What Is a Co-Broker Arrangement and What Can It Do for You?

It's a proactive way to pursue the sale of a property. One broker supplies an exclusive listing from the seller and the other brings in the customer. The selling broker will have his or her written exclusive agreement with the owner that grants permission and obliges him or her to distribute it to other New York City brokers if he or she is a member of the Real Estate Board of New York (REBNY).

Now, you have the aforementioned exclusive apartment (via broker 1) that is matched with the potential buyer (via broker 2). If the two parties make a "love connection," then the would-be buyer goes before the board and (hopefully) it's a deal.

After that, the successful brokers split the commission. Because of this split — fifty/fifty of some percentage of the sales price; six percent is the commission rate I see most often quoted — one broker will get three percent, which must be split with the firm for which the broker works, also called "the house." This arrangement illustrates why it's good to maintain a high commission rate so you get maximum attention from the brokerage community.

Why use two brokers? It is, quite simply, the most powerful marketing tool at a broker's disposal. It expands reach and makes it more likely that you will get the appropriate buyer.

These groups have less of an incentive to be involved in co-brokering: independent brokers, 100-percent commission types of operations (broker keeps 100 percent of the commission, but pays some kind of rent and perhaps other fees to its office), and non-REBNY members. As they do not need to "split with the house" they can reduce their commissions to get an exclusive listing, but then have little left over to offer outside brokers. To hire one of these is, to me, a costly way for a seller to save money: given that most people are not in the real estate business, it may not occur to them that they are not getting the exposure they would otherwise get through robust co-brokering and a heavily funded marketing capacity (to which the lone or small operator may not have access).

A broker's success is based on the incoming stream of listings and sales; no one deal makes a career. But a badly handled one could do a lot of damage. And that's important to remember: a good broker goes for the deal that is best for the client, whether it is a "direct" arrangement (no other broker involved) or involves another broker's customer. That's where a broker's fiduciary obligation lies, and how well he handles the sale affects his standing.

Reputation is important to the seller and the broker. A good reputation helps to bring in other brokers to share their resources with you, to have them open your e-mail announcements, attend your open houses, schedule appointments with you, follow through in sensitive and tricky negotiations, and help close a transaction. Co-brokering increases the chance of a sale; this is why so many of New York City's residential sales get made with two brokers involved. Remember: there are more than 13,000 licensed sales agents, associate brokers, and brokers in New York City. If they work together, it increases your chance of getting the best deal.

However, if you, as an owner, have some really solid reason to think you will not benefit from or do not need the marketing punch delivered by co-brokering, then go for it: get a broker to give you the lowest rate possible. I cannot think of too many examples where that would make sense.

Siim Hanja is a licensed associate real estate broker at Brown Harris Stevens.

Illustration by Marcellus Hall