Jack Ryan, a self-described King David who believes real estate brokers aren’t deserving of their entrenched 5.5% to 6% percent commissions, is waging a war against the powerful National Association of Realtors. NAR is hardly a pristine organization, having just settled unfair competition claims relating to its requirement that seller agents must offer compensation to all buyer brokers as a condition for listing properties on its multiple-listing database of homes for sale. NAR on March 15 agreed to scrap its rule and pay $418 million to compensate sellers over a four-year period.

I’d be remiss if I failed to mention NAR insists that its agreement to fork out $418 million “makes clear that NAR continues to deny any wrongdoing” and that interim CEO Nykia Wright says the goal of her organization has always been “to preserve consumer choice and protect our members to the greatest extent possible.”

NAR photo

I suspect NAR places more emphasis on protecting its members than preserving consumer choice. Ryan agrees. That’s why he founded REX, a tech company looking to disrupt the real estate industry with a website that allows consumers to buy and sell homes outside the NAR database and avoid paying hefty broker commissions.

“Why is it that every middleman’s fees are down but residential real estate fees?” Ryan posited in an interview with Wall Street Journal columnist Allysia Finley. “And why is it always the same fee whether it’s a $300,000 home, a $3 million home or a $30 million home? And why is it the same if it’s a hot market or a cold market? And why is it that a first-year associate charges 5.5% and the 30-year grizzled vet who’s done 500 transactions charges 5.5%?” In most other developed countries, few buyers use brokers and overall commissions run in the neighborhood of 2%.”

Ryan implies it doesn’t take very much talent or smarts to sell real estate.

“Is it really true that 1½ percent of the workforce should be real estate agents in America?” Mr. Ryan asks. “When the price for the job drops to what it should be, then people are going to start doing other things with their time, which will be much more productive.”

Ryan also believes the practice of making sellers of homes pay commissions creates an inherent conflict of interest because there is little incentive for buyer brokers to negotiate a lower price. Typically, the broker selling a home will split their commission with the broker representing the buyer. Ryan maintains that buyer agents steer clients away from homes that offer lower commissions. 

I’m loathed to issue a blanket defense of all real estate brokers, and agree with Ryan that many, if not most, aren’t deserving of their lucrative commissions. But some real estate agents are worth their weights in gold, and I’ve been blessed to have worked with some of them. Real estate is something I’ve done well in but only because I listened to brokers who knew a lot more about their respective markets than I did.

Meet New York’s Judy Rubin

My first real estate purchase was in the mid-1990s when New York City’s real estate market was in the early stages of recovery from years of decline. New York in those days was a complicated market because most of the inventory was in so-called co-ops rather than condos. Unlike condos where owners outright own their units, buyers of New York co-ops merely own shares of a corporation that owns the entire building. As a result, co-op owners are dependent on the finances of the corporations that owns their buildings, adding another layer of risk.

I was a babe in the woods buying real estate, let alone New York City real estate, so I called a lawyer named John Delmar I saw quoted in the New York Times. In those days, the Times was a reputable publication and I figured if it was relying on Delmar’s expertise, the guy must be credible. Delmar referred me to an independent broker named Judy Rubin.

Judy Rubin

Rubin, whose NYC breeding was readily apparent, and I didn’t initially hit it off. I gave her my unnegotiable criteria for what I wanted: A stable and well-financed co-op on the Upper East Side, a unit with lots of natural light, and no “if onlys.” An “if only” was an undeniably great unit if only the living room view wasn’t blocked by a garage building. I wanted the UES because in the 90s the area’s real estate was the most stable.

I arranged to meet Judy on a weekday, and expected I’d spend hours viewing dozens of units. Rubin showed me all of three properties.

“That’s all you are going to show me?” I recall asking.

“Do these properties not meet your criteria?” Rubin retorted. “That’s all the UES inventory that’s available within the parameters you gave me.”

Admittedly, all the units Rubin showed me met my criteria, but I thought it prudent to see more than three units before making the biggest purchase of my life. I mistakenly thought that Rubin was either too lazy to show me more properties, or perhaps as an independent agent she didn’t have access to the inventory that brokers at major firms enjoyed.  I contacted one of the big-name NYC agencies and was placed with a broker who was happy to run me ragged showing me more than a dozen properties.

The broker subjected me to what I later learned was a tried-and-true real estate sales tactic, at least in New York City. The initial properties she showed me were incredibly depressing (you’d be amazed about some of the abodes in NYC), so that when I finally viewed some half-way decent properties, I’d perceive them as being akin to the Taj Mahal. Not one of the properties the broker showed me even remotely was of the quality of the three that Rubin had shown me.

Tail Between My Legs

I’m fortunate that Rubin didn’t hold grudges and was willing to continue working with me despite our rough beginning. The first property Rubin showed me was far-and-away the best I’d seen, and it was still available. I wanted to make an offer.

Rubin had done on her homework and understood why the unit hadn’t quickly sold despite being fairly priced. The owners wouldn’t allow brokers to show the unit unless they were home, which wasn’t often because they had another property. Rubin advised me to submit a slightly lower bid than the asking price and insisted not to go lower because the owners were classy people and would view a low-ball bid as an insult.

I heeded Rubin’s advice and made her recommended offer. The owners countered with a slightly higher price, and Rubin advised me to take it, which of course I did.

NYTimes, December 6, 2013

One cannot buy a New York City co-op without being approved by the co-op board, often comprised of power-hungry Nosy Parkers who enjoy delving into the finances and affairs of strangers. Rubin cautioned me that my desired property was in a building with a tough and discriminating board, particularly regarding a buyer’s finances. She advised me there were some potential red flags with my finances and warned me that “None of your f—ing business” wasn’t an acceptable response when asked about some of my spending habits.

I was well-prepared for the board’s questions, and thanks to Rubin’s prep, I easily passed muster. As for the value of the property Rubin found me, a month after I closed, she called me to say that NYC’s real estate market was fast recovering, and she could easily get me $50,000 more than what I paid if by chance I wasn’t enjoying my property.

Heeding A Warning in Barron’s

I was reasonably happy during the 12 years I lived in my UES dwelling, although I would have preferred living in Tribeca as I was more of a downtown sort of person. But in the summer of 2008, I read an alarming article in Barron’s, which in those days was still a quality publication.

Two subprime Bear Stearns mortgage funds had collapsed earlier in the year, and Barron’s published an article quoting an expert with an impressive track record warning that the issues responsible for the collapse of the Bear Stearns’ funds were systemic, and a bloodbath was about to ensue. At the time, I represented a high-profile securities arbitration attorney who had already identified Wall Street’s peddling of subprime mortgage securities as his next big payday.

I called Rubin and told her I wanted her to list and sell my unit ASAP. Rubin demurred, advising me that New York was an island with limited inventory, and that any market downturn would be short lived.

“Stop being a worry wart,” Rubin advised.

By coincidence, I struck up a conversation with a woman at the gym who said she was part of this award-winning real estate team at one of New York’s best-known firms. The incredibly attractive and sexy woman was elated when I told her I was looking to sell my co-op. She asked if she could come by with her colleagues to view the property.

Chez Starkman, New York

I was underwhelmed from the get-go. The woman and her two male colleagues looked like they emerged from the pages of GQ and Vogue, but I was turned off when they showed up 20 minutes late. They told me what they thought my unit could fetch, and repeatedly emphasized the global network of international brokers and buyers they were tapped into.

The price the hotshot brokers said they could get for my unit was lower than what Rubin said she would command. As soon as they left, I called Rubin and despite her objections, she agreed to list my unit.

Rubin’s Way – or the Highway

When one listed a property with Rubin, there was her way or the highway. I was given a detailed check list of conditions that had to be met on the days she showed my unit. She would arrive before each showing to inspect, and on one occasion took out some Comet and scrubbed my kitchen sink that I thought was pretty darn clean. With Rubin, everything had to be just so.

Rubin got me the price she quoted, which was especially impressive given the New York real estate market had begun to tank after she listed my property. Conditions had deteriorated so badly that buyers were forfeiting their deposits and walking away from their contracts. Fortunately, my buyer wanted to close.

I’m not certain if this is still the case, but New York City real estate closings when I sold my unit were done in person and made me feel like a Mob victim in a Martin Scorsese film. I walked into a room where there was more than a half dozen people claiming I owed substantial sums to – a broker, the bank, the escrow company, a co-op representative, and an assortment of other individuals I wasn’t even aware were involved in the transaction.

Judy Rubin loved her clients, and she kept in touch over the years just to ask how I was doing.  I’m concerned her office telephone number has been disconnected and she hasn’t responded to the messages I left on her cell number. A truly amazing woman, and I hope she is well.

San Francisco’s Paul Hwang

Living in San Francisco was a longtime dream, and when I finally mustered the courage to move there, I thought it would be my forever home. After renting a small San Francisco condo for a year and living a bicoastal life, New York lost all its appeal and I wanted to settle permanently in the City by the Bay.

Paul Hwang, the founder of an independent realty firm in the SOMA (South of Market Street) district of San Francisco, had his Skybox Realty office on the ground floor of the building where my condo was located. In those days, SOMA was an up-and-coming neighborhood and high-rise condos were sprouting like dandelions. I especially liked the neighborhood because it had an awesome Whole Foods and easy access to all the major freeways.

Paul Hwang/Skybox Realty

My initial dealings with Hwang were very frustrating. His vocabulary was seemingly limited to two words: “Too expensive.” Unlike New York properties that were rife with “if onlys,” SOMA’s were chock full of “OMGs.” Most of the condos were new construction or renovated factories, and featured great amenities like commercial-quality gyms, swimming pools, Jacuzzis, outdoor grills, as well as movie viewing, party, and massage rooms.

I enjoyed looking and viewing SOMA properties and set up my own appointments. Whenever I found a property I loved, I’d forward Hwang the listing and invariably I’d get the same curt reply.

“Too expensive.”

What about this?

“Two expensive.”

One property I particularly loved was in a building called The Millennium Tower, and Hwang impressively knew that it had issues with its foundation, which wasn’t well known then but is now very public knowledge.

Hwang for months nixed every property I sent him, and I became increasingly frustrated. By New York City standards, the quality of SFO units struck me as great values, but Hwang wouldn’t allow me to buy a property he felt was overpriced. I considered finding another broker but given that Hwang didn’t make money discouraging me from buying properties on which he’d earn a bigger commission, I instinctively knew not to go against his judgment.

In 2013, a few days before Christmas, I received once of Hwang’s pithy emails.

“You around? I have something you need to see ASAP.”

I was in New York, but it was rare for Hwang to get excited about a property, so I got on a plane and headed to SFO. The unit Hwang wanted me to see was a guy’s dream pad, with a couch and love seat made of the finest leather, top-of-the-line Wolf appliances, and two massive balconies with awesome unobstructed views of San Francisco and the Bay Bridge. The sale price included all the furniture.

I knew enough about the San Francisco market to readily know the asking price was a steal. There were several other people viewing the property, and I pulled Hwang aside expressing my concern.

“Paul, if something seems too good to be true, it probably is,” I said.

The broker for the seller overheard my comment and approached me. He shared that the owner was a famous baseball player who wanted a quick sale before the end of the year. The property wasn’t officially listed, and only top-tier brokers knew about it.

“If we can’t sell this property before year-end, we will wait till spring to list and stage it properly and will be asking a lot more for the property than we are now,” the broker told me.

Brokers who knew about the property were given till the weekend to submit bids, and Hwang wanted to go a tad lower than the asking price. It was the property of my dreams, and not wanting to lose it, I insisted that Hwang offer the asking price and get the deal done.

He did, and for a time I lived in one of the most awesome residential spaces in San Francisco.

City view from Chez Starkman SFO

Alas, construction on a high-rise began a few years after my purchase that would eventually block my unobstructed views. As I had soured on San Francisco and believed the market was headed for a correction, I opted to sell.

Of course, I gave Hwang the listing. I fast learned that he was not only a hard ass on knocking down real estate prices, but he was just as ruthless demanding every last penny when he was on the other side of a real estate transaction.

Let’s just say I made a killing.

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