Do you Need to Pay 6% Commission to Sell an Apartment in NYC?
NO. Over 97% of NYC home sellers choose to pay 6% in commission to a traditional listing agent, but you don’t have to. Thanks to recent innovation NYC’s real estate market, NYC home sellers actually have a number of lower-cost options which are equally as effective as hiring a traditional 6% full-service listing agent.
The question should not be ‘how to sell an apartment in NYC’ but rather ‘how to sell an apartment in NYC without overpaying’.
Your first instinct may be to think that the lower cost, alternative method we are referring to is the old-school ‘FSBO’ method of the past. However, the traditional NYC FSBO method has been proven time and time again to be extremely ineffective. Against the powerful vested interests in the NYC brokerage community, old-school FSBO sellers have virtually no chance of success. Most of these aspiring FSBO sellers end up defeated and end up paying NYC’s traditional 6% commission.
Sellers in NYC currently have four options for how to sell an apartment in NYC:
Selling an apartment in New York City can seem like a daunting task to even the most educated and hands on NYC home owners. For many NYC home owners, selling a property in NYC is one of the most important financial transactions of their lives. While the financial and personal rewards for success can be substantial, the cost of failure can also be equally damaging and long lasting.
Before trying to sell an apartment in NYC, it’s worth doing your homework. Whether you decided to sell FSBO (For Sale by Owner) or hire a full service listing agent, having some basic knowledge about the sale process and your options can save you money, give you more confidence in the process and increase your chances of a good outcome.
How to Sell an Apartment in NYC Option 1: Old School FSBO Method
Full Disclosure: This is not a method we’d ever recommend to our worst enemy. The NYC real estate industry regularly makes minced meat of old-school FSBO sellers. Unprepared FSBO sellers are no match against 50,000 hungry salespeople in NYC whose sole goal is to break down a seller’s confidence and try to extract a commission out of them.
What is the ‘Old School’ FSBO Method?
Historically, the easiest answer to ‘how to sell an apartment in NYC’ without getting ripped off was to fully exclude agents from the process. This outdated and ineffective method was the only way to have a chance at selling an apartment without paying any commission in NYC. The method entailed a NYC home owner posting his or her property on a few free websites online and blanketing the ad with various synonyms of: ‘no brokers please’, ‘principals only’ or ‘for sale by owner’.
While seemingly a logical method, this strategy mostly resulted in any number of disastrous outcomes for sellers, including: a low sale price, failure to sell altogether or the eventual forced hiring of a listing agent who charged 6% in commission.
Why doesn’t ‘Old School’ FSBO Work?
Reason 1: Lack of Buyers
No matter how much you dislike brokers, the reality is that over 75% of buyers in NYC are represented by one. Therefore, by listing FSBO and writing ‘no brokers’ on your ad, you’ve effectively eliminated 75% of the potential home buyers from seriously considering your listing.
Would it ever make sense to reduce the available pool of buyers for your property to just 25% of the available total? Never. If you have fewer people looking at your listing, you will receive fewer offers and have a lower likelihood of a bidding war.
We regularly have old school FSBO sellers reach out to us and ask why their fairly priced listing is not selling. Our answer is simple. ‘Fairly priced’ assumes you have 100% of all buyers looking at your listing, not just 25% of them!
Reason 2: You are a Target
You may be thinking that as an old-school FSBO seller, you can seek out those wonderful buyers who just want to do a deal directly with a seller so everyone saves a bit of money? Think again.
FSBO sellers are routinely targeted by two of the worst groups of people in the real estate industry: vulture buyers and predatory agents who don’t have any clients.
The latter (predatory agents) are the worst group of all. These agents will initially approach you by claiming they have a buyer for your property, but in reality they are just trolling for an opportunity to get in front of you, feed you lies to break your confidence and hope that you hire them as a 6% commission full-service listing agent. We’ve written extensively on NYC broker harassment in the past.
By definition, the agents who ‘fish FSBOs’ are the ones who have the fewest clients, the most free time and therefore the most unsuccessful, least competent and least likely to do a good job for you. Yet they are the ones who disillusioned old-school FSBO sellers eventually hire and pay 6% to!
What about buyers? FSBO sellers are routinely sought out by professional ‘vulture’ buyers whose bread and butter is taking advantage of unknowing sellers. These buyers prey on the old-school FSBO seller’s poor marketing strategies and lack of knowledge about the market try and pay a below-market price for a property.
How to Sell an Apartment in NYC Option 2: Agent Assisted FSBO Method
‘Agent Assisted FSBO’ is the most effective method for sellers who want to save on commissions but also maintain the highest chances of success, akin to that of using a full-service listing agent. It is a very different method from the disastrous ‘Old-School FSBO’ method discussed previously.
What is the NYC ‘Agent Assisted’ FSBO Method?
The Agent-Assisted FSBO method consists of a FSBO seller utilizing a NYC Flat-Fee MLS Listing Service to list his or her home on the RLS Broker Database and a dozen other sites such as StreetEasy all at the same time.
Under the agent-assisted FSBO method, a seller’s listing has the exact same exposure to potential represented and unrepresented buyers as it would have with a traditional, full-service (and full price) listing agent. How? The FSBO seller’s property is actually listed and syndicated by a full-service listing agent. The only difference is that instead of paying 6% under an exclusive right to sell listing agreement, the seller is paying nothing more than a one-time flat fee.
Why is the Agent Assisted FSBO method so effective?
The primary reason why this method is so successful is that it solves the perennial old-school FSBO issue of not being able to effectively market to represented buyers. Because 75% of buyers in NYC are represented, agent-assisted FSBO sellers have dramatically more exposure to buyers than old-school FSBO sellers.
Stop getting harassed by the most unethical agents in the entire NYC real estate industry.
Another huge reason why the agent-assisted FSBO method is so effective is that it eliminates the aggravating harassment and intimidation from annoying agents who regularly troll old-school FSBO sellers. These predatory agents are experts at finding FSBO sellers, lying to them and ultimately making you, the old-school FSBO seller, think that somehow the only way you can sell is if you hire one of these low-class agents and donate 6% of your sale price to them.
Never mind the fact that these are by definition the least successful agents in the business. They are the ones with plenty of free time and no ethics, such that they have time to solicit and lie to you without an ounce of remorse.
Even if you were to decide at some point to list with a full-service listing agent, would you want to pay 6% to one of the least competent agents in the entire industry?
How to Sell an Apartment in NYC Option 3: Discount Full Service NYC Listing Agent
For the reasonable NYC homeowner who doesn’t have time to list FSBO but thinks 6% commission is ridiculous, hiring a discount full-service listing agent is actually a great idea.
Homeowners should feel insulted by agents who try to justify why they need 6% in commission to sell some of the most desirable (and easiest to sell) real estate in the world. The fact that there is virtually no negotiating down of real estate commissions in a city with over 50,000 agents should be a dead giveaway that something is terribly wrong in this industry for sellers.
However, it’s not always smooth sailing for the NYC seller who goes the discounted, full-service route. Hiring a listing broker that publicly discounts the cost of its services carries tremendous risk for home sellers:
Risk 1: Buyer’s Agents Boycott Your Listing Agent
It’s no secret that the top 10% of NYC agents have 90% of the deals and buyers. These agents often earn more than the most successful NYC investment banker by collecting 6% commission on dozens of deal per year. Do you think these sorts of agents want the gravy train to end?
These influential buyer’s agents don’t like anything that smells like lower commissions. Even if your openly discounted listing agent is offering a co-broke to a buyer’s agent, these buyer’s agents will often steer their buyers away from these listings and towards the listings of 6% listing agents purely out of distain towards brokers who charge less for their services.
As a seller, you don’t want the most successful NYC buyer’s agents with the most clients boycotting your listing!
Risk 2: Poor Quality
While paying 6% to sell a NYC apartment is egregious, it’s certainly true that within reason you get what you pay for. Some agents are better than others. Is the job rocket science? No. But the price for incompetence is still very high.
Many openly discounted listing agents suffer from quality issues. They may also treat your listing differently from other more lucrative opportunities since you aren’t paying them as much as they feel they deserve.
How do I Find a Quality Listing Agent Who Will Work for Less?
Hiring a discount full service listing agent is a brilliant idea if can avoid the two risks above. Hauseit partners with only the most competent and discerning full-service REBNY member listing firms who have privately agreed to work for 1% commission just for our clients. Our partners are willing to offer the consistent quality of a 6% listing agent but for less money, and they won’t treat your listing any differently simply because you got a good deal.
Furthermore, our affiliates are full-service firms which therefore aren’t subject to the boycotting and harassment by agents of openly discounted brokerages.
How to Sell an Apartment in NYC Option 4: Full Price, Full-Service Listing Agent
When you can easily find a top-quality, full-service listing agent who will work for 1%, it makes very little sense to pay somebody 6% to do the same thing.
As a NYC seller who doesn’t have time to sell FSBO, you shouldn’t feel discouraged by the listing agents who tell you that commissions aren’t really negotiable. They are. Just don’t count on a real estate broker who earns more than investment banker to make you aware of that fact!
We’ve helped hundreds of sellers avoid paying 6% through either our agent-managed FSBO option or our 1% discount full-service listing option.
The key takeaway is that you shouldn’t feel obligated to pay 6% just because brokers tell you ‘that’s how it works’ in NYC.
How long does it take to sell an apartment in NYC?
On average, it can take anywhere from two to six months to sell an apartment in NYC. The specific stages of selling an apartment in NYC include:
30-90+ days: marketing the listing, finding a buyer and signing a contract
1-2 months: co-op board application process (if applicable)
1-2 months: mortgage application process (if applicable)
Note that in the case of a financed co-op sale, the mortgage application can be completed alongside the preparation of the board application.
In most cases, the mortgage commitment letter is the final required item for the purchase application before your buyer’s agent can submit it to the managing agent of the co-op.
The overall time it takes to sell an apartment in NYC depends on a number of factors, including:
Due to the rigorous co-op board application process, it usually takes one to two months longer to sell a co-op in NYC compared to selling a condo.
Condos often have ‘purchase applications’ for buyers to complete and submit, however they are much simpler to complete. Because there is no interview or highly credible threat of rejection with condos, deals usually sail through quickly.
Note that ‘sponsor unit’ co-ops do not require buyers to submit a purchase application. Therefore, these types of co-op sales can close as quickly as condo deals.
Cash vs. financed deal
Financed deals usually take 60-90 days to close after signing a contract compared to as little as 30 days for an all-cash sale. Non-contingent and/or all-cash deals are preferred by sellers because there are no contingencies (such as the requirement for a buyer to successfully obtain a mortgage within a set period of time) which could derail the deal. As such, all-cash buyers often have more leverage during a negotiation with a seller as opposed to traditional financed buyers.
New construction, sponsor sale or private resale
Before a new construction building can begin closings, the building is required to receive a “Certificate of Occupancy.” Depending on the current stage of the construction, it can therefore take slightly longer to close on a new construction unit compared to a traditional private resale of existing construction.
It’s a well-known secret across the insider brokerage community here in NYC that there’s a price for everything. What this means is simply that regardless of market conditions or which brokerage lists a property, if a typical NYC apartment is priced correctly it should go into contract within ~90 days.
Of course, the logic above is a generalization and there are certain exceptions including (but not limited to):
Ultra high end units ($5m+) – can take significantly longer to sell
Ultra affordable properties (HDFC coop units, etc.) – usually sell in a matter of weeks
Units in buildings with litigation issues or other obstacles for buyers seeking financing – can take significantly longer to sell
There are a number of reasons why listings are priced incorrectly, but the primary reason is due to a homeowner having a particular numbers in mind for how much of a profit they’d like to earn on the sale. Most of the time however, the seller’s targets are not in line with the reality of where the market is currently priced.
Attempting to sell your apartment in NYC by initially listing with an unreasonable asking price will most often result in a failure to sell altogether. The reason for this is simple. As your listing sits on the market, you will not attract a large amount of buyers and therefore be forced to continually cut your asking price. Each time you this, your listing becomes more and more ‘seasoned’ and buyers become suspicious about your property (why hasn’t it sold already?) and even less likely to express an interest in your listing.
Sadly, FSBO sellers who go to market with an unreasonable asking price often fail to sell and then end up hiring a traditional broker and paying 6% in commission – a truly detrimental outcome which could have been fully avoided if he/she had just listed at a reasonable price to begin with.
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).