While sellers in NYC still pay an average commission of 5-6%, home buyers in New York City can save money by requesting a NYC real estate commission rebate (also known as a buyer agent commission rebate).
In this article we will discuss several important aspects of buyer broker commission rebates in NYC.
Table of Contents:
How Can Home Buyers Get a NYC Real Estate Commission Rebate?
Securing a buyer agent commission rebate in NYC as easy as working with a buyer’s agent who has agreed to give you a portion of the commission she or he is paid by the seller upon closing. Real estate commission rebates are completely legal in NYC, and receiving a rebate is the most effective way for a buyer to save money on closing costs.
Finding a buyer’s agent who is willing to offer a rebate is easier said than done however, as the typical buyer’s broker in NYC is used to giving their buyer clients a nominal gift like a box of chocolates as a closing gift instead of splitting her or his paycheck! Chances are that you will receive an earful from any traditional agent if you even broach the topic of commission rebates.
Once you’ve connected with a rebate broker, be sure to have your agent conduct the initial outreach to listing agents in order to schedule viewings or ask questions.
It is essential that you do not reach out to any listing agents directly. This is important because listing agents document very carefully how the “first substantive contact” with a potential buyer is made.
If you reach out to a listing agent directly, the agent may feel emboldened to refuse to allow you to involve a buyer’s agent later down the line. This problem is more acute for new developments, as listing agents are even stricter about buyer’s agents attending showings and properly registering prospective purchasers. Read our article on how commissions work when buying a new development in NYC to learn more.
Therefore, it’s very important you send the list of properties you’re interested in to your buyers’ agent who will then proceed to sign you up for open houses and viewings.
If you’ve reached out to a listing agent already, it’s not the end of the world! You have the right to choose separate buyer representation at any point, and a seller’s broker must honor your desire to work with a broker of your choice.
Practically speaking however, you really must involve your new buyer’s agent before an offer has been submitted, and certainly before it is accepted.
If you try to loop in a buyer’s agent after you already have an accepted offer, the listing agent can make a credible case that your buyer’s agent was not the procuring cause of the deal and is therefore ineligible for the buyer agent commission.
Please keep in mind that a listing agent is not required to split commission with your buyer’s agent unless there is a pre-existing agreement between the brokers. In NYC, most agents are REBNY members who are bound to split commission under the REBNY RLS Universal Co-Brokerage Agreement.
Can I Get a NYC Real Estate Commission Rebate If I've Already Reached out to the Listing Agent?
You are free to elect a buyer agent representative at any stage of the transaction.
While it is preferable and more courteous to allow your buyer agent make first contact with listing agents, it is not the end of the world if you’ve already reached out directly.
This sort of thing does happen quite frequently, especially for “hot” properties where the listing agent is being inundated with inquiries and is slow to respond to buyers’ agents. In these situations it is quite common for impatient buyers to stop waiting for their buyers’ agent to get back to them and to instead inquire directly with the listing agent.
Here is what REBNY Counsel has opined on the issue of buyer representation in New York City.
Is a buyer always entitled to be represented in a transaction?
Yes, the New York State Department of State (“DOS”) has consistently stated that a buyer always has a right to be represented in a real estate transaction and the listing broker must always honor this right. The DOS has stated that “any such denial will be construed as a violation of the listing broker’s duty to deal honestly, fairly and in good faith with the buyer.”
May a listing broker refuse to work with a buyer’s broker if the seller has specifically asked the listing broker not to do so?
No, doing so would still amount to a violation of the listing broker’s duty to deal honestly, fairly and in good faith with the buyer even though the listing broker was following the seller’s instructions. According to the DOS, “If a seller chooses to use the services of a real estate broker, the seller must do so with the understanding that the broker cannot refuse to cooperate with real estate brokers who represent buyers.”
Is a buyer’s broker entitled to a commission by virtue of introducing the buyer to the property?
No, simply showing a buyer a property does not necessarily entitle a REBNY member to a commission. A broker is only entitled to a share of the commission if he or she is considered the “procuring cause” of the transaction.
What is “procuring cause?”
There is no specific definition of “procuring cause.” However, case law suggests that in order to be considered the procuring cause, a real estate broker must show a “direct and proximate link between the bare introduction of the buyer and seller and the consummation [of a sale].” In other words, a REBNY member must bring together a meeting of the minds between the buyer and seller and show that he or she generated a chain of circumstances which led to the sale. The ultimate determination of whether or not the REBNY member procured the buyer, and thus can be considered the procuring cause, is a fact-sensitive inquiry that turns on the specific facts and circumstances of each case.
May a buyer switch real estate brokers at any time during a transaction?
Yes, absent an exclusive representation agreement, a buyer may switch real estate brokers at any time during a transaction. However, the buyer’s decision to change brokers does not necessarily dictate which broker is the procuring cause of the buyer.
For example, let’s assume that Broker A represented the buyer for the entire transaction and, on the night before closing, the buyer instructs Broker A not to come to the closing because the buyer wants to bring Broker Z to the closing. The buyer has the right to change to Broker Z, but doing so does not negate the fact that Broker A was the “procuring cause” of the buyer. In this case, Broker A would still be entitled to share in the commission even though the buyer has changed brokers. Once again, the determination of who is the procuring cause of the transaction is a fact-sensitive inquiry that turns on the specific facts and circumstances of each case.
How Do I Loop in My Buyer's Agent If I've Already Directly Contacted a Listing Agent in NYC?
The easiest way to loop in a buyer’s agent is by replying to the existing email chain with the listing agent and mentioning that you are copying your buyer’s broker with whom you’ve retained.
Even if you are on your way to a private showing that you scheduled directly, you can copy your buyers’ agent on an email to the listing agent and give them a courteous heads up that your buyer agent will be attending as well.
You really need to stick up for your buyer’s agent if you’ve already led the listing agent on into thinking that you’re unrepresented (i.e. a direct buyer) and open to dual agency.
The most effective way of doing this is by emailing the listing agent and stating that your real estate attorney has recommended that you get a buyer’s agent to guide you through the purchase process. Perhaps this is because you’re a first time home buyer, you don’t feel comfortable with dual agency and/or because you’re not a trained negotiator and prefer to have a professional negotiate on your behalf.
For added effect, you can subdivide the buyer’s agent introduction process into two steps. The first step is to email the listing agent and inform them that you’re putting ‘pencils down’ on the listing to first retain a buyer’s agent (for any of the reasons mentioned above).
This first step will make the buyer’s agent much more concerned about whether you end up reengaging with the listing instead of focusing on the fact that you’re no longer an unrepresented buyer.
The second step is waiting a day or two and then replying to the listing agent and copying/introducing the buyer’s agent who you’ve retained.
Obviously, we do not recommend utilizing the more protracted approach to looping in a buyer’s agent in the event the listing you’re considering has lots of interest or other offers.
Can I Involve My Buyer Agent If I've Already Made an Offer Directly in NYC?
This is not preferable since it would be debatable whether your buyers’ agent is the “procuring cause of the sale,” especially if the offer you made directly is accepted without further negotiation or involvement by your buyer agent.
You are of course free to elect representation at any point in time; however, if you’ve already made an offer directly it will be questionable whether your buyer agent is able to secure commission on the deal. It is highly advisable that you consult your buyers’ agent before you submit an offer.
This is especially relevant for home buyers who want to secure a buyer agent commission rebate and have already set their heart on a property they want to buy. In this case, it is not necessary for your buyer agent to view the property.
However, it is strongly encouraged for you to consult your buyer agent before submitting an offer. Your buyer agent should submit the offer and negotiate on your behalf, as is proper protocol in NYC.
Why Are NYC Real Estate Commission Rebates Uncommon for Sellers?
Commission rebates are uncommon for sellers in NYC because it makes more sense to negotiate a reduced commission structure upfront instead of paying a higher commission and then receiving a rebate later on.
In other words, sellers who are looking to save money in NYC can simply secure a more advantageous commission arrangement (such as 1% Full Service) and pay less at closing compared to a traditional seller. Therefore, the concept of a seller commission rebate doesn’t make logistical sense.
Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided. Hauseit LLC is a Licensed Real Estate Broker, licensed to do business in New York under license number 10991232340. Principal Office: 244 Fifth Avenue, Suite 2950, New York, NY 10001.