Real Estate Myth Number 1: The Boutique Broker

Your luxury apartment or townhouse is genuinely spectacular. It's a multi-million dollar home, and when the time comes to sell it, you're not going to entrust the sale to just anyone. The broker who represents your property must be every bit as refined and pedigreed as your lovely home. This is clearly the milieu of the "Boutique Broker"

"Edwin Paddington Snodgrinckle" of "Snodgrinckle Elite Luxury Residences" is "the" most prestigious broker in the city -- or so you hear -- and fortunately for you he's been able to squeeze you in this Thursday so he can evaluate the suitability of your humble abode for inclusion in the Snodgrinckle stable of superior luxury homes.

Snodgrinckle arrives punctually, and nods casually at your tastefully decorated home. He remarks that it reminds him of the well appointed servant's quarters of the Rockefeller mansion; where he regularly attended black tie affairs when New York was "New York!".

Oh, it gets better. Old Edwin here has done $500,000,000 worth of business over his career and he conspiratorially -- "I really shouldn't tell you this, but ..." -- rattles off a gaggle of names from old New York Society whom he has represented.

Ask Mr. Snodgrinckle how he plans on marketing your property and he'll wax poetic about the thousands of buyers unique to his rolodex gathered over the course of his 45 years in the business. He'll also tell you that you'll get the best of both worlds; his premium service and the service of all the brokers in Manhattan since he distributes your listing to all the "big name" pedestrian firms.

Flushed with excitement from artfully spun tales of patrician hob-nobbing, and overwhelmed by his 45 years plus in the real estate business, you practically beg for the honor of having him represent your property.

Sounds like a dream come true to me, so what's the catch? Where is the myth?

1. Unfortunately for you the Boutique Firm has no real advertising and marketing budget. They can not hope to reach the number of qualified buyers that the largest firms do. Instead they play up their "expertise" in your type of luxury property as if this will somehow mitigate the fact that they can't and don't advertise extensively. All the alleged expertise in the world is completely worthless if buyers aren't exposed to your listing.
2. Their one page, out-of-date, homemade website; (if they even have a website); is virtually invisible to anyone searching for a property. It may appear on page 2,137 of a Google search, but who realistically looks past page 2 (at most) of the results? No buyer searching for a luxury property is ever going to find your listing on the Internet.
3. The only advertising you will likely get with a boutique firm is the occasional ad in the New York Times. Unfortunately the role of the Times as the "New York Real Estate Bible" has almost completely evaporated in recent years along with its precipitous decline in circulation. My listings typically attract over 10 times the number of visitors to my company website than I receive on the Times site! (Yes, the big firms advertise on the Times too -- we have the budget to advertise on many, many venues.)
   
4. While it (should) be true that Mr. Snodgrinckle will share the listing with other brokerage firms, the other firms will not advertise it on their multi-million dollar prominent websites, nor will they publish it in magazines, newspapers and international venues since it's not their listing. Since all the major firms share their listings, it begs the question why not invest your $500,000 commission with a firm that can actually promote your listing around the city, country and world, since all the one-man-bands like Snodgrinckle will still receive the listing information anyway?
5. Mr. Snodgrinckle almost certainly has a rolodex, but buyers at this level do not "belong" to one broker. If you're a player in New York real estate, you appear in many rolodexes. When your listing is disseminated among all the brokers in New York, you can be absolutely sure that Mr. Snodgrinckle, all the other "boutique brokers" and all the brokers from the big firms will be on the phone to their best buyers within seconds because each one of them will be competing to be the first to reach the big players and therefore share in the co-broke commission.
6. Today's buyer is younger, more educated and computer savvy. They do not read print ads. They use the Internet, and they search on their own. Having no public presence other than a newspaper ad borders on ludicrous. You would be doing yourself a egregious disservice by not doing all you can to reach these buyers.
7. Snodgrinckle's track record of success over 45 years is most likely just that: Snodgrinckle's success, not his seller's! If Snodgrinckle sells a $10,000,000 townhouse directly to someone on his rolodex, he collects $600,000. That's a tidy sum. But what if more buyers saw the property? Buyers not in Snodgrinckle's rolodex, but instead brought by a co-broker? Maybe the townhouse would have gone for $12,000,000. In this case Snodrinckle would "only" make $360,000 since he would be splitting the commission with a co-broker who brought the buyer to the deal. Can you see how it's in Snodgrinckle's best interest; and specifically not in your best interest; to keep the deal close to the vest?
   

This is just the tip of the "boutique brokerage" iceberg waiting below the surface to sink your ship. If you are considering the services of a "Mr. Snodgrinckle", please reach out to me so we can discuss it further. It simply makes no sense to pay such a significant sum of money in commission to someone who doesn't have the capablility of bringing you the best buyers so that you will receive the highest price for your property.

Reach me at: michael.sussilleaux@gmail.com

I Read the News Today Oh Boy!

Unless you live under a rock, you are undoubtedly cognizant of all the bad news of late. The first quarter 2009 Manhattan real estate sales statistics recently came out, and predictably the news was that sales are down. No surprise there.

What is surprising is that signed contracts are on the rise. Hmmm, "So what?" you may ask. "How does this affect me, and why should I care?"

If you were to "buy" or "sell" a property today, you would sign a contract of sale. This is really what the "sale" is. All the terms of the transaction are spelled out in the contract and the Buyer and the Seller both sign the document to acknowledge their agreement to the terms and conditions.

Can you move in to a property you just "bought" today by signing a contract? Heck no. You've got to "close" the deal. A closing is where the Buyer & Seller as well as a bunch of lawyers and other folks sit at the "closing table" and a myriad of documents are signed, fees paid, mortgages issued and monies exchanged. Oh, and at the end of it all, the Seller has his money and the Buyer has the keys.

The closing typically happens two to four months after the contract is signed. This creates a significant lag between when a property is "sold" and when the property "closes". The media reports on closed sales, not contracts signed, so for all intents and purposes, the media's perspective of the housing market is months behind. This lag is exacerbated by the fact that the reports come out quarterly, so if a deal "closes" in the beginning of the quarter, it won't be included in the quarterly statistics until almost three months later!

The news that contract signings are up validates my, and my colleague's "real-life" experiences that there is significantly more activity in the market than last year, and even the early part of 2009.

No one can say for certain that we have hit bottom, but the indication is that we are either there or very close since activity is on the rise. The sad thing is that Buyers who are waiting for the "official" bottom to hit, will only find out about it long after it has actually occurred. By then it may be too late.

You may want to re-read this fascinating article if you're a Buyer.

Reach me at: michael.sussilleaux@gmail.com