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Concentration of Power and Lack of Competition in NYC Real Estate
One of the main reasons why real estate agent commissions in New York City have traditionally not been negotiable is because NYC brokerages have never had serious competition from discount brokerages. Almost all of the 50,000 agents in New York City work at traditional, full-service brokerages with often unwritten yet strict firm policies against discounting or negotiating real estate agent commissions.
Furthermore, there are a variety of intrinsic reasons why agents won’t do a flat fee MLS listing in NYC such as damage to their reputation. Moreover, the proportion of listings and agents that are concentrated in the hands of the largest firms makes the industry oligopolistic by nature. As a result of controlling almost all agents and listings in the city, traditional brokerages do not need to discount or negotiate their real estate agent commissions.
Widespread Misinformation and Market Manipulation by NYC Brokers
The second reason that NYC real estate commissions have not been negotiable is because insider agents are able to get away with providing misinformation about the market to unknowing sellers.
For example, large NYC brokerages and their real estate agents can easily convince home sellers that they won’t have the same exposure to buyers by listing through a smaller firm or a discount brokerage who is willing to negotiate on commissions. Real estate insiders know that all firms, large or small, have the same listing syndication tools and exposure to clients.
Yet most home sellers will still push themselves into believing the common real estate agent lie that smaller firms receive less buyer exposure because as outsiders they have no way of disproving it.
Because of the secretive nature of the NYC real estate industry, real estate agents are able to mislead home owners into listing with them through a combination of fear, misinformation, harassment and solicitation.
Peer Pressure from the Real Estate Brokerage Community in NYC
A third reason why NYC real estate commissions have not been negotiable is because agent insiders who offer to discount commissions often face backlash from fellow agents.
When a broker attempts to break ranks and openly discount their services, they face an incredible amount of flak and pressure from the rest of the broker community.
Because 90% of all NYC real estate transactions involve two agents through the concept of co-broking, brokers have a tough time openly discounting their commissions because they need the cooperation of other brokers to successfully close deals.
The team at Hauseit has instead taken a softer approach to negotiating and reducing real estate commissions in NYC. Hauseit affiliates are traditional, full-service REBNY Member Firms who have agreed to privately reduce commissions for both home buyers and sellers.
Hauseit sellers can choose between listing FSBO in NYC for a flat-fee or by using a full-service listing agent for only 1% commission.
What Are Common Responses from Agents When Asked If Real Estate Commissions Are Negotiable in NYC?
Here’s a sampling of what we’ve experienced from our tests in the field.
“It’s very corporate here and you have to get approval for any sell-side listing that isn’t 6%. Management will recoil at 5% because they feel like it will hurt the brand to be seen taking a discount.”
– Stephanie D., Licensed Real Estate Salesperson at [redacted, large NYC brokerage]
“Our commission rate is 6% to sell. Sorry there is no flexibility and firm policy.”
“Does anyone else want to do that?”
“The best we can do is 6% if there’s a buyers’ agent and 5% if there is an unrepresented buyer and we represent both sides of the deal”
How Can I Save on Real Estate Broker Commissions When Selling?
Option 1: Agent-Assisted FSBO in NYC
NYC homeowners who want to save the full 6% commission would be best served by listing FSBO through a NYC Flat-Fee MLS Listing Package. A quality NYC Flat Fee MLS listing package lists your home on the NYC equivalent of the MLS (called RLS here in New York City) and dozens of websites all at once.
The key benefit of listing via an Agent Assisted FSBO is that your listing has the same exposure to buyers and buyers’ agents as if you’d hired and paid 6% to a traditional listing agent.
It’s no longer necessary to choose a listing agent just because they have access to the broker database. Our partner brokers who help you list FSBO have the exact same listing syndication technology used by the rest of the city’s 50,000 agents who are all charging 6%.
If you decide to list FSBO in NYC, it’s important to remember that you are saving on commissions primarily because you’ve agreed to conduct showings and work with buyers on your own. Therefore, it’s critical that you properly set your expectations about how much advice and assistance you will receive from our partner brokers when selling FSBO in NYC.
Option 2: List Full Service for 1% in NYC
NYC homeowners who don’t have time to list FSBO can still save thousands of dollars by working with a highly rated, brand name real estate brokerage for just 1% commission. Just think to yourself: is the amount of work a broker does for me on an hourly basis worth paying 6% of the value of my home?
Our value proposition is simple. Hauseit’s 1% full-service listing option better aligns the cost you pay for working with a full-service partner broker with the amount of work he or she actually does.
As a seller with Hauseit’s 1% full-service listing option, you can expect to receive the exact same level of service you’d receive from a broker who charges 6%.
Are Real Estate Agent Commissions Negotiable in NYC for Buying a Home?
Yes. Yet sadly almost no home buyers we’ve spoken with have ever even heard of a buyer agent commission rebate or knew that saving money on their closing costs in NYC was even possible. Home buyers do not know about commission rebates despite almost universally haven spoken with real estate agents before. It is a common joke after all that every New Yorker has at least 5 real estate agent friends.
However, even New Yorkers without real estate agent friends will have been in contact with a real estate agent the instant they begin their home search. Because 98% of home buyers today start their search online and because 96% of NYC listings on any given day are listed by agents, the instant a home buyer contacts a listing they’re interested in is the instant they become a potential client for that listing agent.
The fact that none of these real estate agent “friends” or listing agents have mentioned to New York home buyers the possibility of a buyer agent commission rebate is a staggering example of the complicity of the New York City brokerage community in maintaining irrationally high commission rates.
Why Don’t NYC Real Estate Agents Inform Buyers About Commission Rebates?
The less revealing answer is because most agents are licensed real estate salespersons who work for a broker that takes a 50% commission split. Therefore, if an agent gives away 1% commission to the home buyer, he or she might be left with only half a percent in commission after the commission split with his broker.
The more controversial and accurate answer is that there is an act of collective collusion among the large brokerages in NYC. While it may be difficult to imagine 50,000 agents in a competitive market all independently deciding to collude and keep commission rates high, it is not so difficult once you realize that Principal Brokers at brokerages set firm policy on commission rates.
And because most agents in the city work for the biggest brokerages, collusion is only needed by a handful of Principal Brokers at the biggest firms. This is not so hard to imagine in a city with a tight-knit real estate broker community like New York City.
Ready to buy or sell in NYC and benefit from reduced real estate commissions?
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).