The murky world of real estate brokers

In Delhi, or maybe even India, there’s probably a saying that goes – “Never ever trust your real estate broker”

The world of real estate is viewed as quick and easy money. Everyone wonders why they make 1% of the transaction amount or one month of the rental. These amounts can run into multiple of lakhs and even upto a crore, and surely a broker doesn’t do that much work to deserve that.

Here’s our take on it – For every transaction that a real estate broker closes, there are 10 more that don’t close and the broker works as hard on them if not harder. To close a real estate transaction is incredibly hard, and one of those multi lakhs deals happens once in a few months if not years. So yes, our fees is justified.

What is not justified is the way a real estate broker is treated. With complete mistrust and that feeling of disdain. While we’ll be the first to admit that all brokers are not equal and there are the bad elements out there, please do not generalise. There are enough brokers out there who work hard and honestly.

The other murky side of the real estate brokerage world is the inter broker relationships. This is an industry where knowledge is zealously protected and no one trusts the other broker even though they might have known each other for 20 years. Here’s a live example of how it works:

A has a mandate to sell a property, and therefore is comfortable in publicising and marketing the property and even spending some money in doing so. When any broker calls him, he does not hesitate to share the address and full details. Now lets say B calls him and gets all the details.

B will go to C & D and share the same details and you can see where this is going – the network effect takes place and before you know it, when A calls Z, Z tells him that P has already told him about this property. When A says he has a mandate, he is scoffed at.

A goes to meet the seller, and find out that F, Q and X have found out who the seller of the property is and have directly reached his office in a bid to cut out whoever gave them the property details and A in the deal. So while A might have shared the details with only a few trusted people, those people in turn shared it with their trusted network and so on and before you know it, the chain became so diluted, that no one has any control and the whole market is talking about the property.

It is a known fact that most real estate transactions happen with two sets of brokers involved, one side which represents the buyer, and the other side that represents the seller. Now let me educate you on something called a “margin”. A “Margin” for a real estate broker is like butter chicken for a North Indian, like Pamela Anderson was for every kid in the 90’s and like meeting Sachin Tendulkar is for like any cricket fan.

A margin is when the broker apart from making 1 % of the transaction value, makes something on top as well. So lets say the seller is asking for Rs. 10 for the property. The broker will go to him, and say if I get you Rs. 12, I will keep the 2 and you can keep the 10 as that is what you are asking for. They make a deal with the seller and basically hoodwink the buyer. Is this ethical? In my view, this is something that is completely wrong and only serves to ruin the long term reputation of a real estate professional. How can one be trusted when they are doing these manipulative transactions.

We were once accused of doing this, and to every allegation made to us from the buyer, we showed him documented proof and after it all, he apologised to us. We however, refused to transact with him further!

So the next time you treat the real estate broker with disdain, think about all these factors, take a judgement on the person and don’t generalise, and as always, Happy transacting!

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