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Are Brokers Necessary when Purchasing Co-ops and Condos in NYC?

Guzov's Good Advice, Real Estate Legality

The real estate market is rapidly changing, especially in New York City, with development booms in each of the five boroughs. Real estate brokers are finding themselves less and less relevant amongst rent seekers due to the influx of companies filling their gap. However, when it comes to purchasing your co-op or condo, brokers serve an important role and cannot be streamlined out of the equation.

Financially, it may be tempting to bypass a broker and avoid the fee – especially in New York City, where a brokerage commission is commonly six percent (6%) of the sales price.  Nest Seekers International explains the benefits of buying or selling property with a broker. There are numerous forms that need to be completed correctly and carefully, including “mortgage documents, disclosure forms, deeds, insurance policies, inspection reports, and closing statements, which are complicated and government-mandated.” Brokers are real estate specialists. They know the ins and outs of the procedures and are also up to date with the frequent changes. They will have greater insight into the property and surrounding area and will ultimately make the process of purchasing or selling your property easy, efficient, and most of all compliant with legal regulations.

For rental agreements however, companies have been very successful by making the process of acquiring a lease as simple as possible. A sharing economy has allowed individuals to conduct peer-to-peer business without intermediaries. And unfortunately for NYC rental brokers, multiple startups are using apps to bypass the role of real estate agents and brokers. Companies such as Rentlogic and Rental Geek allow users to search and apply for apartments hosted on their apps. Why is this appealing? There is only a $25 fee.

Indeed, online real-estate platforms have become the trend for rentals, necessitating brokers’ adjustment to the new real estate regime. In early 2016, the online real estate marketplace, Zillow Group (founded by former Microsoft executives), acquired Naked Apartments for $13 million. Naked Apartments brings rental seekers, landlords and brokers together in one easy platform. In order to compete in this evolving industry, the real estate brokerage Bond New York pays for advertising on these sites to gain business and they successfully meet their demands.

What does this mean for landlords during a development boom? These rivalling companies are making it more difficult for landlords to advertise their property without using their sites. Currently, supply is outpacing demand for apartments in New York City. In some cases, Landlords have been desperate to find tenants to such an extent that they are offering “no rent” incentives along with luxury amenity packages. The company Nestio, an online platform for residents, landlords and brokers, helps landlords advertise their property to the appropriate demographic, thereby reducing the time it takes to close a deal. For brokers in New York City to stay relevant in real estate, they need to step up their game and shift to meet new demands. The brokerage firm MDRN Residential for instance is developing a new app called Stoop to assist landlords in selling their property. This will give people the ease of using an app and the experience and knowledge of local brokers. MDRN Residential’s CEO, Zach Ehrlich, explains that “[t]he future of brokerage is after the lease.” Brokerage firms are evolving to provide services that go beyond their traditional roles to facilitate their breakthrough in the modern real estate market.

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