Broker fees

Isnt the amount the brokers are willing to discount largely determined by the agencies they work for? You may get a smaller firm or one man shop to do this but not likely a major agency will take this. See threads on discount brokers- people like Keith Burkhart are highly recommended (I have used him in the past)

Vmk, There is no large broker who will list it for less than 5 percent. You can always try to sell it yourself without even paying to the buyer's broker. It will be hard as most buyers come represented by a broker and the buying broker expects 2.5 percent.

vmk86724, I'm pretty certain brokers can't list a flat fee in compensation to buyers' agents. Not only will most major brokerages not allow this sort of thing, but I believe it's physically impossible to enter anything but a percentage in most systems that access the RLS (that's the major broker database here you need access to).

Have you considered a flat fee RLS listing through a company like Hauseit? Again, you still wouldn't be able to list a flat dollar amount in "co-broke" to buyers' agents, and it's definitely recommended that you offer at least 2.5% to get the proper attention of buyers' agents.

vmk, brokers from a lot of the major firms in the city are typically so brazen that they say 6% is a rule or law (it's not by the way).

With that said, you should offer something market to buyers' agents. 3% or at least 2.5%. I've heard of cases of buyers' agents from top 10 firms in writing saying they can't work for less than 2.5%, or that they have a firm policy against commissions lower than that at that price point. Probably anti-trust violations I'm sure, but that's the reality.

Also, I don't think you can offer flat dollar amounts in the RLS system, must be percentage.

Would echo the above sentiment though on saving money via the listing broker side, and potentially the buyer side as well if you get lucky. Definitely check out Hauseit, they're the largest player in the assisted fsbo or "flat fee" market in the NYC. Good luck and curious to hear what you end up deciding to do!

I am not pitching this listing, but since I am a broker, I want to address a more general point: how is what brokers make "vulgar'? I'm not talking about the reality TV stars (I think of them as entertainers first and brokers second) but I'm talking about any real estate agent you know through work or college or your kid's school. Do these people seem to you to have "vulgar" lives? I would reserve that word for a flashy style of living that most brokers I know don't have -- especially because we're living in a city where the prices of major goods (like real estate and education) are set by people who make many times what we make.

That question aside -- if the listing service you're using won't take flat fee numbers, what's to stop you from hiring a broker who will take a 1.5% commission to sell your place while offering a 1.5% co-broke? By my math, If you sell your place for $1,700,000, then you're paying $51,000 commission, which should get you where you want to go.

ali r.
{downtown broker}

There's no reason why you can't find a broker who is willing to take a smaller commission. Whether a flat rate is legal, I don't know, but I do know you can find a discount broker like front_porch mentions. I used Dan Gotlieb from Digs Realty (www.digsrealtynyc.com) to sell my place. He charged me half the typical broker fee (on a percentage basis) while still offering a standard commission to buy side brokers (I was afraid many brokers wouldn't bring their clients to my listing if I didn't offer them a full commission, and I didn't want to limit my buyer pool). Dan was awesome and did just as much (if not more) as any broker earning a full commission would have done, and I highly recommend him. At the end of the day, if you don't want to pay 6%, you have other good options out there.

My concern though with these discount brokers commenting above is that it might compromise my sale. What's to prevent an agent from just Googling them, realizing what's up and ignoring them?

Obviously I would prefer to pay less, but not if it jeopardizes my deal!

I work at Corcoran and have been a member of these message boards for a while now, even before I worked as a real estate agent professionally! I'm happy to talk to you - Danielle.Nazinitsky@corcoran.com.

I know hiring a full service / full fee brokerage firm & broker results in higher offers and properties close for higher prices because I see it every day!

My non-professional two cents:

You are not going to get a representative sample on these message boards on benefits of hiring a full-service brokerage & broker (Corcoran, DE, etc) paying the 6% commission because many of the people who actively post on these message boards use these message boards for lead generation because they get exposure to buyers like you who are hesitant paying the full 6% commission.

In Summary: Discount brokers main source of sellers is this message board!!

My professional two cents:

I love working with "For Sale By Owner" sellers and those hesitant to pay a full commission. It is always fun to exceed expectations. This is quoting one of my references:

"Sometimes people think when an apt sells really fast it was so easy that they can do too. But often it’s because a good broker makes it look easy, with the correct pricing and proper marketing and negotiation skills."

People think they are "saving" 1, 1.5% going with a discount broker, but in the end, if you hire a full service brokerage firm / broker you can net 3-5% more AFTER paying a 6% fee. Its all pricing, exposure and getting as many buyers to see the property as possible.

I would suggest hiring an agent who only has 1-5 active listings and doesn't have an assistant and will actively show your property the whole time and not outsource open houses and showings. I am "anti-team" generally because there is a lack of consistency and communication.

There are countless examples where a seller first tries listing it on their own, then hires a discount broker, and finally realizes the best option is a full-service brokerage.

Finally & personally, I sold a FSBO last year and netted the seller 3% more after the 6% fee (9% more than the offer they received when trying to sell on their own).

Hope that helps!
Danielle Nazinitsky

Flat fees are not illegal, net listings are.

" I've heard of cases of buyers' agents from top 10 firms in writing saying they can't work for less than 2.5%, or that they have a firm policy against commissions lower than that at that price point. Probably anti-trust violations I'm sure, but that's the reality."

A company policy setting a minimum commission rate for deals is not an anti-trust violation. It is just the company's standard, just like every cashier at the grocery store will charge you $2 for a can of soup. If the company colluded with other companies to fix a rate across the industry or region, that would be a violation. But the legal definition of collusion does not include 'all the other companies are charging it so I do to'.

I don't understand the proposal. It is 50k total (to be split with buyer's and seller's broker) or just $50k to Seller? If Just $50k to Seller then you're barely saving anything. If it's $50k total then it seems that you might be better suited trying to sell the idea of 3% total (to be split between buyer and Seller).

I am always amazed that some sellers complain about high commission rates but still want a broker to get the job done for them. If you do not like to pay a broker, there is no restriction on doing it yourself. Selling it yourself is certainly possible but it is a fair bit of work.

300 - I think it's like any service, consumers of the service would generally prefer to pay less for it. At some point I suspect that market pressure will allow consumers to be able to drive down the standard pricing.

The difference in this case say vs lawyers or doctors is that the consumers can do it themselves.

And you know the cost upfront!! That said I would love to see market pressure driving cost down. The biggest obstacle to lower cost is that buyers think that the buying broker is free when they can get a rebate.

Best I have ever heard from a traditional broker is 5% with 4% if the buyer uses the listing agent. I think this is a reasonable get for a seller of a property above $1m who doesnt want to use the discount model.

Has anyone seen a broker reduce the sales commission if they are included as the buyers broker on a purchase? I am likely moving to a bigger apartment and don't need a buyers broker but happy have one if they will be more competitive on sales commission.

curtis, Just use a broker who will give you rebate for purchase.

I think maybe "investment adviser" is a better analogy than "doctor" because yes, consumers can sell their own apartments , just as they can manage their own investments , but many choose not to. A lot of my clients (though by no means all) are double-income families, and one reason they want a broker is that neither of them feels able to step away from his/her desk long enough to complete the sales process. I hear Team M that they might want brokerage to be "cheaper," but realize that for them it is somewhat "cheap" in that they are outsourcing the task to someone who makes fewer dollars per hour than they do.

Yes, if you're a high flying partner at a big law firm and your rate is $5,000 per hour, it may not make sense to do it yourself either through a traditional FSBO or an assisted FSBO through Hauseit etc.

However, I'd wager most folks in the city aren't making that kind of money. Say the average sale price is still around $2 million, 6% is $120,000. My guess would be that's close to the average annual salary for New Yorkers, if not more. So for most folks, I still think a do it yourself method through a flat fee RLS listing etc. is the better choice.

https://www.inman.com/2016/07/25/the-underground-for-sale-by-owner-movement-in-nyc/ check this out vmk, I was doubtful at first as well, but quite a lot of people are doing assisted FSBO sales!

I don't think the "do it yourself" replacement cost is really how most consumers look at whether a service is fairly priced - consider the various services consumers use (e.g., mowing the lawn, shoveling snow, doing taxes, moving, fixing cars, etc.), and these are mostly priced by the market.

Standardized pricing across professionals (like RE brokers) frustrates consumers if they don't think they are getting fair value because it feels like the market isn't appropriately working for them due to other forces. There are a lot of reasons why the RE brokers have been able to hold the line fairly well, but I suspect that will eventually shift and pricing will come down or shift to a different model.

ccurtis - no that is against corporate policies at all the firms I know of. Management won't even hear it. Management at the bigger firms will give you a lot of flak for even proposing 5% (2.5% split evenly) vs. 6%, as it hurts the brand image.

Furthermore, why do you think we as listing brokers will consider your offer if the first thing you do is ask to take money from me? Would much prefer to work with someone else who's easier to deal with. Doesn't exactly help your chances ... just saying ...

And in terms of discounting, I'm with Danielle Nazinitsky on this one, there are probably 20k or 30k licensees in NYC. Just having a license and then saying you'll work for free isn't exactly a new idea, or something that is likely to work. Why would consumers trust a one man bucket shop with such an important transaction? Why would other brokers cooperate? Because they're forced to? Seriously believe that? Consumers, just google these guys who are posting constantly, they are mom and pop's! So easy to see!

There are about 27,000 Real Estate Agents in NYC and about half that many deals done a year so on average each agent does 1/2 sale per year.

Agree, it's shocking but it's also funny how so many of them like to "enforce" commission standards ... even though they have 0 listings! I've heard funny stories from both sides. Maybe it's the million dollar listing tv shows that are propping all of this up :-)

But in all seriousness, I do think brokers play some useful role especially for busy sellers and buyers. So some element of it will always remain imo.

OP, did you make a decision yet? This thread has descended into a war of the 6% establishment vs. alternatives, so I think it's important to stay focused and remember that the ultimate goal here is for you to sell for the highest possible price while minimizing fees, right?

Are you open to doing some work yourself? If so, the cheapest solution which has been discussed at length on this forum and online is listing through a Flat Fee RLS listing i.e. www.hauseit.com . It's very simple - list on RLS and different websites, offer commission to buyers agent in RLS and show the apartment yourself.

If you do this, agents like "LuxuryBroker" will flock to your listing because they want that 2.5% or 3% commission (that is, if they have any real buyers...)

There are options today, which is a great thing. We've had great success with a disruptive model going on 10 years. It's been an interesting ride! We're not the only way to get a deal done, but we certainly have proven we're a viable option.

I've heard all the criticisms and everyone is entitled to an opinion. Shop at Costco or support your local merchant? Buy American or save a few bucks on a foreign product? Use Amazon or go to Sears? All viable options that produce good outcomes.

I'm sure Merrill Lynch wasn't thrilled when E-Trade rolled out $10 trades. But that's business and that's evolution.

Keith Burkhardt
www.theburkhardtgroup.com

@ vmk86724 I am with you! The average commission paid to brokers in the United Kingdom, Australia, France and Belgium ranges from 1 to 3 percent.

Prices in the NYC may rise and fall, trends may come and go, but one number remained unaffected: the “standard” six percent broker commission. With 6%, NYC has the highest real estate commission rate in the world and even within the United States. If you try to negotiate, brokers will tell you that “6% is standard” and “this is the way it is in New York”. Maybe if you are a friend or a family member, they will go down to 5%... lucky you!

The national U.S. average real estate commission charged by real brokers to sell a home stands at 5.36%. In the U.K., real estate brokers charge 3.25% and in France it ranges from 2 to 4%. In the center of London, brokers charge 1.7%. In London or Paris it’s common for real estate agents to charge a lower fee for more expensive apartments, brokers, generally, do not accept that in New York. To make matters worse, in London or Paris the average commission is lower than what it is in the rest of the country. How do you explain this? Real estate in London and Paris is considered a safe and liquid “asset class”, in other words, it is easy to sell. For instance, it is easier to sell a studio by the Eiffel tower than a farm in Normandy; this is the reason why the agent trying to sell the farm needs to charge more.

The same rationale should apply to NYC real estate but it does not. It turns out that real estate in NYC is actually higher than in the rest of the country, when the market is more liquid and transparent. In New York most real estate opportunities are available on public domains such as Zillow and Streeteasy, properties move fast, inventory is always high and demand is constantly growing.

Nicole
www.nestapple.com

Nicole, In you long list of correct facts, you forgot to mention the most important reason why US real estate commissions are higher. That is splitting of commission between buyer and seller's brokers which forces the buyers to be represented by a broker as otherwise the seller's broker will keep the commission intended for buyer's broker.

In most of the countries you mention, buyers pay their own broker either based on a fee or contingency. Discount or rebate brokers are indeed welcome change. I have gotten rebates on several purchases.

Another "truth" in my opinion is that a seller's broker represents both sides in a transaction as their fiduciary responsibility is really to the deal not to the seller. Same for a buyer's broker whose primary interest is to see that the deal closes. So I see little need to include a buyer's broker in a deal or to pay a full 5-6% commission. Other countries have it right.

Not only is a 6% commission ridiculous in comparison to other countries but its ridiculous when considering the tremendous increase in housing prices in NYC over the years. Real estate brokerage is also an easier business today with lower barriers to entry due to greater market data transparency and other improvements in technology. Commission rates would have gone way down years ago if it were not for market collusion.

It all comes down to the fact that real estate in the US is a two agent model ... vs countries like Sweden or the UK where it's a single agent. It's actually insane that agents in those European agents haven't totally gone the way of travel agents (i.e. again single agent) ... anyway there is lots on this topic, just google why real estate agents still exist in nyc and you'll have plenty of answers!

@ 300_mercer, i agree with every word you say basically, technology has changed the way business is done in ways that were unimaginable a decade ago. Real estate practices should adapt and evolve now that buyers and sellers have unlimited access to property listings and other information that was once hard to get. Twenty years ago, brokers were receiving apartments listings over fax, had access to information not available to the general public and were considered to have an insight into the business. Brokers are still useful and play a major role in real estate transactions however it is realistic to say their role has changed and should therefore be reflected in the commissions they receive.

The high fees are not coming from a lack of competition either: with 26,000 brokers in New York most of them do not close a deal per year and most new agents do not renew their license after 2 years. In New York, my personal theory is that the industry is actually LESS competitive than it looks. In Manhattan a few successful brokers handle most high-end transactions. This selected group set high 6% fees, which lure ever more people into the profession. To put matters in perspective, an average agent in Britain closes 40-50 deals a year, compared with just seven a broker does in the U.S.

Although collusion about real estate commissions is illegal among agents, we have heard many real estate brokerage firms not allowing their brokers to work for less than 5%.

@ 300_mercer, i agree with every word you say basically, technology has changed the way business is done in ways that were unimaginable a decade ago. Real estate practices should adapt and evolve now that buyers and sellers have unlimited access to property listings and other information that was once hard to get. Twenty years ago, brokers were receiving apartments listings over fax, had access to information not available to the general public and were considered to have an insight into the business. Brokers are still useful and play a major role in real estate transactions however it is realistic to say their role has changed and should therefore be reflected in the commissions they receive.

The high fees are not coming from a lack of competition either: with 26,000 brokers in New York most of them do not close a deal per year and most new agents do not renew their license after 2 years. In New York, my personal theory is that the industry is actually LESS competitive than it looks. In Manhattan a few successful brokers handle most high-end transactions. This selected group set high 6% fees, which lure ever more people into the profession. To put matters in perspective, an average agent in Britain closes 40-50 deals a year, compared with just seven a broker does in the U.S.

Although collusion about real estate commissions is illegal among agents, we have heard many real estate brokerage firms not allowing their brokers to work for less than 5%.

I think you also have to take into account that the people on this forum and therefore regularly on this website are not the entire Market. There are still plenty of people who actually have their brokers go out and choose which properties to pitch and show them.

Yes, there are many firms with corporate policies believe it or not that disallow all of their agents from working for less than certain amounts.

"Sorry, my firm won't allow us to show listings for less than 2.5% at this price point"

"Sorry I can't work for 2%"

Despite what the AG says, unfortunately and sadly that is the reality of the market. Traditional brokers have a lot of power. That's why it's best to work with a traditional broker at the end of the day. Save yourself the trouble!

Same thing on the buy side as well as the sell side: https://www.hauseit.com/low-commission-real-estate-agents-nyc/ there's a good amount of debate on the merits of discount vs full commission and how effective a discount agent can be given that they'll need the cooperation of traditional brokers.

Some sellers are going a more circumspect and discreet route in terms of getting a better deal when they buy or sell: https://www.inman.com/2016/07/25/the-underground-for-sale-by-owner-movement-in-nyc/

And it seems to not just be NYC that's seeing more alternatives coming to market, Westchester NY as well: http://www.lohud.com/story/marketplace/real-estate/2017/12/21/tech-lure-lohud-home-sellers/940429001/

My apartment sold for over a million dollars and there was flexibility in the percentage fee by the large firm I used. Fortunately, the buyer did not have a broker, so they reduced the percentage further.

My apartment sold for over a million dollars and there was flexibility in the percentage fee by the large firm I used. Fortunately, the buyer did not have a broker, so they reduced the percentage further. 6% was the starting point.

After 10 years working with a disruptive model I can assure you there is no negative effect to the buyer or seller using such a broker. Brokers or agents may have their opinion about such disruptive companies, but that's as far as it goes. A listing agent may or may not like my business model, but they're certainly happy when one of our clients purchases their listing.

As I've noted before, when a buyer uses a broker offering a rebate it's a win-win for both the seller and the listing agent. The buy-side agent is the one absorbing the additional discount, its not costing the listing agent or the seller an additional penny. Why would the seller care if the commission he has already agreed to pay is going to a corporate entity(brokerage) or back to the buyer? The seller simply wants the apartment sold at a price s/he is willing to agree to.

As more information becomes available to Consumers and Technology becomes more effectively utilized, alternative ways to do business pop up. Think airline travel, retail shopping, tax preparation and investing.

Happy New Year everyone!

Keith
The Burkhardt Group

Just to play Devil's Advocate - while it shouldn't make a difference which buyer's broker the purchaser uses as you can see from the directly before it can make a difference whether they use a discount broker as opposed to no broker.

30 Years-Point taken and I agree in some instances using no broker can be an advantage, however I think that is in a very minute number of circumstances. My only experience with this, where we advised the client that they would be better off dealing with the listing agent directly was with a one person show, non-REBNY in Queens. The broker was essentially only out for herself, no regard for the the buyer or seller.

We do let our clients know in advance that if they believe, during any point in the process they would be better served with out us, they can 'fire us' with no recourse. We will let the listing agent know we are no longer representing them and will not be seeking a commission. We make this retroactive to include any property we showed them or worked on with them. Essentially we are very confident they are better off working with us :)

The bottom-line is the seller makes the calls, sophisticated NYC sellers are not going to be snowballed by a real estate agent/broker! With our model the buyer can quantify the advantage, dealing directly with a listing agent, much more difficult to do that.

That said I firmly believe buyers are better off with their own (qualified) representation regardless. I have heard from many buyers that their experience dealing with agents directly has been less than pleasant, of course their are exceptions. We tend to get clients that are not what I would say, big fans of the brokerage business. I have literally had listing agents thank me for getting involved, even if a little after the fact (something we don't like to do, but it happens).

Keith Burkhardt
The Burkhardt Group

Just to be clear we are pretty much 100% in agreement. The only time I really get rubbed the wrong way as a listing broker is when a buyer calls me directly, has me show them the property multiple times, has me get them building financials, etc., Has me get them a bunch of comparable sales and do other analysis, and then another broker calls saying they represent the buyer and starts asking a whole bunch of questions (the answers to which could have easily been ascertained by any competent broker) because they know nothing about the property. And then they start telling me it's overpriced without any reasonable argument, or how great "their" buyer is when I've already found out everything I need to know because I've had more contact with the buyer and asked more relevant questions about their financial picture than this interloper.

Just saw this 30... I absolutely agree! It's equally as annoying when a buyer calls us up and tells us they've only been to an open house or one or two showings with minimal communication. Then when we contact the listing agent we hear a completely different story. That said I think there are times when buyers think they had some Advantage going in alone or thought they would prefer working that way, and then after some interactions with the listing agent realize they're in over their head. They're not getting the dedicated, personalized service they thought they would because they're unrepresented and mean a bigger paycheck to the listing agent.

In those cases we are very reluctant to get involved, however our approach is to be transparent and I will call the listing agent and discuss the situation. Now I personally think a buyer even in these circumstances has the right to change their mind and seek representation after the fact. However, after almost 30 years of doing this in New York City I understand how annoying this can be to a listing agent. And that is why I will always pick up the phone and call them and have a conversation about it.

Keith
The Burkhardt Group

Just saw this 30... I absolutely agree! It's equally as annoying when a buyer calls us up and tells us they've only been to an open house or one or two showings with minimal communication. Then when we contact the listing agent we hear a completely different story. That said I think there are times when buyers think they had some Advantage going in alone or thought they would prefer working that way, and then after some interactions with the listing agent realize they're in over their head. They're not getting the dedicated, personalized service they thought they would because they're unrepresented and mean a bigger paycheck to the listing agent.

In those cases we are very reluctant to get involved, however our approach is to be transparent and I will call the listing agent and discuss the situation. Now I personally think a buyer even in these circumstances has the right to change their mind and seek representation after the fact. However, after almost 30 years of doing this in New York City I understand how annoying this can be to a listing agent. And that is why I will always pick up the phone and call them and have a conversation about it.

Keith
The Burkhardt Group

https://therealdeal.com/2018/02/27/new-realogy-ceo-not-impressed-with-the-competition/