How Does a Realtor Get Paid When You Buy a House in NYC?

Realtors in NYC are typically paid by the seller. In other words, the seller pays commission to both the listing agent and the buyer’s agent. Sellers aren’t legally required to pay any commission (or to pay the buyer’s agent), but sellers paying both agents is the longstanding norm in NYC, which endures even after the NAR settlement took effect on 8/17/24.

Do buyers have to pay for their broker?
How does a Realtor get paid when you buy a house in New York City?
How much are Realtor fees in NYC?
Do sellers always have to pay Realtor fees in NYC?
Who pays Realtor fees in a For Sale By Owner transaction?

Buyers in NYC typically don’t have to pay their buyer’s agent out of pocket. This is because sellers continue to offer commission to buyer’s agents despite the NAR settlement, which removed commission data from the MLS and mandated written buyer agent agreements.

In the wake of the NAR settlement which took effect on August 17, 2024, sellers in NYC have continued to pay both sides’ commissions in the vast majority of transactions (often at slightly reduced buyer agent rates, like 2–2.5% instead of 3%), as it’s seen as necessary to attract buyers and keep listings competitive.

Sellers aren’t legally required to offer commission to buyer’s agents—it’s negotiable and market-driven—but the longstanding custom persists more strongly in competitive markets like NYC than in some other areas.

If you’re buying in NYC, there’s still a chance you could be on the hook for paying your buyer’s agent out-of-pocket. This depends on the commission rate stipulated in your buyer broker agreement and whether the seller is offering at least that amount.

If the agreement with your buyer’s agent stipulates a 3% commission and the seller is only offering, say, 2% or 2.5%, you are responsible for the difference.

Obviously, you won’t pay anything out-of-pocket if you’re working with a buyer’s agent who offers a commission rebate, in which case your buyer’s agent pays you!

A Realtor gets paid at closing out of the seller’s proceeds as a closing cost.

The seller’s attorney will issue certified checks on behalf of the seller to both the buyer’s broker and the seller’s broker.

Because contract negotiations and closings are handled by real estate attorneys in NYC, brokers aren’t expected to show up to closing. Sometimes, brokers will show up near the end of closing simply to congratulate their client and to pick up their commission check.

Often times, the seller’s attorney will mail them their checks, or the broker will show up at a more convenient time to pick up their check from the seller’s attorney’s office.

Realtor fees in NYC are typically 5-6% per recent studies done by both Hauseit and large publications such as the New York Times. Unfortunately for sellers, 6% of the sale price in commission is still the most commonly quoted figure by brokers in New York City.

The total commission is usually split equally between the listing agent and the buyer’s agent.

If the buyer chooses not to have dedicated representation, the listing agent typically collects the entire 6%. The fact that there’s usually no economic upside to being unrepresented is why most NYC home buyers work with a buyer’s agent.

Homeowners in NYC are not legally required to pay any commission when selling a home. Many sellers think paying 6% in commission is some sort of legal requirement, but this is simply not the case.

However, if you take a look at the total number of listings in NYC on any major real estate search website, you will see that over 96% of listings are being sold by agents.

That means almost all listings are offering some level of commission to buyers’ agents. Therefore, if a seller refuses to offer any commission to buyers’ agents, they will simply be boycotted by them. After all, a buyer’s agent can show his or her client almost any other listing in the city which does offer commission!

Note that the rise of Assisted FSBO listings has ameliorated the situation for home sellers by helping them at least avoid paying a percentage commission to the seller’s broker. Furthermore, when a seller lists through an Agent Assisted FSBO listing, the seller may be able to avoid paying any percentage commission altogether if a direct buyer is found!

Most For Sale By Owner (“FSBO”) sellers expect the buyer to pay for their own buyer’s broker. Their rationale is, if you want the advice of a buyer’s agent then pay for it yourself!

What they fail to understand with this naive mentality is that they are automatically being boycotted by buyers’ agents who represent 90% of all buyer traffic.

This is why traditional For Sale By Owner listings are considered “off market.” They are off market because most buyers never even see the listing from the buyer’s agent!

Think about it, a buyer is worth 3% in Realtor fees. Why would a buyer’s agent bother sending a FSBO listing to his or her client? That would amount to shooting oneself in the foot! Even if a FSBO seller tried to offer commission to buyers’ agents, how would the commission be enforced?

The buyer’s agent would have to ask the seller to sign a one time showing agreement or a FSBO commission agreement.

Before that is signed, the buyer client can at any time just search online for the address to realize that it’s a For Sale By Owner listing.

It may be too tempting for the buyer to just skip his buyer’s agent altogether!  This risk is obviously unacceptable to any buyer’s agent. No one can afford to work for free in this city!

So what’s the moral of the story here? How does a Realtor get paid when you buy a house? If you’re a home buyer you don’t have to worry about ever having to pay a broker directly.

However, you should be cognizant of the fact that your buyer’s broker is indeed earning 3% of your purchase price. It’s no small favor!

So you need to make sure your buyer’s broker is really earning their keep. There’s no reason to throw such a large favor to a random agent friend who may know less than you about real estate.

Work instead with an experienced buyer’s agent who has agreed to share some of the buyer agent commission with you in the form of a commission rebate. After all, you’re paying for the buyer agent commission through your purchase price, so why not get some of it back?