February 02, 2017
NYC real estate’s “kickback economy”: Buyer (and seller and renter) beware
By Leigh Kamping-Carder for Brick Underground
You’re all set to renovate your apartment. You’ve lined up a contractor and picked the fixtures you want. You’ve saved $100,000, which should even cover emergencies. But what you may not know is that hundreds or thousands of dollars of your budget may be going straight to your super, just to make sure the job goes smoothly (and maybe bend a building rule or two).
Graft, payola, quid pro quo: Whatever you call it, money passes under the table all the time in New York. Often it’s comparable to a tip, a way to say thanks to people who help out; sometimes it slides into illegal territory.
**This story first ran in June 2014, and has been updated with new information.**
Either way, these informal payments may not be in your best interest. If someone refers you to real estate professionals or other businesses with the goal of getting paid, you can’t be sure you’ll get the best person for the job, or pay the right price. And anyone relying solely on shady referral fees to get business is likely not at the top of their game.
“From the consumer standpoint, when somebody’s paying a kickback, you can be virtually assured you’re not getting the best service and the best protection,” says Daniel Price, CEO of OneTitle National Guaranty Company, who founded the title insurance firm with a focus on ethics and customer service, in part because he saw a troubling level of fraud in the title insurance industry.
Price adds that New Yorkers are particularly vulnerable to being taken advantage of—and losing money—when they’re facing the kinds of transactions that don’t come up often. “In general, the biggest opportunities for consumers to get hurt because of these types of kickbacks come in situations that they don’t face everyday,” like buying, selling, and renovating a home, he explains.
So what kickbacks should you be looking out for, and how can you protect yourself during high-stakes real estate transactions? We spoke to several real estate brokers, building staff members, and other industry professionals to find out.