If you are selling FSBO in NYC but not listed in RLS, trying to co-broke with a buyer’s agent can seem like a nightmare. Without being in NYC’s MLS (RLS), most buyer’s agents won’t even see your listing. For those that do, you will be asked to sign a separate agreement with each one…
To make matters worse, co-broking incorrectly as a FSBO seller can harm your chances of selling and for the highest price.
What is co-broking?
When a buyer’s agent asks whether you will co-broke when you sell FSBO in NYC, he or she is simply asking whether you will pay them a commission for bringing you a buyer.
Co-broking for a FSBO seller in NYC essentially means that the seller is willing to compensate a buyer’s agent for bringing a ready, willing and able buyer whose offer is accepted by the seller. Co-broking, as normally defined in NYC, actually refers to the 50/50 splitting of the traditional 6% NYC real estate commission between the seller’s agent and the buyer’s agent in the course of a deal.
Saying ‘no’ to co-broking as a FSBO seller means that you are not willing to pay a commission to a buyer’s agent who brings you a buyer. For the reasons we will discuss below, this is a really bad idea.
Saying ‘no’ to co-broking as a traditional full-service listing agent in NYC means that the listing agent is not willing to share the 6% commission with a buyer’s agent who brings a buyer. In New York City, co-broking is actually required of all firms who are members of the Real Estate Board of New York. Listing agents who are REBNY members are required to share no less than 50% of the total commission with a buyer’s agent.
If you are considering hiring a full-service listing agent in NYC, you’ll want to make sure he/she will co-broke (i.e. share) the 6% commission you will be paying them. If your agent does not share the commission, then the chances you will sell for the highest price or sell at all will decline materially. This is because a listing agent who does not co-broke is essentially in the same position as a FSBO seller who does not-co-broke: they are ignoring 75% of buyers who are represented by other buyer’s agents.
Why is co-broking with buyers’ agents so important in NYC?
NYC FSBO sellers are obviously looking to sell without paying any commissions, so why would it make sense for a FSBO seller to offer a commission to a buyer’s agent? The answer becomes clear once you realize that over 75% of New York City home buyers are represented by buyers agents.
Therefore, FSBO sellers who openly ignore buyer’s agents face the highly damaging prospect of saying no to over three quarters of potential buyers.
Having fewer buyers looking at your listing means that your chances of the highest sale price, a bidding war or just selling at all go down materially. Just think about it for a moment. If you co-broke your listing and properly market it to the army of 30,000 NYC buyers agents, you may get an extra offer or two. That could induce a bidding war amongst the represented buyers as well as the unrepresented buyer who also submitted an offer on your unit.
This may result in your unrepresented buyer increasing his/her offer and paying more than he/she would have otherwise. On top of that, you still won’t pay any commission because you ultimately decided to sell to an unrepresented buyer!
Here are a few more things you should know about co-broking in NYC:
Co-broking is even more important at higher price points, as the percentage of buyers who are represented increases above 75%!
You only pay a buyer’s agent if you accept a represented offer
Why do traditional FSBO sellers fail at co-broking?
The only correct way to co-broke in NYC is the address the key issues which present themselves when old school FSBO sellers simply post a listing on Zillow and write “brokers welcome”, “brokers protected” or some other half-baked and vague promise to compensate buyer’s agents.
Traditional FSBO sellers struggle to co-broke correctly for the following reasons:
Buyer’s agents avoid showing FSBO listings to their buyers
Why? Think about it, why would the buyers’ agent risk taking his client to see a FSBO listing where the seller clearly doesn’t like agents and there is a reasonably great risk that the seller will try to steal his client and dis-intermediate him from the transaction entirely? Given the incentives, the buyers’ agent will clearly steer his clients to see homes that are for sale by other agents, starting with the ones offering the most commission in the interbroker database.
Another reason why for sale by agent listings are preferable for buyers’ brokers is the fact that cobroking is institutionalized and in some cases contractual by default. For example, in most regions’ Multiple Listing Services (MLS), which is a network of interbroker databases affiliated with the National Association of Realtors (NAR), broker commissions entered are contractual, sometimes because members are required to sign a mandatory co-broking agreement with all other members before they are allowed to join.
Buyer’s agents don’t see FSBO listings which aren’t listed in RLS
Because of the assurance it offers in terms of collecting a commission, buyer’s agents almost exclusively search for listings to send buyers which are listed in RLS (REBNY Listing Service). Failure to list in RLS means that the vast majority of buyer’s agents will not actually see your listing or send it to their buyers.
If you listed FSBO, you may very well have received inquiries from brokers from those online listings. Therefore, you may be tempted to say: brokers have already contacted me, therefore my listing already has full exposure to buyer’s agents.
The reality is that this couldn’t be further from the truth. While it’s true that the occasional buyer’s agent may stumble upon your listing through Zillow, the reality is that most brokers who contact FSBO sellers don’t have any buyers and are really just looking to harass you and trick you into hiring them and paying 6%.
How do I co-broke as a FSBO seller in NYC?
The easiest way for a NYC FSBO seller to co-broke correctly is to list his/her on the RLS through Hauseit’s NYC Flat-Fee RLS Listing Package.
Hauseit’s agent-assisted FBSO service lists your home on the RLS (REBNY Listing Service) broker database, StreetEasy, Zillow, Trulia, Brownstoner and many more for a small, one-time flat fee. Sellers receive the exact same listing exposure as they would through a full-service listing agent, but the difference is that our sellers pay 0% listing agent commission.
Hauseit FSBO sellers also enjoy a multitude of other benefits through our listing service, such as reduced broker harassment and up to two free professionally managed open houses.
By listing in RLS through Hauseit, you’ll never have to worry about buyer’s agents not seeing your listing or hesitating to send their clients your way. Some buyers’ agents will even ask if they can send their client to the open house without them – that demonstrates the strength of the co-broke! In NYC, it’s important to note that the Real Estate Board of New York (REBNY) has some rules about direct negotiation between buyers’ agents and owners that you should be aware of.
In effect, they do not allow buyers’ agents to communicate or negotiated directly with the owner of an apartment without the consent and full knowledge of the listing agent. You can address this issue easily by telling agents to check the listing in their local interbroker database, your Hauseit affiliate listing agent has already given them permission to contact you and negotiate directly with you!
How much commission (co-broke) should I offer to buyers’ agents?
The first question asked by FSBO sellers who have decided to co-broke in RLS is: what commission percentage should I offer to buyer’s agents?
To answer this question, you need to consider that listings compete with each other for buyers and buyer’s agents have a lot of influence in deciding what listings to pitch to buyers. Therefore, if you are seriously interested in competing for buyers against other properties, you’ll want your co-broke percentage to be competitive.
One would hope that buyer’s agents don’t just send their buyers the listings with the highest commissions on offer. Ethical considerations aside however, the reality is that buyer’s agents work on commission only. If a co-broke percentage is overtly low, you can be assured that some buyer’s agents will not send your listing to their buyers.
Why would a buyer’s agent pass up an extra 0.5% or 1% in commission if the buyer is indifferent between two listings and one pays more commission?
What if my commission/co-broke percentage is too low?
Given the ethical issues around steering clients towards higher commission listings, you can assume that most brokers won’t say anything if your buyer agent commission is too low. These brokers will simply pass on your listing and choose to send other ones to their buyers.
As a result, the FSBO seller with a low co-broke won’t receive a lot of inquiries from buyer’s agents. This will result in fewer offers, less traffic and perhaps a lower sale price.
Since sellers are under no obligation to accept an offer from a represented buyer, there’s no harm in offering a competitive co-broke. If you don’t think that the offer net of the buyer’s agent fee is worthwhile, then you are free to reject the offer. But having more offers can give your listing more momentum and ultimately result in a bidding war or other positive outcome. Therefore, why would you offer a below-market / uncompetitive buyer’s agent commission?
We’ve even seen written evidence from buyer’s agents at major brokerages who refuse to show listings which pay below 2.5%. Take a look at this real inquiry one of our affiliates received about a listing that was only offering 2% to a buyer’s agent:
Here is another example of real pushback one of our affiliates received from a buyer’s agent who was unhappy with the 2% buyer’s agent commission being offered by our seller:
In the example below, the buyer’s agent is so unhappy with 2.5% to the point where her language suggests that her client will not improve the offer if the co-broke to the buyer’s agent is not increased to 3%. Since it’s unclear whether or not the buyer is aware of this side negotiation, this raises all sorts of ethical concerns on the part of the buyer’s agent.
Please note that it’s much more common to see pushback from buyer’s agents when there are more listings to choose from (higher inventory). In the case below, the listing is $1m+ and located in a neighborhood where there is fierce competition from a glut of new construction units which almost always offer 3% to the buyer’s agent.
The fact that experienced buyer’s agents are willing to go on the record and document the fact that they openly steer clients away from lower commission listings is the clearest indication that NYC real estate agents are used to earning way too much commission. In fact, NYC listing agents rarely if ever negotiate down their commissions.
At best, this sort of buyer agent behavior is unethical. At worst, it’s anti-competitive and perhaps a criminal act which merits further investigation!
In the event you notice anti-competitive behavior in New York’s real estate market, please report it right way to the New York State Attorney General who is finally cracking down on unethical behavior.
Illegal behavior by real estate brokers can include:
Collusion among brokers not to charge commissions below a certain level (i.e. price fixing)
Collusion among brokers not to work with or cobroke with discount brokers
Refusals to deal with brokers who offer rebates to their customers
Refusals to show properties that are for sale by owner (FSBO) or listed by a discount broker