Undercover Broker: Farming for Customers and Commissions

This is the second edition of Undercover Broker, where we share interesting insights into the mysterious life and career track of a Manhattan apartment broker.  The first edition discussed the myths and truths of broker bait and switch tactics, how it happens, and why declaring your loyalty to one good broker might be the best move.

Today’s topic is far more important to the new or aspiring brokers who follow us.  How do brokers find their customers?  Many extremely intelligent  and capable individuals seem to shy away from the real estate profession because of this hurdle.  They fear that no matter how good they are at negotiating complex deals, visualizing remodeling efforts, or analyzing cashflow numbers, every transaction still needs a client.  In fact, having a client who trusts you tends to compensate for deficiencies in almost all of the other necessary broker skills!

How Brokers Farm for Clients (Excluding New York City Rentals)

So what do we brokers do to find these customers?  The standard myth is that brokers spend their free time farming for leads, where “free time” means any day we aren’t actively working with a client.  Supposedly, farming encompasses various sources, some of which include (from most desirable to least):

• Referrals from satisfied past clients
• Referrals from friends, neighbors, and business relationships
• Holding open houses and meeting buyers / renters who want something else
• Leads from your heavily-trafficked website / blog / news column
• Partnering with a seasoned pro who hands you smaller “teaching cases”

By now, you must be pretty depressed if you are a new agent, because if you actually got your leads from any of these sources, you certainly don’t need much help!  Ok, the next tier of farming is largely unsolicited asking for business, and it will certainly feel like dirty work at first.  Many new real estate agents dislike it.  You will be turned down by almost everyone, sometimes rather impolitely.  It may even feel rude at times, imposing yourself on people asking for their business, and the way I’ve seen some brokers behave, it IS downright obnoxious.  Here are some examples:

• Cold call owners who are doing a lame job on their own and offer to advertise it professionally
• Similarly, go to an open house and tell them how much easier their lives would be if you held the open house
• Also similar, find a bad newspaper ad from an owner, convince them it was so bad only you saw it
• Send lots of post cards to your neighbors about why they should use your services

If you weren’t afraid of turning sleazy and slimey before, the thought of doing the above must make you worried you even bothered to take the 75 hour real estate classes.

What Makes New York Different?

BUT WAIT!  Time Out!   You are in luck.  Maybe in every other part of the country, farming would be a huge part of the job, but fortunately this is Manhattan and you are an aspiring rental broker (or you are here to spy on what brokers do).  Amazingly, in Manhattan it is absolutely possible for brand new brokers, with no connections and no rolodex of clients, to add lots of value and gain leads from Day 1, without a single unsolicited cold call.  That’s because unlike real estate everywhere else, Manhattan rentals have two unique concepts:  open listings and previewing.

Open Listings

Brokers exist to help market properties, but the industry believes in pay-for-performance, aka commission paid when the transaction closes.  However, to ensure our efforts marketing a property can’t be stolen away, we brokers insist exclusive rights to lease / sell (and allows co-broking, an important and intriguing topic for another day).  At least, that’s how it works everywhere else in the country.

In Manhattan rentals, the market is instead dominated by the more peculiar Open Listing agreement.  That means the landlord is free to ask you to market their apartment and find renters, but they also intend to ask every other broker in the city to do the same.  The first broker to bring a renter and sign a lease gets the commission.   And to make matters a bit more interesting, the landlord also reserves the right to set up their own leasing office and find renters directly!  Oh what fun!

While that sounds like a horrible deal to the brokers, there is a bright side to all the open listings… it means there is a lot of non-exclusive inventory out there, begging for anyone with a real estate license to bring them a renter!  All you need to do contact a bunch of landlords, introduce yourself,  check out their available NYC Apartment Rentals, and build your own personal inventory.  In Manhattan broker speak, we call that previewing.

(to be continued…)