About one in three New York City real estate agents who advertise “no fee” apartments at online sites actually charge a broker fee, a New York City Council investigation revealed Thursday.
A 23-page report released by the New York City Council’s Policy and Investigations Division details the September investigation of 223 real estate agents who posted ads on the craigslist.org and backpage.com Internet sites. Both sites accept online classified advertisements. Seventy agents told investigators that the apartment listings advertised as “no broker fee” did have a broker’s fee, according to the report.
The report, “Brokered Deception: The Hidden Perils of Online Real Estate Ads,” concludes that “a significant number” of no-broker-fee ads on the two Web sites are deceptive and recommends that the New York City Department of Consumer Affairs take immediate action to monitor real estate agents’ ads.
Also, the report recommends that the Consumer Affairs Department step up fines for unfair trade practices and work with the Web sites to educate consumers about deceptive advertising practices, that the industry self-police itself to identify and prevent fraudulent practices, and that the New York State Board of Real Estate regulatory agency include consumer advocates among its appointed public members.
Councilman Eric Gioia, chairman of the council’s Committee on Oversight and Investigation, said the fraudulent online practices appeared to use “the old bait-and-switch” tactic. The Internet, in creating another marketplace for real estate advertising, has also created a new realm for enforcement agencies to address, he said.
“As new marketplaces are created it’s especially important that government be vigilant and also change with the times. Government’s role is to make sure it’s a fair playing field and people are not getting ripped off.”
Craig Newmark, customer service representative and founder of craigslist.org, said he has been spending a lot of time over the past few years in an effort to tackle the problem of fraudulent real estate postings. “Any kind of deception, any kind of bait-and-switch is wrong,” he said, no matter what the industry. “It has been the biggest time-consuming project over the last few years (for me).”
Newmark said he has made many personal contacts and some personal visits to brokers who are part of the problem, and he has also worked with law enforcers to get the brokers to clean up their act. He added, “I have learned that in New York, real estate is kind of a blood sport.”
He said he hopes there will be some action on the council’s recommendations, as he needs lots of help to stop the fraudulent ads. “I’m not Batman. We do need some governmental action to handle this kind of thing. I need some help with boots on the ground to make (the fraudulent advertisers) go away.”
Craigslist.org has sites in many major markets in the United States and internationally, and New York City has the worst problems with fraudulent real estate ads, he said. “We do have a very minor problem in Boston, (but) not significant compared to New York City.”
Backpage.com, a free advertising site launched in 2004, and craigslist.org, created in 1995, both offer community listings sites that are geared to the New York City market.
In addition to the 31 percent of investigated agents who said they were charging a fee despite posting apartment listings in a “no broker fee” section of the two Web sites, 4 percent of the agents stated that they do have a broker’s fee and that their online ads stated “in very small print” that there would be a broker fee, according to the report.
And two of the investigated agents stated that there were was an up-front fee, though “it was unclear whether or not this fee went to the agent or was part of a deposit that would go to the landlord or back to the consumer,” the report states.
The city’s Department of Consumer Affairs does not currently monitor any advertising by real estate agents, the report also states, and “reliance upon the New York State Department of State has not been a solution.”
The state’s Board of Real Estate now consists of 15 members, including 13 appointed members who are either real estate agents or public members. Five of these appointed members must be real estate agents. While the public members cannot be real estate agents, there is no requirement that the public members have no attachment to the real estate industry. The report recommends that the board require some members to be consumer rights advocates who “can work on behalf of the consumer.”