Co-broking exclusive listings gains popularity.

Over the past two decades, the Manhattan residential real estate market has changed from one of "open" listings to the "exclusive" marketing of properties for sale. This is accomplished though an agreement between the seller and a brokerage firm which binds the seller to use that firm as the exclusive broker to market and sell the property, and obligates the broker to use its best efforts to accomplish this.

For the seller, there are many advantages. The exclusive broker, who is assured of receiving a commission if the property is sold, has a powerful incentive to invest time and energy into devising a marketing plan (including brochures and mass mailings), to invest advertising dollars to publicize the property and to show the property whenever needed and to its best advantage. Without an exclusive, residential firms are hesitant to revest advertising and marketing money, as well as the valuable time and energy of their agents.

In addition, the exclusive broker arranges showings, fields the numerous inquiries and keeps track of potential buyers who leave seen the property, thus protecting the seller against claims for multiple commissions by conflicting brokers. The exclusive broker screens prospective buyers - particularly in the case of a cooperative apartment - so as to avoid costly and embarrassing board turndowns. In short, the exclusive broker arranges for every detail involving the sale, from showing to closing, to make the process as painless as possible for the seller. Most importantly, the seller gets more bang for the buck, as the commission payable is generally the same in either an open listing or an exclusive.

From the point of view of an exclusive broker, the advantage of having an exclusive listing is primarily financial. This can bring out both the best and the worst in a broker. There's a temptation for a firm to keep its new exclusive listing a secret until the firm has had a chance to bring in its own buyers to insure the firm of receiving a full commission on a sale. But according to the laws of the State of New York, the broker's responsibility is to the seller - to achieve the best price possible for the property and the most desirable terms, regardless of who receives the commission or how much is received

In the fast-paced competitive market we're enjoying today, too many firms and their agents are doing their sellers a disservice by delaying the desirable co-broking process.

The process of co-broking a property is simple. The exclusive broker "shares" the listing with those firms with which they have a signed agreement to do so, which protects both seller and broker. If a customer who is produced by the co-broker buys the property, the exclusive broker and the co-broker share the commission equally.

I believe this sharing should take place immediately when a broker receives a signed exclusive agreement with a seller. By immediately opening up the market to other brokers' customers, a far larger audience is created. This will, in all likelihood, increase the possibility of the seller receiving multiple competitive bids, and perhaps even lead to a "bidding" auction or sealed bids. This competition drives up the sale price, so that the broker is able to achieve the ultimate goal of getting the best deal for the seller.

The Real Estate Board of New York (REBNY) has instituted ethical guidelines which have helped regulate and streamline the co-broking procedure. While REBNY has not gone so far as to call for immediate co-broking for members, it does recommend, in a case where an exclusive firm refuses to co-broke, that if a cooperating broker has a specific customer to show the property, the exclusive agent must agree to show it, unless the seller has directed otherwise.

With between 80 and 90 percent of listings now being marketed exclusively, co-broking has become a dominant way of doing business in our industry. But up to now, Manhattan residential firms have shared the information in a rather antiquated fashion. Each individual firm has listing clerks who daily type in the mailed or taxed exclusive and update information received from cooperating companies. The redundancy among firms is wasteful, time-consuming and expensive. It's impossible to control the accuracy of information, and human error abounds when dealing with the massive amount of data which is input daily.

On the other hand, the Manhattan residential industry has adamantly rejected the idea of a multiple listing service, which firms contend does not lend itself to the intricacies of cooperative ownership, where intense customer screening is all important.

But now, at last, we've been able to identify a happy medium. The residential brokerage community, in association with REBNY, has contracted to develop new software that will allow for electronic (but selective) dissemination of exclusive listings and other information from member firm to member firm. I have been privileged to sit on the Board of Managers of what will be known as the "Listing Exchange," or the "LEX," and to have participated actively in its formation.

The idea of the LEX is to transfer information to the database of cooperating firms without creating a centralized database (as is done with a multiple listing system). The LEX will have the ability to allow the exclusive broker to decide which firms it wishes to receive the information, in accordance with the desires of the seller. The information will be received within minutes, without the lag time experienced in the past.

For those firms who choose not to participate in the LEX, but with whom many firms still wish to share listings, the process will be eased for members through the use of electronic fax and e-mail. The members of the ILEX are hopeful that all firms will eventually participate and help move the residential industry smoothly into the new millennium.

Co-broking clearly gives the advantage to the seller. In a strong market like today, where numerous buyers are vying for fewer properties, co-broking is the best process for securing the highest price for a property by opening it up to competitive bidding. In a weak market, where fewer buyers exist, the co-broking helps identify the maximum number of possible buyers. In either market, co-broking subordinates the broker's interest in receiving a commission to the seller's interest of achieving the highest price from the best candidate. When the exclusive broker is focused on getting the best deal for the seller, the entire industry benefits.