Is a NY Attorney with a Broker License Entitled to Commission?

Is a NY attorney with a broker’s license automatically entitled to collect the buyer’s agent commission when representing her or himself on a residential real estate purchase in NYC?

The answer is not necessarily. We’ll explain why in this article.

First, let’s start by answering the following question: why is it common to see attorneys representing themselves on residential real estate purchases of condos, co-ops and townhouses in New York and NYC specifically?

The reason is that lawyers who are admitted to the New York State Bar essentially receive a shortcut when it comes to obtaining a broker’s license in NY.

Whereas other broker license applicants in New York (such as a Licensed Real Estate Salesperson) must satisfy a litany of challenging educational, experience and examination requirements, attorneys essentially get a free pass by way of not being required to fulfill any of these prerequisites.

An attorney who is a member of the New York State bar simply needs to fill out an application and pay $155 in order to become a Licensed Real Estate Broker.

In other words, attorneys who are admitted to the New York State Bar automatically qualify for a broker’s license in New York State.

As per the Division of Licensing Services Real Estate Broker Application:

“Attorneys who are admitted to the New York State bar are exempt from the educational, experience and examination requirements. Submit a completed application and fee, indicating on the application that you are admitted to the New York State bar.”

As a result, attorneys often apply for a broker’s license right before buying a home in NYC in the hopes of representing themselves, and by extension, collecting the buyer broker commission on a purchase. This creative strategy is usually the outcome of a search for ways to reduce buyer closing costs, which in NYC are ridiculously high.

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In other words, an attorney who obtains a NY broker’s license and attempts to represent her or himself is essentially trying to obtain a buyer agent commission rebate in order to save money on closing costs.

Instead of being represented by a traditional buyer’s agent who agrees to rebate a portion of the commission (as would be the case under a traditional buyer agent commission rebate arrangement), the attorney seeks to represent her or himself and pocket the entirety of the buyer agent commission paid by the seller.

While this is a great idea in theory, it often fails in the execution stage. This is because many lawyers who attempt this strategy in NYC specifically aren’t aware that a listing agent has no obligation to split a commission with another licensed individual in the absence of a signed co-brokerage agreement between both parties.

To be clear, NY licensing law does require a listing agent to cooperate with a buyer’s agent (and by extension, a licensed individual representing her or himself).

However, attorneys often conflate this with a misguided assumption that listing agents are also required to co-broke (i.e. share) a commission.

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Most likely, this inaccurate assumption stems from the prevailing custom in NYC under which most agents agree to automatically split commissions. More specifically, all member agents of REBNY sign a universal co-brokerage agreement which obligates them to split/share (co-broke) no less than 50% of the total commission paid by a seller with a cooperating broker.

In other words, automatic co-broking only exists as a result of REBNY membership. Most attorneys who apply for a broker’s license simply don’t realize that there is a second step involved in order to be automatically entitled to the buyer’s agent commission on a purchase: applying for membership with the Real Estate Board of New York.

Therefore, many attorneys with a broker’s license often start submitting offers in NYC while incorrectly assuming they’ll get paid a buyer’s agent commission.

This can be a difficult scenario for a listing agent, as the agent will inevitably need to give a ‘reality check’ to the licensed attorney, and this could inadvertently offend the attorney/purchaser and result in retraction of an offer.

NY attorneys often incorrectly assume that obtaining a real estate broker license automatically entitles them to a buyer's agent commission when buying in NYC.

This scenario can also be harmful to the purchaser (attorney), as the act of representing her or himself and wrongly assuming the right to earn a commission could rub a listing agent the wrong way.

Ultimately, the most prudent course of action for an attorney looking to collect a commission on her or his purchase in NYC is to both apply for a broker’s license and apply for membership in REBNY. However, the latter is rather pricey and currently costs $1,650. Not to mention, it’s more paperwork and extra headache to join an organization for just one deal.

Therefore, we believe the most effective route for an attorney looking to collect the buyer agent commission on a purchase in NYC is to retain traditional representation from a buyer’s agent who offers a commission rebate.

This approach is advantageous for several reasons. First and foremost, this saves the attorney the cost and time associated with applying for REBNY membership

More importantly however, having a traditional representation structure reduces the risk of agitating or annoying a listing agent.

And for obvious reasons, agitating the person who can influence the seller when it comes to negotiating and accepting offers is the last thing a purchaser wants to do.

To be more explicit and direct, real estate agents in NYC don’t like needless complications or headaches. Agents naturally gravitate towards the simplest path to a deal, i.e. the easiest buyer to deal with. A lawyer who submits an offer guns blazing, declaring that she or he is an attorney with a broker’s license and making an automatic claim to a buyer’s agent commission likely comes across as aggressive, annoying and complicated in the eyes of a listing agent.

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