Is Changing the Buyer Agent Commission in NYC Allowed?

Sellers in NYC often ask if the buyer agent commission rate is permanently fixed at the time of listing or if it can be adjusted over time. For example, if you originally offer 2% to a buyer’s agent, can you increase it to 2.5% or 3% later on as a means of driving more traffic to your listing?

This is a very important question, as the buyer agent commission percentage being offered has major ramifications on the amount of traffic a listing receives in NYC. This is because the vast majority of purchasers in NYC are represented by buyer’s agents.

In fact, over 75% of buyers are still represented by buyer’s brokers in NYC despite the ubiquity of consumer facing online search portals, such as StreetEasy.

As a result, offering an uncompetitive buyer agent commission can be a fatal mistake when it comes to the likelihood of selling for the highest price, or selling at all.

In essence, offering an unreasonably low buyer agent commission can wipe out up to 75% of the potential pool of buyers for a listing.

Despite the risks, sellers who are looking to minimize closing costs often look to the buyer agent commission as an easy target for reducing closing costs. For example, it’s increasingly common to see 2.5% for the buyer’s agent commission in NYC as opposed to the more traditional ‘gold standard’ of 3%.

While offering 2.5% generally won’t have an adverse impact on represented buyer demand in most circumstances, many sellers often flirt with the idea of starting with something a lot lower, such as 2%, with the idea of raising it later on if represented buyer traffic is underwhelming.

Estimate your seller closing costs in NYC with Hauseit’s Interactive Closing Cost Calculator for Sellers.

This leads us back to our original question: is changing the buyer agent commission in NYC allowed? Technically, the answer is yes. The buyer agent commission can be increased after you’ve already listed (assuming your listing agent is onboard), but is it actually an effective strategy? The answer is probably not.

Changing the buyer agent commission after listing is ineffective because listings typically receive the highest amount of traffic during the first few weeks on the market.

This means that the potential audience is inherently much smaller by the time you finally decide to change the commission rate.

Many sellers assume that any demand problems caused by starting with a low commission rate can be completely cured by simply raising the commission later on, if necessary. But this completely ignores the fact that listing traffic and momentum falls precipitously over time. In short, starting with too low of a buyer’s agent commission can have irreversible and disastrous effects on a sale effort which cannot be fully cured by raising the commission at a later date.

Another reason why changing the buyer agent commission after listing is ineffective is because there’s no way to ‘recover’ the buyer’s agents who may have originally viewed the listing and dismissed it due to the low commission rate you were originally offering.

Many of these agents have already made a mental note to ignore your listing going forward on the basis of the initial (low) commission rate.

This means they’re highly unlikely to check the commission rate on your listing ever again. In short, they’ll never know you decided to increase the commission rate.

Moreover, there’s no way for you to contact these agents directly to advertise the higher commission rate. After all, they never contacted you, so you have no means of identifying them and alerting them of the higher commission rate.

Obviously, you can notify the buyer’s agents who previously contacted you of the higher commission rate being offered.

But since these agents already reached out, presumably it means they’re okay with the original commission rate you offered.

So it would seem that announcing the higher commission rate to these brokers is ineffective and simply a waste of money.

In conclusion, raising the buyer agent commission later on will have a fraction of the impact on represented buyer traffic compared to starting with a higher commission rate from day one.

Prior to listing your home for sale, we recommend researching the buyer agent commission rates being offered on similar properties.

While consumers generally don’t have access to RLS commission data, you can always ask the listing agents you’re interviewing for data and insight on buyer agent commission rates.

This information will help you determine the appropriate buyer agent commission rate to offer on your own listing.

For example, let’s say there are six competing listings for sale. Five of them are offering 2.5%, while just one listing is offering 3%. In this scenario, offering 2.5% is probably the right decision. That being said, you could decide to offer 3% if you’re particularly motivated to sell, in a rush or simply want to be absolutely sure that your listing receives the maximum amount of attention from buyer’s agents.

Using this same example, let’s say you decide to offer 2%.

This means that your listing offers the lowest compensation out of every competing listing on the market.

Changing the buyer agent commission in NYC is allowed, but adjusting the commission percentage after listing is an ineffective strategy.

Therefore, you can expect any rational buyer’s agent to advocate for every other listing prior to pitching your listing to her or his buyer client. To make matters worse, some buyer’s agents might simply refuse to show your listing altogether as a result of the unacceptably low commission being offered.

By the time you realize that the commission is too low, it’s effectively too late to adjust it for the reasons we’ve previously mentioned. Most buyer’s agents will have already written off your listing for good, which means that the only benefit of raising the commission is to capture the attention of new buyer’s agents who might be seeing your listing for the first time.

To reiterate, starting with the correct buyer’s agent commission is a crucial determinant of your chances of selling for the highest price, or selling at all. The mistake of initially offering too low of a buyer’s agent commission can never be fully rectified, as raising the commission rate later on will never be able to recover the buyer’s agents who’ve permanently dismissed your listing on the basis of the low commission rate you were originally offering.

Moreover, listings receive the highest amount of traffic and inquiries during the first few weeks of a sale effort. Raising the commission later will give your listing a fraction of the benefit of having started with a more competitive commission upfront, during the first few weeks when momentum and interest are at peak levels.

Now let’s answer one final question: is a seller allowed to reduce the buyer agent commission?

Generally speaking, this is strongly discouraged and usually outright prohibited by listing agents.

This is because there is no way to determine whether a buyer’s agent who inquiries on a listing originally accessed your listing in the database at the time of the original, higher commission rate, or after it was lowered. Moreover, the buyer’s agents who’ve already shown the unit to their clients on the basis of the original commission rate certainly will not accept the lower commission percentage.

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