Kliegerman said. "Then we figured out he advertised our listing on Craigslist." Mr. Kliegerman reported the agent to his managers, and he has left the firm.

If brokers or buyers believe an agent has acted egregiously, they can file complaints with local real estate boards or a state’s licensing agency. For severe infractions, brokers can lose their licenses.

But most battles are fought privately. Earlier this year, when a prospective buyer attended an open house on Central Park West organized by Richard Merton, a broker at Bellmarc Realty, the buyer failed to indicate on a sign-in sheet that he was working with another broker. Mr. Merton invited the buyer to see a $1.5 million apartment down the hall, seeing no reason to tell him that the seller would not accept any buyers represented by other brokers.

When the buyer tried to have his own agent, Steve Goldschmidt of Warburg Realty, accompany him on another look at the apartment later in the week, Mr. Merton said he would show the place again only if the buyer agreed in writing not to use another broker unless he was willing to pay Mr. Goldschmidt’s share of the commission.

Mr. Goldschmidt accused Mr. Merton of unfair dealing. Mr. Merton said the buyer should have disclosed his relationship with Mr. Goldschmidt earlier. The buyer, fed up with the wrangling, decided he wasn’t interested.

Last month in Southampton, N.Y., Ms. Saatchi said, a broker from Manhattan called an owner of a house listed at $10 million to arrange a showing, posing as a friend of the prospective buyer. When a local broker who had previously worked with the buyer got wind of the conversation, a battle ensued over who would get the commission if a deal was reached.

"They were more concerned about the commission and the protocol than actually coming to a deal," Ms. Saatchi said. The buyer, meanwhile, balked at the price and never made an offer.

Ms. Saatchi said that so many lawyers, builders and others have recently obtained real estate licenses that everyone wants a referral fee, normally taken out of an agent’s commission. "It’s like you make a deal and everybody has their hand out," she said.

Some listing agents offer kickbacks to buyers who agree to drop their own brokers. Katrina Campins, an agent in Miami who was fired last year by Donald Trump on "The Apprentice," said she recently sent a client to see a condo with a listing agent she thought she could trust. After the showing, though, her client told her the other agent had said that " ‘if I didn’t use you he would give me a few points of his commission back,’ " Ms. Campins said.

Some house hunters complain that brokers are so concerned about pleasing the seller that they run roughshod over the buyer, even when the buyer has hired the broker. When Nazli Yuzak bought a town house in Gaithersburg, Md., this year, she hired a friend’s husband as her agent. After her offer of $385,000 was accepted, an appraiser said the town house was worth $35,000 less, so Ms. Yuzak said she asked her agent to help renegotiate the deal.

He pushed her to find another appraiser instead. The seller, who worked for a mortgage company, arranged a loan for Ms. Yuzak at the higher price. Ms. Yuzak said she believes she overpaid.

Some buyers’ agents misrepresent their clients to sellers. Janet Gushue, an agent in Rancho Cucamonga, Calif., said an agent recently told her that the buyer had the down payment in cash in the bank when in fact it was contingent on the sale of the buyer’s own home.

"Five years ago, probably one in 20 offers that would happen," Ms. Gushue said. "Now you can just depend on some of the offers you receive on each property" having a hidden contingency.

Similar problems have plagued some deals in New York. Sharon Held, a broker with Corcoran, said she recently represented the seller of a downtown loft co-op who accepted an offer from buyers who appeared financially qualified. After signing the contract, the buyers submitted financial information to the co-op board, and Ms. Held said she quickly realized they did not have the assets they had claimed during the bidding.

"The new brokers don’t properly know how to qualify their customers," she said.

Meanwhile, the prospect that the market may cool has some insiders predicting a return of better manners. "When the market is not very good," said Michele Kleier, the Manhattan broker, "the brokers are all very nice


Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: