So you’ve decided to sell or buy a home in NYC and one of the first questions that has crossed your mind is: What’s the typical real estate commission in NYC?
How is the average NYC real estate commission split between listing agent and buyer’s agent? In this Hauseit blog post, we explain what the typical real estate commission is in NYC and demonstrate how you can reduce or eliminate traditional commissions when selling an apartment in New York City.
Table of Contents:
How is the typical real estate commission rate in New York City shared between the listing agent and buyer’s agent?
What’s the average real estate commission in NYC?
You’ve probably heard that the traditional sales commission to sell your home in NYC is 5-6% as is the case nationwide. According to recent articles by the New York Times and The Economist, the national average real estate commission charged by real estate agents to sell a home stood at 5.4%. Despite the average sales price in NYC now hovering over $1.73 million, real estate commissions in NYC have remained stubbornly fixed at 5-6%.
However, the truth is that there is no official record or statistic for what the average real estate commission in NYC actually is. The reason is that most brokered sales have their final sales prices and NYC commission amounts recorded in private inter-broker databases like REBNY’s (Real Estate Board of New York’s) RLS Broker Database, MLS Long Island or Hudson Gateway MLS. These broker databases do not publish data on real estate commission amounts to the public.
To make matters worse, most MLS broker databases only record the buyer agent ‘co-broke’ commission amount (as opposed to the total commission rate, including what is earned by the listing agent). Buyer agent commission data in MLS is typically no longer visible once a deal closes, which means that even real estate professionals with MLS access are unable to view historical commission data being charged by fellow listing agents in NYC.
Moreover, NYC listing agents will typically avoid publicly answering any questions involving what the normal or average real estate commission is in NYC as it can be a sign of collusion and price-fixing.
Due to the lack of transparency on commission rates being charged by NYC listing agents, it’s extremely difficult for potential sellers to know how much commission fellow NYC home sellers are actually paying. Most NYC sellers will reluctantly sign a 6% commission listing agreement after hearing from a handful of agents, friends and neighbors that 6% is going rate.
Why have NYC real estate commissions remained so high?
The average real estate commission rate in New York City has remained elevated for a number of reasons, including the following:
Lack of NYC Real Estate Commission Transparency
Unfortunately for NYC home owners, there is no centralized or public database which provides information about the typical NYC real estate commission rates to the public. Therefore, most potential sellers are not easily able to determine how much in NYC real estate commissions other sellers are actually paying.
This lack of transparency, combined with the incessant references NYC listing agents make to “6% commission” result in most busy NYC sellers begrudgingly agreeing to pay something very close to 6% in total NYC real estate agent commissions.
Secret NYC Brokerage Prohibitions Against Reduced Commissions
Although commission rate fixing and collusion among real estate brokerages is highly impermissible and illegal, we have heard from our NYC FSBO sellers (who may have interviewed some traditional agents before deciding to list FSBO) on numerous occasions that brokerages simply will not permit any agent to sign a listing agreement which charges less than 5% in total NYC real estate commission to the seller. We’ve also heard these same words uttered directly from many brokers/salespeople who are associated with these firms.
In short, a key reason why the average NYC real estate commission has remained high is that many large brokerages simply won’t permit their agents to work for lower commissions such as 1% for full service.
Dominance of NYC Buyer’s Agents
Buyers’ brokers still dominate the NYC home buyer market. Even though well over 90% of today’s home buyers may start their search online, they eventually end up purchasing their home through a buyers’ agent over 80% of the time.
In order to access buyers represented by agents, sellers need to list their property in the city’s broker database (called RLS in NYC). Because all REBNY member brokerages have signed a ‘universal co-brokerage agreement’, it means that when you list on RLS all 15,000+ buyer agents automatically know that you are contractually offering a commission if they procure a buyer for your home.
Unfortunately, the vast majority of sellers in NYC think that the only way to list in RLS and fully market their home is to hire a traditional 6% listing agent who will post the property in RLS. Many sellers are not aware that they can list their home in RLS (and everywhere online) for zero percent listing agent commission through a Flat Fee RLS Listing Package.
Perceived Complexity of Selling in NYC (Especially When Selling a Co-op)
Listing agents in NYC often portray selling apartments in NYC as being more challenging than in the rest of the country and something which only a seasoned listing agent is capable of handling successfully. While it’s true that selling a co-op in NYC is more difficult than selling a condo in another city, the reality is that it’s not rocket science. Through our agent-managed NYC FSBO Listing Service (Flat Fee RLS), we’ve helped hundreds of NYC home sellers succeed without the assistance of a traditional, full-service real estate agent.
If you do your homework as a FSBO seller in NYC, you will have no difficulty in preparing a co-op board application, coaching your buyer for the coop board interview and managing the overall sale process.
Has the typical NYC real estate commission rate gone down recently?
Only recently has the average NYC real estate commission rate started to fall more in line with what’s charged in the rest of the country and in London. With the advent of competition on the listing agent side with NYC flat fee MLS listing services like Hauseit and the legalization of buyer rebates in NYC, real estate commissions in NYC have become compressed on all sides.
As a seller in NYC, you can take advantage of these reduced commission options to minimize your seller closing costs. Unfortunately, there are a countless number of buyers and sellers in NYC who simply don’t know that they can easily sell FSBO and save 6%, or buy and automatically save $20,000 or more by requesting a NYC broker commission rebate.
How is the typical real estate commission rate in New York City shared between the listing agent and buyer’s agent?
Before you decide whether a commission charged to you by a traditional NYC listing agent is fair or not, first you must understand how a normal real estate commission in NYC is shared among all parties. Over 95% of NYC listings are sold by agents, which almost always means the seller has agreed to sign an “exclusive right to sell” with the listing, or seller’s, agent. In an “exclusive right to sell” arrangement, the seller is obligated to pay a real estate commission in NYC to the listing broker if the property is sold during the term of the agreement, regardless of who finds the buyer. This means that even if the owner tells a close friend or neighbor about his property, and that neighbor ends up buying the property, the listing agent will still collect the full 6% commission.
In the event that a buyer’s agent procures the buyer, the traditional 6% commission is split equally between the listing agent and the buyer’s agent. Each brokerage firm will earn 3% of the sale price on the transaction.
When a listing agent is hired by a seller, the agent will typically post the listing along with the real estate commission in a local NYC brokerage database so other agents will see it and try to find a buyer. If another agent finds a buyer that ends up purchasing the apartment, the listing agent will be obligated to share, or co-broke, half of the real estate commission in NYC to the buyers’ agent. It’s important to understand that the real estate commission in NYC earned by a typical real estate salesperson will be less than the nominal commission percentage (6% or 3%) because a salesperson will have to share some amount of the real estate commission in NYC with the brokerage that he or she works for.
While it is quite easy to get a real estate salesperson’s license in NYC (there are over 27,000 real estate agents in NYC), it is more difficult to acquire a real estate broker’s license in NYC. The latter requires 2-3 years of real estate experience based on a points system (1750 points required to become a broker, 250 points accumulated per closed condo/co-op transaction). Real estate salespersons are required to work for a broker and can only collect fees via their supervising broker.
The real estate commission in NYC is split on a case by case basis for each brokerage. Typically the split will start at 60/40 in favor of the brokerage, and becomes more favorable as the salesperson proves himself. Some brokerages have no split, but instead charge agents a periodic desk fee to be a part of the brokerage and utilize its marketing resources. Therefore, it is important to understand that after splitting half of the real estate commission in NYC with their brokerage, the real estate agent will only take home 1.5% per typical transaction before tax.
While 6% may make sense in most of the country where the average home value is around $250,000, in NYC the typical 6% commission equates to roughly $100,000.
As you can see, the value proposition is clearly not there in this day and age where an attractive apartment that sells itself in a few weeks through the internet will require NYC real estate commissions that equate to some people’s yearly salaries.
How can you reduce or eliminate the traditional NYC real estate commission when selling?
You can avoid the traditional 6% NYC real estate agent commission as a NYC home seller by listing your home FSBO with Hauseit’s NYC flat-fee MLS listing service.
Whether you’re selling a coop or a condo, Hauseit’s Flat Fee MLS listing service offers your property the same listing syndication and exposure offered by a traditional NYC 6% listing agent without having to actually hire and pay 6% to a traditional, full-service listing agent. Better yet, our agent-assisted FSBO service allows you as a NYC FSBO seller to maintain full control of the sale process.
How does Hauseit’s NYC FSBO Flat Fee RLS listing service offer the same exposure as a traditional, full-service listing agent?
Hauseit’s Flat-Fee MLS listing service offers NYC FSBO sellers the same advertising exposure and reach as they’d have through a traditional listing agent, including co-broking in REBNY’s RLS broker database (providing access to represented buyers) and syndicating their listing to over a dozen websites like StreetEasy and Brownstoner, without asking for any percentage NYC real estate agent commission or broker fees.
Can I reduce my NYC real estate commission bill if I don't have time to sell FSBO?
Sellers who don’t have the time to sell FSBO but who’d like to save a substantial amount of NYC real estate commission should consider Hauseit’s 1% discount full service NYC listing option.
This service is identical to what you’d receive if you hired a traditional full-service listing agent and paid 6%. You can expect to save 3-5% in New York City real estate commissions as a seller when using this option.
Can NYC home buyers save money on New York City real estate commissions?
Yes, home buyers in NYC can also benefit from reduced commissions by requesting a NYC buyer’s agent commission rebate.
Price competition on home buyer representation in NYC has slowly emerged as well. Historically pitched as free, buyers’ agents offer negotiation, hand-holding, guided open house tours, neighborhood knowledge as well as NYC coop board package preparation assistance to potential buyers without charging them a fee directly. How can there be price competition when it’s already nominally free for buyers?
The answer comes in the form of a non-taxable NYC broker commission rebate, which has recently become legalized in New York City.
While all of this may sound great to you as the home buyer, the reality is that the seller and/or listing agent would not be very happy if they found out that you were saving money on the purchase through a commission rebate. What if the listing agent and/or the seller becomes aware of the rebate you are receiving? Working with a known discount broker will put you at obvious risk of being mistreated by the listing agents and sellers.
The only way to receive a buyer agent commission rebate without risking the competitiveness of your offer altogether is to ensure that you are working with a discreet buyer’s broker who does not publicly advertise that they offer rebates to buyers. After all, what is the benefit of saving money on your purchase through a rebate when the deal itself falls apart?
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).