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Are NYC Broker Commission Rebates Legal?

As a NYC home buyer who may have just heard about the concept of a broker commission rebate, you are likely asking yourself: are NYC broker commission rebates legal?

Fortunately, buyer broker commission rebates in NYC are fully legal. In addition, broker commission rebates are not generally considered to be taxable income.

Save Money Without Risking Your Deal

Hauseit’s Buyer Closing Credit Program pairs New York home buyers with experienced, reputable partner brokers who never openly discount their services. Because our partner brokers are established, traditional brokers themselves with great working relationships across the real estate community, you can rest assured that neither you nor your agent will be treated any differently.

What do I need to know about the legality of broker commission rebates in NYC?

Broker commission rebates in NYC are 100% legal, despite what you may hear from traditional buyer’s agents and NYC listing agentsNew York is one of 40 states where receiving a broker commission rebate is permissible and encouraged by law. Specifically in New York City, broker commission rebates are 100% legal as per the Real Property Law which governs the state’s property market.

Real estate commission rebates are actively promoted by New York’s Attorney General and Antitrust Division as a means of increasing competition in the real estate industry and ultimately reducing overall real estate commissions when buying and selling real estate in New York City.

Rebates Contradict the Status Quo

Broker commission rebates are rare in NYC because they are vehemently opposed by traditional real estate agents who have been earning full commission for the past three decades. If you ask an old school agent about buyer agent commission rebates, he or she will likely first say that rebates are illegal. If you point out that rebates are actually legal, a typical broker will be highly offended and simply refuse to offer a rebate.

Because the topic of broker commission rebates is a highly divisive subject among brokers in NYC, it’s especially important to make sure that any rebate you are receiving from your buyer’s agent is discreet. After all, how can you expect a veteran listing agent to treat your offer fairly vs. other offers if the agent is offended that you will be taking away some of his or her commission on the deal? Will a seller be open to negotiating as much on the price if they realize that they are basically paying you commission?

How much are buyer closing costs in NYC? Estimate your buyer closing costs in NYC using Hauseit’s interactive closing cost calculator for buyers.

Reduce Your Closing Costs When Buying in NYC

Requesting a Hauseit Buyer Closing Credit is a legal and non-taxable way to discreetly save money on your purchase and reduce your buyer closing costs in NYC. Because our partner brokers don’t openly discount, you can be assured that requesting a closing credit won’t risk your deal.

Where in the law does it say that NYC broker commission rebates are legal?

Broker commission rebates are legal in NYC as per Section 442 of the New York Real Property Law, Article 12-A. As per the excerpt below, broker commission rebates in NYC are fully legal and there is absolutely no limit on the amount or types of incentives a New York City real estate salesperson, associate broker or broker can offer to his or her client as a means of securing a client’s business:

“ … nothing in this section shall prohibit a real estate broker from offering any part of a fee, commission, or other compensation received by the broker to the seller, buyer, landlord or tenant who is buying, selling, exchanging, leasing, renting or negotiating a loan upon any real estate including the resale of a condominium or cooperative apartment. Such fee, commission, or other compensation must not be made to the seller, buyer, landlord or tenant for performing any activity requiring a license under this article.”

Source: New York State Real Property Law Section 442, amended December 2014

Pro Tip: Are you buying investment property in NYC? If so, check out our detailed rental property calculator to figure out your anticipated cap rate and cash and cash return.

Save $30k When Buying a Condo, Co-op or House in NYC

Safely and discreetly receive a Hauseit Buyer Closing Credit without risking your deal. On the average New York City apartment, you can save $30,000 or more either through a credit against your closing costs or a check written to you post-closing.

How are lawmakers in New York encouraging broker commission rebates in NYC?

New York’s former Attorney General Eric Schneiderman issued an open letter to New York’s real estate community in 2015 specifically encouraging them to offer NYC broker commission rebates. In this excerpt below, you can see that the Attorney General makes multiple references to the fact that broker commission rebates are fully legal and encouraged in New York City:

“In December, a statute was signed into law amending Section 442 of the New York Real Property Law to make it completely clear that it is lawful for a broker to pass through, or “rebate,” part of his or her commission to the client…This legislation arose out of an investigation by my office into competition in the residential real estate brokerage industry. .. As of December’s legislative fix, there is no room for debate: commission rebating in New York State is legal…Such rebating is also procompetitive and good for consumers…I encourage all real estate brokers and salespersons in New York to consider enhancing the choices available to real estate buyers by offering lower commissions (by means of rebates) to some or all of your clients.”

Source: Open letter from Attorney Eric Schneiderman to the New York real estate broker industry, dated April 20th, 2015

Pro Tip: Curious about the differences between condos and co-ops? Read our Condo vs. Co-op Comparison for NYC.

Reduce Your Closing Costs When Buying in NYC

Requesting a Hauseit Buyer Closing Credit is a legal and non-taxable way to discreetly save money on your purchase and reduce your buyer closing costs in NYC. Because our partner brokers don’t openly discount, you can be assured that requesting a closing credit won’t risk your deal.

What is a NYC broker commission rebate?

As a buyer in NYC, you may have heard that the services of a so called ‘buyer’s agent’ are free. But you may be asking: if my buyer’s agent is free, who pays the bill? And what is a New York City real estate commission rebate? How does a real estate rebate save me money?

A Rebate Is a Closing Gift

A NYC broker commission rebate is a cash rebate offered to a home buyer from his or her NYC buyer’s agent as an incentive for working with them on the home purchase. A buyer agent commission rebate is simply a much larger closing gift versus your typical bottle of wine or box of chocolates that a buyer’s agent offers his or her client at closing!

To better understand what rebates are, how they work, and how you can request one when buying in NYC, let’s take a step back and look at how a typical sale in NYC works:

Step One

A seller hires a NYC listing agent and signs a 6% Exclusive Right to Sell Listing Agreement.

In signing this contract, the seller agrees to pay a total of 6% commission when the property sells. If you as the buyer are unrepresented and have no buyer’s agent, the seller pays the entire 6% commission to the listing agent. If you are working with a buyer’s agent, the listing agent will split the commission equally so that the seller pays 3% commission to the listing agent and 3% commission to your buyer’s agent.

The key takeaway here is that sellers typically pay the same amount of commission regardless of whether a buyer’s agent is involved in your deal alongside the listing agent. If you are unrepresented, the listing agent will simply collect both sides of the commission and the seller will not save any money. Because the seller pays the commission bill for your buyer’s agent and you won’t achieve a lower sale price by being unrepresented, hiring a buyer’s agent is a no brainer.

Step Two

You hire a buyer’s agent to help you with your purchase. Your buyer’s agent offers several services to help streamline the overall deal process.

The typical services provided by a New York City buyer’s agent include the following:

Typical Buyer Agent Responsibilities

Helping you search for listings

Answering your questions about specific buildings and units

Preparing pricing analysis for the listings you are interested in

Implementing a negotiation strategy

Reviewing and assembling your co-op board package

Now here’s where the real estate commission rebate concept comes into play. If you hired a traditional buyer’s agent who does not offer a rebate, your agent will collect his or her commission check at closing and walk away. If you are lucky, your traditional buyer’s agent will buy you a box of chocolates or a bottle of wine as a token of gratitude for you sending them a deal worth tens of thousands of dollars.

On the other hand, if you requested a real estate commission rebate your buyer’s agent will write you a check at closing for a portion of the commission he or she earned on the deal. While it’s certainly not permissible for a broker or salesperson to split a commission with an unlicensed party, brokers and salespeople are fully permitted and encouraged by the law to offer commission rebates (cash or otherwise) to their actual customers (buyers and renters).

Save $30k When Buying a Condo, Co-op or House in NYC

Safely and discreetly receive a Hauseit Buyer Closing Credit without risking your deal. On the average New York City apartment, you can save $30,000 or more either through a credit against your closing costs or a check written to you post-closing.

Who pays for a NYC buyer agent commission rebate?

The average New York City real estate commission rate of 5-6%, which includes the buyer’s agent commission, is fully paid by the seller in NYC. When a buyer is unrepresented, the full 6% commission is pocketed by the listing agent. If a buyer has representation, then the 6% commission is generally split equally between the listing agent and buyer’s agent.

A Rebate Can Pay Your Mansion Tax

Because of the high median purchase price in the city, real estate commission rebates in NYC can end up being $30,000 or more. A NYC real estate commission rebate can significantly reduce your NYC buyer closing costs. If you are buying a property above $1 million, a NYC real estate commission rebate will usually cover your entire NYC mansion tax bill. Better yet, real estate commission rebates in NYC are completely legal and generally considered to be non-taxable income.

Are buyer closing costs different for condo and co-op apartments in NYC? Read Hauseit’s Condo vs. Co-op Closing Cost Comparison for NYC.

Save Money Without Risking Your Deal

Hauseit’s Buyer Closing Credit Program pairs New York home buyers with experienced, reputable partner brokers who never openly discount their services. Because our partner brokers are established, traditional brokers themselves with great working relationships across the real estate community, you can rest assured that neither you nor your agent will be treated any differently.

Why should a NYC home buyer work with a buyer’s agent?

When searching for a property in NYC, home buyers are presented with two options. They can either choose to search on their own and then work directly with the listing agent for a particular property. Alternatively, NYC home buyers can work with a buyer’s agent throughout the search.

Typical NYC buyer agent responsibilities include everything from the initial search through to submitting offers, negotiating, preparing a NYC co-op board package and guiding the overall deal to closing.

There are two compelling reasons to hire a buyer’s agent in NYC as opposed to being unrepresented. They are:

  • Receive a NYC Broker Commission Rebate – Requesting a NYC buyer agent commission rebate is an automatic way to save money when buying in NYC. The best part about receiving a commission rebate is that it’s an automatic discount which is on top of whatever other pricing concessions you negotiate with the seller. If you work directly with a listing agent, you are simply handing all of the commission to the listing agent without receiving any direct, monetary savings or benefit yourself. Requesting a NYC broker commission rebate will also save you from the risks of working directly with a listing agent under a dual agency arrangement.

  • Buyer’s Agent Representation in NYC is Free – Buyers don’t pay anything to have professional representation. Sellers in NYC pay 100% of all real estate commissions, including the percentage commission which is paid to a buyer’s agent. In addition, there’s almost always zero benefit to an unrepresented buyer in terms of getting a lower sale price by being unrepresented. This is because virtually all NYC home sellers sign an exclusive right to sell listing agreement with his/her listing agent obligating the seller to pay 6% commission no matter what. So if you are unrepresented, the full commission just goes to the listing agent as opposed to being split with your buyer’s agent.

Reduce Your Closing Costs When Buying in NYC

Requesting a Hauseit Buyer Closing Credit is a legal and non-taxable way to discreetly save money on your purchase and reduce your buyer closing costs in NYC. Because our partner brokers don’t openly discount, you can be assured that requesting a closing credit won’t risk your deal.

Will I save more money on my purchase by being unrepresented than by requesting a rebate?

Because of the way NYC commissions are structured, unrepresented buyers almost never benefit from a lower purchase price simply because they are unrepresented. This is because sellers typically agree to pay the same 6% in real estate commissions even if no buyer’s agent is involved in the deal. The only thing that’s up for debate is how that 6% will be split. It will either be 100% kept by the listing agent (if the buyer is unrepresented) or shared 50/50 with the buyer’s agent.

Commission Structures Are Not Transparent

Even if a listing agent claims that the seller will pay less commission if you are unrepresented, there is no way to prove how much less commission the seller will pay. This is because a seller’s commission structure is private and only known by the seller and listing agent. There’s also no way for you to guarantee that any seller commission savings will be passed onto you in the form of a lower purchase price.

Are Broker Commission Rebates Legal in NYC? (2018) | Legality of Rebates - NYC broker commission rebates are legal. Learn about buyer agent commission rebates in NYC. Save money by requesting a NYC real estate commission rebate.

Because a seller’s commission structure in NYC is not openly disclosed, it’s impossible for you as the buyer to measure the size of the alleged discount you’d receive as an unrepresented buyer and ensure that you are actually receiving it. On top of that, a typical NYC real estate commission rebate will almost always dwarf the amount of potential (unquantifiable) savings you’d pocket by submitting an offer as an unrepresented buyer.

Why chase a theoretical, unquantifiable discount by being unrepresented when you can lock in an automatic and quantifiable discount by requesting a NYC broker commission rebate?

Save $30k When Buying a Condo, Co-op or House in NYC

Safely and discreetly receive a Hauseit Buyer Closing Credit without risking your deal. On the average New York City apartment, you can save $30,000 or more either through a credit against your closing costs or a check written to you post-closing.

Are NYC broker commission rebates available for renters as well?

Given the low inventory of rentals in NYC and fierce competition for apartments, it’s definitely less common to receive a broker fee rebate as a renter in New York City. There is less room for negotiation with a rental agent because he or she likely has a line of potential renters who won’t ask for a rebate.

Even though rental broker fees are highly detested and perceived as being high by renters, the reality is that after the commission split with his or her brokerage, brokers don’t actually earn that much money from rentals. Commission rebates may also be unofficially not permitted by their brokerage. So there are many forces working against renters in NYC receiving any form of rental broker fee rebate.

Pro Tip: Save money on your next rental by requesting a Hauseit Rental Broker Fee Rebate.

Reduce Your Closing Costs When Buying in NYC

Requesting a Hauseit Buyer Closing Credit is a legal and non-taxable way to discreetly save money on your purchase and reduce your buyer closing costs in NYC. Because our partner brokers don’t openly discount, you can be assured that requesting a closing credit won’t risk your deal.

Will I be discriminated against by listing agents for receiving a NYC broker commission rebate?

Broker commission rebates in NYC are highly controversial among established listing agents in NYC. While it’s illegal for a broker to discriminate against innovative listing brokers and buyer’s agents who work for low commissions or offer rebates, the reality is that there’s no way to prove that a listing agent is treating you differently. Even if you were able to somehow prove that a listing agent mistreated you because you were receiving a buyer broker rebate, there would be no way to change the fact that another buyer walked away with your dream home.

After all, broker commission rebates are a threat to the status quo and the livelihood of thousands of established agents in NYC who haven’t had to offer discounts in the past. Wouldn’t it be understandable for a traditional listing agent to harbor resentment against you and favor another buyer if they realize that you are working with a broker who openly offers rebates and is out to disrupt the industry?

The only way to safely secure a NYC buyer agent commission rebate without risking your deal altogether is to receive a discreet rebate from a traditional broker who doesn’t openly advertise rebates online. All Hauseit partner brokers are independent, full service, brand name traditional real estate firms that never openly discount or tarnish their reputations in any way. As a result, the discreet commission rebate check you’ll receive post closing will be our little secret!

Save Money Without Risking Your Deal

Hauseit’s Buyer Closing Credit Program pairs New York home buyers with experienced, reputable partner brokers who never openly discount their services. Because our partner brokers are established, traditional brokers themselves with great working relationships across the real estate community, you can rest assured that neither you nor your agent will be treated any differently.

How do I request a NYC broker commission rebate?

First, a word of advice before you request a NYC real estate commission rebate. There are over 50,000 buyer’s agents in NYC, and most of them have little or no recent deal experience. Just like in any other industry, there are seasoned professionals as well as amateurs all vying for your business. Having an experienced buyer’s agent can be a tremendous asset to your deal, but partnering with an inexperienced or unprofessional buyer’s agent can put your entire deal at risk. You can easily lose much more than the amount of your rebate in the form of poor buyer agent advice which may cause you to overpay or lose your dream home altogether.

The only way to safely secure a NYC buyer agent commission rebate without risking your deal altogether is to receive a discreet rebate from a traditional broker who doesn’t openly advertise rebates online. All Hauseit partner brokers are independent, full service, brand name traditional real estate firms that never openly discount or tarnish their reputations in any way. As a result, the discreet commission rebate check you’ll receive post closing will be our little secret!

Request a Discreet Buyer Broker Commission Rebate

Hauseit’s Buyer Closing Credit Program pairs New York home buyers with experienced, reputable partner brokers who never openly discount their services. Because our partner brokers are established, traditional brokers themselves with great working relationships across the real estate community, you can rest assured that neither you nor your agent will be treated any differently.

Why were buyer broker commission rebates legalized in New York?

Buyer broker commission rebates were legalized in New York as a result of the NY Attorney General’s investigation into the lack of competition in the New York real estate brokerage market. The investigation was triggered as a response to NYC commission rates remaining steadfast at 5-6% despite falling commission rates around the country and significantly lower commissions in London than in NYC.

Under the traditional NYC commission structure, sellers agree to pay 6% in total commissions no matter what. This arrangement effectively encourages the use of two agents in every deal: a listing agent and a buyer’s agent. As a result, a buyer effectively for the services of a buyer’s broker even if he/she does not choose to be represented.

The Attorney General’s office concluded that the quickest way to reduce real estate commissions in NYC was to permit buyer broker commission rebates. Legalizing rebates has a much quicker impact in reducing transaction costs compared to trying to change the traditional seller commission structure which has been in NYC for decades and won’t disappear anytime soon.

Reduce Your Closing Costs When Buying in NYC

Requesting a Hauseit Buyer Closing Credit is a legal and non-taxable way to discreetly save money on your purchase and reduce your buyer closing costs in NYC. Because our partner brokers don’t openly discount, you can be assured that requesting a closing credit won’t risk your deal.

Where can I read the letter that NY's Attorney General wrote about the legality of commission rebates?

The full text of the NY Attorney General’s letter regarding broker commission rebates can be viewed below:

April 20, 2015
Dear participant in New York’s real estate industry:
I am writing to alert you to a recent change in New York State’s Real Property Law that was strongly supported by my office. This law has the potential to breathe new life into competition in the residential real estate brokerage industry, to the benefit of all New Yorkers. I urge you take advantage of this law and help reinvigorate price competition among real estate brokers in New York.
In December, a statute was signed into law amending Section 442 of the New York Real Property Law to make it completely clear that it is lawful for a broker to pass through, or “rebate,” part of his or her commission to the client. This legislation arose out of an investigation by my office into competition in the residential real estate brokerage industry. My office worked together with the New York Department of State, the New York State Association of Realtors, and others in the industry to initiate the clarifying legislation.
As you know, for most residential real estate sales in New York State, including New York City, the seller’s broker is usually compensated by receiving a contractually set commission from the seller. The buyer’s broker, however, is not typically paid by the buyer; he or she instead receives a fraction (often half) of the seller’s broker’s commission. Due to this payment structure, often the best way for a buyer’s broker to compete on price is to offer to rebate part of his or her commission to the buyer. Such buyer rebates are legal in most states, including New York. But until recently, some people in the industry may have read Section 442 to suggest that this type of rebating was not permitted in New York. As of December’s legislative fix, there is no room for debate: commission rebating in New York State is legal.
Such rebating is also procompetitive and good for consumers. One reason my office helped initiate this legislative change was because we were concerned that confusion over the legality of rebating may be hindering efforts of real estate brokers to employ more innovative, consumer-friendly business models. For example, the widespread use of sophisticated real-estate search websites now allows buyer-side brokers to offer more limited-service, lower-fee models, under which clients do more of their own legwork when searching for properties. Brokers adopting such models can offer lower commissions (by rebating) and, in principle, may also be able to serve a larger number of clients.
I encourage all real estate brokers and salespersons in New York to consider enhancing the choices available to real estate buyers by offering lower commissions (by means of rebates) to some or all of your clients. I also emphasize that my office will investigate any allegations of boycotting or discrimination against brokers engaged in rebating or other lawful discounting practices. Finally, I urge consumers and other buyers of real estate in New York to take note of your right to bargain with your broker for a lower commission.
For the text of Section 442 highlighting the recent amendment, and additional information about competition in the real estate industry in New York, see my office’s Antitrust Bureau webpage at here.
Sincerely,
Eric T. Schneiderman
Attorney General
State of New York
Source: Open letter from Attorney Eric Schneiderman to the New York real estate broker industry, dated April 20th, 2015

What’s a great way to jeopardize your deal? By looping in a discount broker after you’ve already contacted a listing agent. Listing brokers are not dumb. It doesn’t take much to find out what most mom and pop rebate brokers are up to. So if you really want to make a listing agent’s blood boil, go ahead and risk your home purchase!

Tired of Dealing with Sketchy Discount Brokers?

We’ve secured private label discounts with New York’s finest brokers so you don’t have to! A home purchase is a major life decision. Work with a real broker. We’ve partnered up with the most experienced, non-discount brokerages in New York so you can work with the best without risking your purchase.

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).

One thought on “Are NYC Broker Commission Rebates Legal?

  • Scott
    on December 30, 2017

    This is incredible guys. I’ve had at least 3 brokers tell me that they can’t cut me a better deal because it’d be illegal, I’m not licensed as a buyer yada yada. Including one reasonably good friend who told me that it’d be against real estate “law” to help me out.

    Will definitely be looking into this more. My only question is, will the seller automatically know about the rebate? I’d prefer it if the other side doesn’t know I’m getting a rebate. Don’t want to potentially mess up my deal. It’s much more important that I actually get a home vs a rebate.

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