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How to Negotiate with a Realtor on Commission in NYC

Posted by hauseit on October 19, 2018
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It’s much better to negotiate the listing agent commission vs the buyer agent commission because buyer agents represent 90% of all home buyers, which means you’ll want their full attention if you want your home to sell. It’s easier to convince a listing agent to take a haircut on their commission because of ancillary benefits from having a listing, such as enhanced branding and additional referral opportunities.

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What Is the Typical Realtor Commission?

Realtors will always tell you that there is no standard commission that sellers must pay; however, in practice real estate commissions have always hovered around 5-6% in the United States.

Average commission rates are no different if you’re selling in high priced metropolitan centers like New York City or the San Francisco Bay area. This means even though the average home in NYC sells $2,000,000 which is ten times the national average, Realtors in NYC simply make ten times more money than their cousins out in the country.

Pro Tip: The amount of money that Realtors make in high value metropolitan areas like NYC is truly unbelievable. Read our white paper on what is the average NYC real estate commission rate to learn more.

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Why Do Realtors Quote 6% as a Commission Rate?

Realtors quote 6% as a commission rate because the market rate buyer agent’s fee is 3%, and most MLS broker associations require listing agents to co-broke at least half of the commission with cooperating brokers, i.e. buyers’ agents.

Note that we said at least half vs exactly half. While rules will vary by the MLS system and local Realtor association that operates it, most MLS broker databases will be okay with the listing broker co-broking at least half the total commission.

Some MLS broker databases may even be okay with any amount of co-broking, as long as it’s not zero. Other MLS systems could conceivable be much more strict and require exactly equal co-broking. This latter approach, if allowed, can make it very hard for discount real estate brokers to operate as we’ll explain in the next section.

Pro Tip: Many large brokerage houses in NYC will have corporate policies against discounting commission rates. We’ve heard that agents at some of these more “corporate” brokerages will have to go through layers of management just to ask for approval to offer 5% vs 6% to a seller.

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Can You Negotiate the Listing Agent Commission?

Yes, negotiating the listing broker’s commission is the most prudent path because doing so will not affect your ability to attract the attention of buyers’ agents. The listing broker; however, may be open to taking a reduction in their fee as there are ancillary benefits from having an exclusive listing.

For example, an exclusive listing gives a broker additional branding and referral opportunities, perhaps even from neighbors who contact them to sell their properties after seeing the listing. A listing can also be useful from a recruitment perspective. Having more listings gives the appearance of having more going on, and that can be useful from a recruiting perspective.

It’s much better to negotiate the listing agent commission vs the buyer agent commission because buyer agents represent 90% of all home buyers.

Lastly, a listing broker may be able to make additional commission by representing direct buyers who have inquired on your listing, either on your property or on another property listed on the MLS. After all, only one buyer will end up buying your property, which means every other direct buyer who inquired on the listing is a potential client on something else.

Pro Tip: All of these reasons make it possible for Hauseit’s partner brokers to offer full service for only a 1% listing fee. Interested? Please check out our 1% for Full Service product page and schedule a time to speak with us!

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Should You Negotiate the Buyer Agent Fee?

Don’t negotiate too hard on the buyer agent’s fee because buyers’ agents represent roughly 90% of all home buyers. Since it’s critical to attract the attention and cooperation of buyers’ agents, it’s not a good idea to offer too low of a commission on the MLS to them.

If you have a property worth more than roughly $1,000,000 then you can consider co-broking only 2.5% to buyers’ agents. However, if you have a property worth substantially less than $1 million, you should consider sticking with a full 3% co-broke to buyers’ agents to attract their full attention.

From our partner brokers’ experience, sellers won’t get complaints from buyers’ agents at a 2.5% co-broke. However, once you start offering 2% or less on the MLS to cooperating brokers, you’ll start receiving both verbal and written complaints. Many buyers’ agents will outright refuse to show your listing at those levels and aren’t afraid to put that in writing.

Pro Tip: Can you decide to increase the buyer agent commission later if your listing isn’t getting any action? Read our white paper on lowering home price vs increasing broker commission to learn more.

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Negotiating Commission for Dual Agency

Even though many of the larger franchises may not approve of any haircuts in commission, you may get lucky and have some of them agree to reduce the commission marginally for dual agency situations.

Dual agency simply means the listing agent will get to represent both the buyer and the seller, and as a result will be able to collect both sides of the commission. This happens when the buyer does not have their own agent and is not aware that they can earn some of the buyer agent fee for themselves through a buyer agent commission rebate.

Unfortunately for most home sellers, the most they’ll be able to negotiate from the larger franchises will be 1% off for a direct buyer, dual agency situation. That means the seller will still pay 6% in commission normally, but only 5% if the buyer doesn’t have their own agent.

Pro Tip: If you think this is bogus, you’re right. You can work with some of New York’s finest listing agents through Hauseit for only 1% seller’s broker’s commission. Co-broke 2.5% to buyers’ agents and your total commission will be only 3.5%. If the listing broker finds a direct buyer, the 1% listing fee will be waived and you’d only pay the 2.5% buyer agent fee.

Save 2% on Your Home Purchase

Save money without disrupting your deal by working with one of our traditional, experienced partner buyer's brokers who never openly discount. Discreet buyer closing credit check given at close.

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. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. The services marketed on Hauseit.com are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).

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