Best of Brick

Does a buyer in NYC need to pay a broker fee?

  • REBNY is changing its co-brokerage agreement to ‘decouple’ commissions
  • In some scenarios a buyer may be responsible for paying their broker’s fee
By Jennifer White Karp  |
December 28, 2023 - 11:30AM
Buildings in the East Village, NYC

Under REBNY's new rules, if a buyer's broker rejects a seller's compensation offer, the buyer's broker may negotiate their fee with the buyer.

The short answer is “maybe,” because starting January 1st, 2024, fees for brokers who are members of the Real Estate Board of New York are going to be “decoupled.” The move comes as major anti-trust cases are shaking up courtrooms around the U.S. and in NYC.

On Thursday, REBNY told members it would fight an antitrust lawsuit filed in early November by a New York seller against it and 26 NYC real estate firms. The suit alleges REBNY’s universal co-brokerage agreement violated antitrust laws and that forcing a seller to pay both seller's and buyer's broker fees unfairly inflates commissions.

REBNY announced in October it was changing its universal co-brokerage agreement; the change will go into effect January 1st.

[Editor's note: This article was originally published in November 2023. We are presenting it again as part of our winter Best of Brick week.]

Buyers need to know the new rules

So if you’re buying in the new year, you can no longer assume the seller is paying the 5 or 6 percent fee that is traditionally split between seller’s and buyer’s brokers and that you are off the hook.

If you’re working with one of REBNY’s 14,000 member brokers, here’s how it is supposed to go (in theory): A seller will negotiate a fee with their broker and make a separate offer to your broker in writing. Your broker can then accept, reject, or negotiate the offer. 

If the seller doesn’t offer a fee to your broker, or doesn’t offer enough, under REBNY’s new rules your broker may negotiate their fee with you.

But before you freak out, keep in mind this is a very new system for most of NYC (but not all parts, more on that in a moment). It may take some time to arrive at a new normal.

If your instinct is to skip using a broker so you can avoid having to compensate them, proceed very cautiously in a market as complicated as NYC. Here’s more on what to consider regarding buyer-paid broker fees.

Understand the terms before you fall in love

In the new year, you can expect to see information about broker compensation spelled out in listings or in the form of a disclaimer on sign-up sheets at open houses. If any of it is confusing to you, be sure to ask what the terms mean—don’t assume the information is meant just for brokers.

What you want to avoid is falling in love with a place, only to find out that the seller is not offering a broker fee, or a very low one, which means your dream home could potentially be as much as 3 percent more expensive.

Why paying a buyer's broker fee can make sense

If you have ever bought in NYC before, having to pay a broker fee now on top of the steep cost of real estate here may come as a shock, or even something you dismiss outright. But you should know what you are getting into if you decide to go it alone, because buying real estate in NYC is not like buying in other places. 

The dominance of online listings adds another wrinkle to this debate: It may be hard to stomach paying for that representation when so much information is online and readily searchable, says John Walkup, co-founder of real estate data analytics company UrbanDigs. You may be thinking that since you’re the one who found the place, why not take the next step and negotiate the price yourself?

For one thing, you may not understand what you are up against—and what you don’t know. For example—how was the asking price derived? What are the comps? And what are the comps based on? If any of those buyers received a closing credit, for example, those prices are inflated—and you’re at risk of overpaying. A broker would do that digging for you.  

But the purchase price is not the only thing on the table. Walkup points out: there’s a myriad of other items to negotiate, like the closing costs. Sometimes sponsors or sellers are willing to pay mansion taxes or transfer taxes, for example. If you’re buying a new condo, maybe there are fees for a storage or parking space that a broker would know to push back on.

“As a consumer you would forfeit this without someone on your side,” he says.

Then there’s the time involved in negotiating a deal. You would have to spend all your own time on the transaction. And it would have to be done during working hours, he stresses. That means answering email chains and staying on top of the paperwork.

“It’s not something that you want to take on unless you have the bandwidth,” he says.

Co-op deals go smoother with a broker

Buyer representation is especially important when buying in a co-op, says Sharon Yehoshua Darouvar, a real estate transaction attorney at law firm Konner Gershburg Melnick Darouvar. 

The co-op approval process is complicated and “you want to put your best foot forward,” Darouvar says. A broker will help you put together your board package and help you understand the building’s requirements for post-closing liquidity and other measures of your financial fitness, she says.

Most co-op buyers rely on a broker to “get board approved and have a successful close,” she adds.

Relying on the seller’s agent is risky

REBNY’s broker fee shift could in theory open the door to more dual agent deals.

If you have bought somewhere else in the U.S., you may have relied on one broker to represent both you and the seller. This is known as dual agency, and while it is done in other parts of the U.S., it is not common here. Plus, going this route could “shortchange a buyer,” Darouvar says.

“Buyer and seller interests are not always aligned,” she says. Still, she points out that NYC brokers are conditioned to working together because collaboration makes deals happen and she thinks that mode will continue.

“Real estate is not necessarily adversarial, but you want to make sure whoever is representing you is fighting for your best interests,” she adds.

Decoupled broker fees are the norm in parts of NYC

Interestingly, this experiment in unhitching broker fees has already been done on a smaller scale in Brooklyn.

Brooklyn MLS, which covers neighborhoods in eastern and southern Brooklyn and claims over 3,700 members, does not require equal commission splits. As Hauseit notes, it’s “extremely common” for Brooklyn MLS agents to offer only 1 percent to the buyer’s agent. (Brick has reached out to representatives at Brooklyn MLS for comment.)

Stephen Brobeck, a senior fellow at the Consumer Federation of America, compared NYC buyer broker commission rates for a 2022 report “Diverse Real Estate Commissions: The New York City Residential Brokerage Anomaly.” He found that the median commission for Brooklyn MLS brokers was 1 percent, compared to 2.5 percent for Brooklyn REBNY brokers and 3 percent for Manhattan REBNY brokers.

“Unlike REBNY, the Brooklyn MLS does not require its members to offer any compensation to co-brokers (buyer brokers). In about 10 percent of the sales in our sample, zero commission was offered,” he writes. Notably, properties sold through REBNY in Manhattan and Brooklyn are much pricier than those sold on the Brooklyn MLS. As a result, buyer agents in REBNY Manhattan “would tend to receive commissions that were more than three times the commissions of Brooklyn MLS agents.”

The takeaway: Negotiate with your broker

Brobeck tells Brick that because Brooklyn MLS does not require listing brokers to offer compensation to buyer brokers, it has helped drive down commission rates, frequently to 3 percent.  

“The example of this MLS has stimulated price competition in most other areas of the city, which now frequently see commission rates of 3 to 4 percent,” Brobeck says. 

And that should embolden buyers to negotiate with REBNY brokers to come down from their standard rates of 5 or 6 percent, he says.

“Even though REBNY announced they will partially uncouple these rates, their brokers will work hard to maintain the current rate level. The brokers will succeed unless home sellers and buyers have serious rate conversations with their REBNY agents and try to negotiate rates down,” Brobeck says. “Most consumers who pay 6 percent commission rates in Manhattan, with its pricey properties, are being ripped off. Agents rarely can justify charging $60,000 in fees for the sale of a million-dollar property.”

In his view, it is a “partial” move because while “REBNY will no longer require listing agents to offer compensation to buyer agents, I expect nearly all will continue to do so, and with the same rates,” Brobeck says.

He points to Northwest MLS, which covers most of Washington State, where a similar broker fee decoupling went in effect last year. “The offered rates haven't changed at all—still high and uniform,” he says.



Jennifer White Karp

Managing Editor

Jennifer steers Brick Underground’s editorial coverage of New York City residential real estate and writes articles on market trends and strategies for buyers, sellers, and renters. Jennifer’s 15-year career in New York City real estate journalism includes stints as a writer and editor at The Real Deal and its spinoff publication, Luxury Listings NYC.

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