Location: Does Craigslist scare brokers, in the sense that it opens up access to real estate information?
Mr. Baum: No, Craigslist doesn’t scare me; in fact, I think that Craigslist is fantastic, if used properly. The problem with Craigslist is that it lends itself to ridicule because there are many posts that are either false or absolutely untrue, and there are scams where people have lost thousands of dollars because they think they are renting something when they are not. So Craigslist has its flaws in that respect, but at the same time, the opening up of information I personally think is a great thing.
In the past, brokers predominantly existed because they were the source of the information, and now that information is free to those that have the time to look for it; now it is much easier to find property that you don’t need brokers for. I personally think that brokers will be around for a very long time to come—they are not going anywhere. The issue is simply a matter of how many there will be. Manhattan is not one of those markets where it is so easy to navigate. Landlords have lots of different policies; they have requirements and obstacles to overcome to rent a property. When you have to go through a [co-op] board process, putting together that paperwork and navigating all of the pieces of the puzzle to make that work is somewhat daunting, especially for people who have never lived in New York before.
Do you think rental brokers will eventually drop their commission cuts, then?
Could I potentially see brokers charging less? I guess it depends. Like any other market, it depends on what the market is willing to bear. What are people willing to pay you to help them find an apartment? Fees are negotiable. I’ve never met a broker who refused to negotiate on their fee. Because we all know that there are people out there who are savvy; we are certainly not trying to pull the wool over anyone’s eyes. But most of us would rather do business and make money than hold out for the last dollar and not make money. The Internet forces us brokers to offer something to the client. You have to be able to provide your client something. Just to open doors is not enough anymore.
New York is a good place to be more a morally compromised broker. Is there a way to clean that kind of stuff up in-house?
It starts from the management of each individual broker at the organization and how well they monitor their staff and how well they look after or condone what people do. I’m sure it’s hard for people to let go of the potential money they would be making and say, ‘You know, I am going to take the high road.’ … It really comes down to the brokers themselves and making sure that people are not doing things that are unethical practices in business.
That being said, the unfortunate truth is that clients are no better. There are times when a client deliberately utilizes your service from an informational standpoint and then goes around your back and you lose your fee. I would say that the reputation of brokers is something that we can work on cleaning up.
Let’s talk about the rental market. Is there going to be a substantial cut in rents anytime soon?
I try not to hypothesize about what is going to happen in the future. Our information and our reports are about trying to understand what is happening right now. And then we look at any trends that may have happened in the past as guidance for the future. I don’t know what is going to happen with the rental market. All I know is that if I was a property owner today, I would be spending a lot of time analyzing the comparable property out there to my own, trying to get a feel from brokers about what the demand for property is, so I can understand and measure the feedback so that I could properly assess what price point I am going to get for my property. The question is, do we have a more significant drop in years past, and does that have a long-term effect going into the market next year? I guess we will find out.
Looking at what happened on Wall Street with the credit-rating agencies, is it hard to be an honest broker of information in the real estate industry? Is there ever pushback from people?
Yeah, there is a lot of it. The intention is not to be a bear, or a doomsayer. If you look at what happened with us … in the credit market, it wasn’t just that there were wrongdoings done, it’s that it was taken to such an extreme. People by their inherent nature want to take advantage of good opportunities, and unfortunately, take it to extremes. And it is the extremes that end up causing all the damage.