Who Does Your Broker Actually Work For?

Last month, on an earnings call, the CEO of the largest residential brokerage in the country asked a question he seemed to think answered itself: what seller wouldn’t want their listing agent to bring their own buyer?

Appraiser and longtime market analyst Jonathan Miller took that question apart in a recent piece on his Housing Notes newsletter, When “Serving the Seller” Means Serving Yourself Twice, and it made the rounds in our office. One broker’s reaction was that “it’s dense with agency language but a clear picture of a conflict of interest that is built into how the big corporate brokerages market themselves.” My view was that it’s worth translating for our clients, because the answer to that CEO’s question is: almost none of them, once they understand what’s being asked.

Here’s the short version of Miller’s argument, and then three things we want to say about how we run this firm and why that matters to you.

What the piece actually says

The business model under discussion works like this. A large brokerage encourages its agents to hold a new listing off the public market, first as a “private exclusive” shared only inside the firm, then as a limited “coming soon,” and only later, if at all, on the open market. While the listing sits inside the firm, the odds that the buyer also comes from inside the firm go up sharply. Miller cites the company’s own data showing off-market sales end in dual agency, where one brokerage collects both sides of the commission, 72% more often than on-market sales, 31% versus 18%.

That’s the point. More commission per transaction is what moves a public company’s stock price.

The cost falls on the client. A seller whose home is shown to one firm’s buyers instead of the whole market is not getting price discovery; they’re getting whatever that pool will pay. A buyer working with an agent whose firm also represents the seller is not getting an independent negotiator. And when one firm dominates a market, as this one does in several, Miller notes that a large share of inventory can be effectively invisible to the public. Dual agency is restricted or banned in a growing list of states. In New York it is legal with informed written consent, which in practice means a form most people sign without reading in the middle of a very stressful week where the proper analysis is often dismissed for ease.

Miller’s line that stuck with us was the simplest one: a fiduciary can’t negotiate the best price for both sides of the same deal.

Where we stand

We’re a small firm in Brooklyn, so we’ll skip the part where we pretend to be shocked. The incentives Miller describes exist at every brokerage,although very rare including ours. The difference is whether your business is built on them. Three things we want our clients to know.

Our loyalty isn’t split. We do not build our business plan around double-ending deals. On occasion, a buyer walks into one of our open houses unrepresented and wants to make an offer, and New York law lets us handle that with full disclosure, so we do it carefully. It is not, however, a target, it is not a strategy, and no one at this firm is measured on it. When we represent you, whether you’re selling a two-family on Van Brunt or buying a co-op in Cobble Hill, our job is to get you the best outcome on the other side of the table, and we don’t have a second client sitting there whose interests we’re also protecting, generally. Fiduciary duty is a legal term, but the plain-English version is that you should never have to wonder who your agent is rooting for or who’s best interest they have at heart; because here at Realty Collective we always put your best interest first.

Your listing goes to the whole market. We don’t run a private exclusive network, and we don’t hold your home back from the public so that our own buyers get first crack. Sellers hire us to find the buyer who will pay the most and has the best terms, and that buyer is statistically far more likely to be represented by some other agent at some other firm than to be sitting in a database. Maximum exposure is how you find out what your home is actually worth. For our buyers, the same principle runs the other way: we’re not steering you toward inventory we happen to control. We’re looking at everything, including the listings the big firms would rather you didn’t see until their own buyers have passed.

We answer to you, not a stock price. Realty Collective has no shareholders, no earnings calls, and no quarterly revenue-per-transaction target to hit. Our broker, Tina, put it best in our office thread: she’s grateful to work at a small, client-focused agency with nobody upstairs to answer to. This is the structural reason our incentives and yours point in the same direction. The firm in Miller’s piece is answering to Wall Street, and Wall Street rewarded it for finding a way to get paid twice on the same house. Nobody rewards us for that. We only get rewarded when you come back for your next real estate transaction, or send your neighbors, friends, and co-workers to us as referrals.

A note on the bigger picture

We write a lot on this blog about who the housing system serves and who it extracts from. This is a prime example of what is wrong with this industry to us. Private listing networks don’t just cost individual sellers money; they pull inventory out of public view, which means comps get thinner, appraisals get shakier, and the people with the least access, first-time buyers without an inside agent, are the ones locked out of the best-priced homes. Not to mention how this adds to the housing shortage headlines when adequate percentages of the market go unlisted. Congress has started asking questions. So should you.

If you’re getting ready to buy or sell in Brooklyn, ask any brokerage you interview two questions. Will you put my listing on the open market from day one? And if you bring me a buyer, who represents me? If the answers take more than a sentence each, keep interviewing.

Interested in more? Join us for our monthly workshops: Buying in Brooklyn and Selling in Brooklyn to get all your questions answered and learn the inside scoop on how to navigate the Real Estate market in Brooklyn and beyond.