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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.

Broker Commission Rebates in NYC are 100% Legal and Encouraged

Save Money by Requesting a NYC Broker Rebate

Rebates are legal and non-taxable and help you save money

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

Fortunately and despite what you may hear from traditional buyer’s agents and NYC listing agents, broker commission rebates in NYC are 100% hands-down legal. As a buyer, if you request a broker commission rebate in NYC you can expect to receive a significant cash incentive simply for purchasing a property.

New 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. In fact, 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.

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

Fortunately and despite what you may hear from traditional buyer’s agents and NYC listing agents, broker commission rebates in NYC are 100% hands-down legal. As a buyer, if you request a broker commission rebate in NYC you can expect to receive a significant cash incentive simply for purchasing a property.

New 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. In fact, 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.

Save Money by Requesting a NYC Broker Rebate

Rebates are legal and non-taxable and help you save money

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

To pave the way for broker commission rebates, New York State recently amended Section 442 of the Real Property Law Article 12-A to specifically permit broker rebates. As you can see in 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

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

As if it weren’t sufficient just to change the law itself, New York’s Attorney General Eric Schneiderman issued an open letter to New York’s real estate community 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

Save Money by Requesting a NYC Broker Rebate

Rebates are legal and non-taxable and help you save money

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 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.

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

Step 1: A seller hires a New York City 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 seller pays 3% commission to the listing agent and 3% commission to your buyer’s agent.

The key takeaway here is that the seller pays the same amount of commission regardless of whether a buyer’s agent is involved in your deal alongside the listing agent.

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 2: 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:

  • 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 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).

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 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.

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

Step 1: A seller hires a New York City 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 seller pays 3% commission to the listing agent and 3% commission to your buyer’s agent.

The key takeaway here is that the seller pays the same amount of commission regardless of whether a buyer’s agent is involved in your deal alongside the listing agent.

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 2: 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:

  • 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 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 Money by Requesting a NYC Broker Rebate

Rebates are legal and non-taxable and help you save money

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.

Because of the high median purchase price in the city, real estate commission rebates in NYC can end up being $30,000 or more. An NYC real estate commission rebate can significantly reduce your NYC buyer closing costs. If you are buying a property above $1 million, the NYC real estate commission rebate you receive will pay 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.

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.

Because of the high median purchase price in the city, real estate commission rebates in NYC can end up being $30,000 or more. An NYC real estate commission rebate can significantly reduce your NYC buyer closing costs. If you are buying a property above $1 million, the NYC real estate commission rebate you receive will pay 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.

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 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.

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.

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. 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.

Hauseit explains why broker commission rebates are legal in New York City and how you can request one from your NYC buyer's agent.

Therefore, 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 itOn top of that, a typical NYC real estate commission rebate will unquestionably dwarf the amount of alleged savings you’d pocket by submitting an unrepresented offer.

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?

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. Sellers have already agreed to pay 6% in real estate commissions no matter what.

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. As a home buyer in NYC, you benefit when it’s shared with your buyer’s agent because you can receive a 1% broker commission rebate from your buyer’s agent.

Are NYC broker commission rebates available for renters as well?

Given the low inventory of rentals in NYC and the competitiveness among renters, it’s definitely less common to receive a commission 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.

Furthermore, 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 broker commission rebate.

Are NYC broker commission rebates available for renters as well?

Given the low inventory of rentals in NYC and the competitiveness among renters, it’s definitely less common to receive a commission 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. Furthermore, 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 broker commission rebate.

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

Absolutely not, for two reasons. First and most importantly, it’s illegal and a violation of the State and Federal antitrust laws for any agent to discriminate against innovate listing brokers and buyer’s agents who work for reduced commissions or offer rebates. In his open letter to the real estate community New York’s attorney general specifically warned brokers that any boycotting or discrimination will be investigated by the State.

“I also emphasize that my office will investigate any allegations of boycotting or discrimination against brokers engaged in rebating or other lawful discounting practices.”

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

The second reason why a NYC home buyer requesting a broker commission rebate won’t be discriminated against is because the listing agent doesn’t need to know about your private arrangement with your buyer’s agent!

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.

Discretion is also key when requesting an NYC real estate commission rebate. The last thing you want is for the listing agent and/or seller to hold a grudge against you because they know you are receiving a NYC broker commission rebate.

At Hauseit, we’ve partnered with NYC’s most experienced and seasoned buyer’s agents who have agreed to discretely offer you an NYC real estate commission rebate at closing. As NYC’s largest FSBO and Buyer Agent Commission Rebate company, Hauseit’s reviews online are second to none.

To request a NYC broker commission rebate, contact us today.

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.

Discretion is also key when requesting an NYC real estate commission rebate. The last thing you want is for the listing agent and/or seller to hold a grudge against you because they know you are receiving a NYC broker commission rebate.

At Hauseit, we’ve partnered with NYC’s most experienced and seasoned buyer’s agents who have agreed to discretely offer you an NYC real estate commission rebate at closing. As NYC’s largest FSBO and Buyer Agent Commission Rebate company, Hauseit’s reviews online are second to none.

To request a NYC broker commission rebate, contact us today.

Request a NYC Real Estate Commission Rebate

A broker commission rebate is 100% legal and will save you money

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 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.

Request a NYC Buyer Broker Commission Rebate

NYC broker commission rebates are 100% legal and help buyers save money. Get yours today.

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

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