Eight Lies Brokers Tell—Or Do They?
We speak with a broker and an attorney to get the real story.
Real Estate can be a cutthroat business, especially in New York City where buying an apartment feels like you’re spending a small fortune—mostly because you are. Your relationship with your realtor is everything and you are likely to sit and wait for their call like a jilted lover. In an article written by Steven Wagner, a New York City co-op and condo attorney with Wagner, Berkow LLP, he examined how a buyer may be lead astray by an, um, “overly zealous” broker. We spoke to Julie Zelman, co- founder of Rothschild Realty in Manhattan who weighs in on those same points from a brokers’ perspective. Yeah, this is gonna be interesting.
1. ‘You’re going to lose the deal.’ Truth or tactic?
Wagner: “An unscrupulous broker will say or do anything to get the deal so they might say there’s another buyer, and you’ve got to raise your bid if you want to beat them. Often it’s true, but sometimes it isn’t.”
Now, is this a sales tactic or push to move forward?
Ms. Zelman: “If an apartment is well priced your broker may advise you to put an offer in right away or to go over ‘ask- price’ in order to secure it: believe them. Unethical Manhattan REBNY brokers are the exception, not the rule. With most real estate platforms, everybody has the information they need to figure out how much an apartment is worth and in what areas where bidding wars are prevalent.”
2. ‘You can sublet after you buy, no problem.’ Find this out before you buy.
Mr. Wagner: “The broker might say ‘don’t worry, they have a lenient sublet policy,’ but don’t rely on them. It’s not even that they’re necessarily being unscrupulous, but policies can change, and they may not be aware.”
Ms. Zelman: “The majority of coops in Manhattan have sublet rules. It’s very easy to find out what they are and most Manhattan condos require a minimum of one year leases, although there are exceptions. A buyer’s broker wouldn’t lie about this as he would quickly lose both credibility and his client.”
3. ‘You’ll definitely be able to do those renovations.’ Absolutes are the enemy.
Mr. Wagner: “Many buyers come in and want to renovate, and certain brokers will tell them, ‘Don’t worry about it, those updates won’t be a problem,’ when really they have no clue about the building’s alteration policy. They only way to really know whether your desired renovations will be a problem is to submit your plans to the building.”
Ms. Zelman agrees: “Brokers know that condos and coops have rules about this and you have to submit forms for permission. I find first-time condo and coop buyers are aware there are rules that shareholders need to abide by. A broker in a city (like New York) that is predominantly made up of coop and condos would probably not lie about this.”
4. ‘The building is in great shape.’ The truth is in the financials.
Mr. Wagner: “One thing they (buyers) should look at is money spent on repairs. For instance, if a building had half a million dollars’ worth of plumbing repairs in a year, that could indicate that more expensive work will soon be needed on the building’s plumbing. Often, if repair expenditures are high, that means a larger, more expensive improvement is coming. Your attorney should look into the section of the building’s financial statement that deals with cash flow, and if they’re not regularly spending much on maintenance, that should serve as its own red flag.”
Ms. Zelman says it’s a waste of time for a broker to say: “…’great financials’, if the attorney is going to turn around and tell the buyer something different once the contract is out. I think brokers are up-front about this and it’s the buyer’s choice as to whether or not he wants to move forward with the deal.”
5. ‘Don’t worry about buying in a land-lease building.’ What the heck is a land-lease?
You’re not alone if you have no idea what this is. Land-lease buildings are more of a rarity and according to both Mr. Wagner and Ms. Zelman, many brokers don’t have the experience in this arena, nor are they familiar with the details.
Mr. Wagner: “The leases are very long and complicated and there are different forms depending on when they were created.”
Ms. Zelman agrees: “Most brokers don’t know the first thing about land-leases. Maybe some are misdirecting clients but most I know tell their clients to do the research if they can’t help them.”
6. ‘Your lawyer is holding up the deal.’ Is he really, or is he messing it up?
Mr. Wagner: “As a rule, it takes a couple of days for an attorney to turn around a sales contract, and sometimes during those couple of days, the brokers will be telling their clients ‘the lawyers are holding up the deal’. Instead of panicking that your deal is about to fall apart, take a deep breath. It just takes a little time for a lawyer to read the contract, and put together a rider.”
Ms. Zelman is wary to call this a broker’s ‘lie’. Instead she says, “It’s a red flag that a broker doesn’t know how a deal works. As an attorney, I’m assuming the attorney gets blamed by some brokers for destroying deals, which some attorneys do, due to lack of knowledge. The best advice I’d say is use a real estate attorney who is very experienced in Manhattan coop, condo, townhouse, or new development deals.”
7. ‘The taxes will be fine once the abatement ends.’ This isn’t a brokers’ forté.
Mr. Wagner: “This is technical stuff, and very often the brokers have no idea about this, so they’ll say, ‘Don’t worry about it. Taxes go up every year, rates change, so no one really knows what they will be.”
Ms. Zelman agrees that this is probably not many brokers’ specialties, so they may be misinforming their clients here. She says, “Buyers should know that taxes get reevaluated and anything can happen after a tax abatement ends. But the estimated number is often correct or close, and taxes aren’t guaranteed in any building so tax abatement or not, buyer beware.”
8. ‘It’s a done deal’
Mr. Wagner: “Until such time as there’s a contract signed by both parties, it’s not a deal. Someone could always come in at the 11th hour offering more, and the seller has no obligation to the buyer to stick to the plan if something better comes along.”
Ms. Zelman: “I feel if anything a broker may lie in the other direction to make sure their client has back-up choices. I know no broker who would endanger their clients in this manner. I find that a broker may exaggerate his accomplishments or over-estimate the price in order to please the seller and get the listing. Maybe he’ll tell the potential seller that she can show it to more people and will attract more traffic than the competition. These are all a possibility. The way to avoid being misguided by brokers or lawyers is to hire someone via testimonials by people you know. If this isn’t possible, meet with at least three brokers and ask lots and lots of questions.”
How cool to be a fly on the wall for that conversation? Some very helpful tips from both perspectives. The takeaway from this might be no surprise to most. In the end, while it is important to have people you trust as your advisors, in the end, it is really up to you to do your due diligence. Because ultimately, it’s your house and your money. Good Luck!
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