broker fees too high?

I think it's a big tent, and there is room for different business models at different price points. I run a boutique brokerage, and my clients tend to return for their subsequent deals, and to refer their friends, so it seems that the full-service option is still popular in some quarters.

ali r.
{downtown broker}

The old business model for the real estate brokerage industry is obviously changing and the days of exclusive listings being the raison d'etre of successful real estate brokers is happily disappearing. To be clear, however, the existence of these alternative service providers is a reflection of market participants' dissatisfaction. At the end of the day, we can only hope that we get what we paid for. Unfortunately, that has not always been the case. Now, if only we can get rid of dual agency.....

As much as companies like Redfin and Hauseit have made on the national / NYC real estate markets, I don't think it's affected the star brokers in the city much at all. Once you get to a certain level, you live on referrals. They just come in without you really even having to do much advertising.

So perhaps you're right, unfortunately for consumers, most people still find their real estate broker today through word of mouth and referrals. And that means most people are still going to traditional brokers. It's good and bad.

*as much as companies like redfin and Hauseit have made a dent on the national and NYC real estate markets, respectively

Sorry about the typo

Companies like Redfin, Hauseit, Nobrokerspls, etc. have been operating in NYC for many years. They appear to be effective, proven options for buyers/sellers who want to pocket a bit more money on a transaction. As the brokers who've chimed in on this thread have mentioned, these services don't really seem to have a drastic impact on traditional 6% business which is driven largely by referrals, etc.

For example, I don't think the celebrity agents are affected by the small segment of buyers/sellers who are looking to maximize savings. Most buyers and sellers are simply looking for someone to get the deal done and don't care much about haggling over a few extra % in savings. Look at this: https://www.instagram.com/p/BV5tyfgjMFS/?hl=en&taken-by=ryanserhant

"Last week a buyer from Asia called me and said they loved me on the show, they watch it on the internet, and they wanted to buy a condo in Manhattan. They flew in the next day, I showed them 15 options, and they took a unit at 1110 Park Avenue for $18,000,000. Contracts were signed TODAY and I just got the news while in the car. "

Unbelievable!

Hilarious! That show has done more for these "star" agents than anything. People never used to sell a billion of real estate until that show. Good for them for leveraging the hell out of it. If you get a lucky break, take it LOL!

By the way, in all seriousness, the fact that sh*t like that happens tells me that despite all the buyer rebates companies like Hauseit are facilitating in NYC, you're still not going to disrupt the market.

Especially if there are just wealthy buyers who really don't give a sh*t about getting x% back, especially if it's with a shady one man shop or discount broker. Too funny.

I can assure you that 'wealthy buyers' do care about saving money and making a savvy deal. I have worked with (and learned) from my high net worth clients; they don't waste money needlessly.

Alternative shops are not about destroying the competition, rather about offering an alternative way to buy and sell to those that want it. I closed close to $90M in sales last year, ranking me at 188th in the country for volume. And although the Wall street Journal/RealTrends survey is a bit of a marketing thing, I did have to send them my biz tax return to verify sales.

So the disruption is happening, how large it will grow, time will tell? What is most important is providing a very high level of service. That is where so called discount firms fail; you can't just list for less or offer rebates and expect to be successful. The sophisticated clients we deal with in NYC expect smart, efficient, transparent service.

No one dislikes saving money. Think Bluenile, E-Trade, Costco, Expedia, turboTax etc. That said, Bluenile isn't putting Tiffany's out of business (:

Keith Burkhardt
www.theburkhardtgroup.com

And the poster above is correct, this is a referral driven business. We are coming up on 10 years in business as a 'disruptor', to date I have spent 0 dollars on advertising.

I sold my 2 bedroom coop in 2012 working with Real Direct. Listed it for $200,000 over what brokers wanting my business suggested. Paid a few hundred dollars total for access to MLS. Wrote the listing which was automatically uploaded to Street Easy, NY Times, Willow, etc. and used my own photos which looked very professional. Held open houses almost every Sunday and made sure the space was well staged and meticulously clean. Got multiple bids and when one buyer fell through, raised the price $100,000. Later found another buyer without a broker and got it sold in about 6 months total. Pocketed more than $300,000 more than if I used a traditional listing agent.

Granted, it took a few months longer and took A LOT MORE effort than I expected. I do not think many successful and busy people would go through what I did but I am glad that this option exists.

I realize that traditional brokers offer a valuable service to many but its about time there were different levels of service - and cost - available to those who are willing to do some or all of the work.

In Europe, estate agent commissions are 1-2% of purchase price. That seems about right.

Residential real estate is a referral business – plain and simple. If you are good at it, your clients will want to share their experience with others that they care about. Every agent with a successful track record prides themselves on the high percentage of their business that comes from referrals. This is regardless of whether you are an agent at one of the large shops or whether you do things a bit differently, like we do. Without good service, we wouldn't be getting referrals and repeat business, even with our 2% rebate. The service and value add is 99% of it. The rebate is just the icing on the cake.

And wealthy clients absolutely care about saving money and work with me because of the value proposition – better service at a lower cost.

Dan Gotlieb
Digs Realty Group
www.digsrealtynyc.com

I think it's a lot easier for brokers representing buyers to offer discounts than those representing sellers, unless the seller is willing to do a substantial portion of the work. The reason is that things have changed a lot more in the way buyers go about their purchase than the way sellers have. It used to be as a buyer's agent you had to find properties, schedule appointments, show a ton of places, and then a large percentage of the time the buyer made their purchase through another broker. These days buyers often find their own properties to see on the internet, schedule and see the unit, and then engage a buyer's broker who they are committed to to close the deal. Based on the amount of time spent working with the buyer and surety of actually collecting a commission I think it's much easier to offer service at a discount. I have also worked with sellers where I have offered a deeply discounted fee, but it's generally been with people who are Real Estate professionals who are going to do a substantial amount of the work themselves.

Broker fees are too high to begin with. 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!

Technology has changed the way business is done in ways that were unimaginable a decade ago. Experts say that residential 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.

if you want to optimize the fees you pay, check out those guys at www.nestapple.com they are the buyer's broker in Wall Street

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.

30, Can a listing broker advertise that buyer’s broker gets no commission? Essentially the buyer will have to come without broker? This will allow selling broker to charge half ( say 2.5 percent) while keeping the normal 2.5 percent.

To hijack that question 300, brokerage firms which are members of the REBNY trade association (and I think that's the majority of the brokers who post on this board; not sure about the HauseIt people) have a universal co-broke agreement that we split listing commissions 50/50%. You can take less than 50% as the listing broker (to do a deal where you give a friend a discount, say) but you can't take more. So in order to implement your proposed commission structure, you'd have to use a non-REBNY listing broker. I think one of the questions the industry is pondering is whether StreetEasy wants to be such a broker.

Sorry but another hijack - can a REBNY member listing broker share a commission with a non-REBNY member buyer broker?

As far as I know, yes. My guess it would be restraint of trade if they tried to institute rules against doing so.

Ximon, absolutely. Any NY State licensed broker can share commission with any other NY State licensed broker.

It's optional actually, unless the brokers have an arrangement in place (i.e. RLS Universal Cobrokerage Agreement) to split commission in advance

FWIW undert the NAR Code of Ethics says REALTORS have to "cooperate" with each other, but are not required to split commissions.

To be more specific about my original question - If I see an MLS listing and have an interested buyer, must the listing agent cooperate with me and split any commission regardless whether I am an NAR or REBNY member as long as I have a valid license? Someone from one of the major brokerage firms told me that they will only cooperate with other REBNY member firms.

No, in NY you must be licensed. See Article 12, Section 440-a of the NY Real Property Law. (and Definition 1 of a 'real estate broker' (there are some minor carve-outs).

Oops. Sorry, I didn't see the bit that you already had a license.

Aaron2, yes I am licensed but want to know if a listing agent can refuse to cooperate with me as a buyer broker if I am not a REALTOR or REBNY member.

While we are on the subject, I read somewhere (probably in another SE forum) that listing brokers can share commissions with buyers and sellers whether or not they are licensed. Did I read this correctly?

If a broker shares a commission with anyone who is not licensed they are liable to lose the entire commission. The commissions which go back to buyers from Buyer's Brokers must be carefully worded as rebates.

So, 30, only a buyer's broker can rebate a portion of their commission to the buyer? The scenario I am thinking of is when a buyer wants to buy a property and is not represented by a BB. In this case, the listing broker might get paid the full commission unless the buyer demands a rebate. Is this legit?

Two points: one is to point out to many on this thread (I know 30 already knows) that most REBNY members are not NAR members, and are thus not bound by the NAR code of ethics. (REBNY has its own separate code of ethics).

Second, Ximon, I'm not sure what kind of licensee you are -- an agent or an attorney?

When I've been seller's broker, I've had agents from the big firms fold their part of the commission back into the offer (i.e. "my firm will waive my split so that goes back to the seller") but that doesn't go straight back to them as a rebate.

As far as attorneys, I have certainly written referrals to attorney licensees (say, an attorney sends me her sister as a client) but I've never had an attorney licensee ask for a rebate from the seller. If attorneys don't ask, I bet there's a reason. I'm no legal expert but my guess is that it would be self-dealing. I don't see how you could be a principal in the deal and your own fiduciary at the same time.

front_porch, my example assumes the buyer is not licensed but merely wants to get a better deal by asking the listing agent to accept less than their full commission. This can be done by either 1) reducing the purchase price and the commission by the same amount or 2) having the listing broker split their commission. Call it a fee split or a rebate, the economics are the same and either way, the seller comes out whole. I just thought I remembered - maybe from my salesperson's course - that rebating to unlicensed buyers is not illegal or rule-breaking.

This seems pretty complicated as I am also now wondering whether such a rebate to buyer would be considered taxable income or an adjustment to the tax basis in the property PLUS whether the rebate could be considered as a violation of the Real Estate Settlement Procedures Act (RESPA).

If I'm seller's broker, and buyer is unlicensed, I wouldn't split commission with him. I would regard that as exactly the example 30 cited above, that it's illegal in NYS to pay commission to someone who is not licensed in NYS. Maybe Keith or one of the other rebate brokers on this thread who works on the sales side has other comments.

front_porch, would you do it as a sales price rebate rather than a fee split?

I just read an article on Zillow that said that "In most states, you can negotiate a buyer brokerage fee and have the “excess” compensation from the co-brokerage fee either a) credited towards your closing costs (if allowable) or b) sent to you post-closing by check."

This is an interesting thread. I found another SE thread on part of this thread regarding lawyers acting as their own brokers and getting commissions - the thread gets a bit heated. Seems like a risky position for a brokerage to fight back against (and this thread seems to say that the established brokerages are smart enough not to fight against the position).

https://streeteasy.com/talk/discussion/2330-attorney-as-broker-for-fee

Indeed, TeamM, a fascinating thread addressing the actions of attorneys acting as both principal and agent in the same transaction.

One could apply some of that logic to my original question of whether non-licensed buyers can act as a buyer-broker for themselves and share commissions with the listing agent. And I just found the source for my suggestion that such sharing was OK:

Section 442 (2) of Article 12-A of the Real Property Law states, in part:
“…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 …. 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.”

According to:

https://digsrealtynyc.com/sharing-commissions-with-buyers-is-legal-in-nyc/

"the sharing of the commission could take many forms; for example it could be an incentive (i.e. “use my services and I will pay you $5,000 from my commission”), a gift (i.e. a vase) or a gift certificate (i.e. a $5,000 gift certificate to Home Depot)."

Questions still not answered include:

1. what is the potential tax treatment of such payments to buyer (e.g. rebates vs. income)
2. whether REBNY, NAR, or the brokerage company have bylaws with different rules
3. what is meant by "compensation must not be made to the seller, buyer, landlord or tenant for performing any activity requiring a license under this article.”

Rebate is purchase price adjustment just as most closing costs are purchase price adjustment.

On many occasions where the buyer is not represented by a broker, during the negotiations we have offer to "throw in" part of the commission as a reduction in purchase price and a lower commission payable by the seller. So to answer the question, it comes out as a lower sales price, properly reported vis-a-vis RESPA, and of course a lowering of the tax basis because it's a lower recorded sales price as a result. However, to be clear, these were in discussions with the seller, not the buyer, where we offered the seller a reduced commission for accepting a low offer from a potential purchaser, not with the buyer coming in at the outset asking to do a deal with a lower commission. since this is something you can only do with whomever has the listing you want to purchase, the question can not be answer "in general" because it depends on the individual agent and firm you will be dealing with.

Yes, 30, your scenario where the listing broker accepts a lower commission in return for a lower sales price seems likely to be treated as an adjustment to sales price as the seller does not pay a full commission. But should the adjustment to the tax basis be upward rather than downward as the sales price would have been higher if seller paid a full commission? I guess its negotiable (although tax laws might say otherwise) as seller typically wants a lower recorded sales price and buyer wants a higher one.

In a situation in which the seller pays a full commission and the buyer receives a part of it by splitting with the listing broker, it seems logical that this fee to buyer would be treated as income rather than a rebate/adjustment to tax basis. If the buyer is also a licensed agent, it seems even more logical as the buyer is in some sense doing the work of a broker and therefore would earn the split as commission (i.e. income).

Wonder what others may think.

Buyer is simply negotiating a lower effective price for him/herself.

And maybe that's how the IRS would treat it. I am not sure as I have never been in this situation. If up to buyer, obviously the choice is between higher capital gains tax or higher income tax.

I believe with all my heart you're still better off having your own independent representation. Especially now with all the choices available to you to capture value in various ways. I bet a third of our clients are attorneys and they're all aware they could do this on their own by simply filling out a little bit of paperwork. One reminded me of the saying regarding representing yourself.

As a buyer I personally don't like dealing directly with sellers. I'm currently looking for another home upstate and I almost always pass over for sale by owners. Usually overpriced, too difficult to deal with as the emotional component can be hard to work through.

Perhaps I'm off topic a bit? I always find this to be an interesting conversation especially as someone who's been running a disruptive brokerage company for the last 10 years.

All that said I think it's great and exciting that we have all these new options available to Consumers today. I've been a licensed agent broker in New York City for almost 30 years. It's wonderful to see how far things have come, I started this company because I was bored with the same old grind as well. The old style business model that lasted for so long is finally loosening up and new and dynamic firms are emerging. There's nothing better than good healthy competition to sort the wheat from chaff! And also Force companies and individuals to change and adapt. "Think different".

Keith Burkhardt
The Burkhardt Group

Discounting isn't exactly a novel concept (RedFin .. looking at you) ... it's been tried for as long as there have been real estate brokers.

Do what you will, but I personally wouldn't be comfortable as a consumer. It's just too important of a transaction to risk. It's just too easy for a listing broker to see what a typical rebate broker is up to. No offense guys but traditional brokers, especially all the higher end sales brokers in the city, are not so easy to trick. Great way to get heartburn, and usually results in the listing broker taking out his or her phone and calling up every lead in an effort to sell it to someone else.

Also, no joke but a lawyer buyer client told me that she had tried to secure the co-broke for herself since she happens to also have a broker's license (not REBNY or practicing). Completely messed up her deal as the seller always had a grudge against her knowing that she was getting a better deal. Ended up trading away to someone else even though she improved significantly over asking and "won" the best and final. She still got shopped after the best and final and lost to someone else. It was the perfect UWS home for her and she's very picky. Anyway, that's why she came to us. No point in messing up your deal for a few thousand dollars more or less.

Most brokers I know do not care if the buyer is represented by a discount broker or not. They just want the higher bidder, who can close, for their seller. It will be shady if they let their personal agenda interfere with the best price. Hopefully you are not one of those.

If I were to be a full commission broker (I am not a broker), I would differentiate myself based on the service, advice, knowledge and ability to spend extra time with the buyer.

No rational buyer thinks buyer-broker services are free to them just because the fees are paid by the seller. A buyer tricked into dual agency is hurting their own position. In the situation where I represent myself as both buyer and broker, the listing agent is not my agent or fiduciary and therefore clearly not entitled to a full commission. I, on the other hand, expect to do a lot of work representing myself and therefore deserve a fee split or rebate whether I am licensed or not.

We are about to celebrate 10 years at The Burkhardt Group and we will do over $90M in buy-side deals this year. It's not a fad; think Charles Schwab, Bluenile, Expedia, Turbo Tax etc, just a very efficient model. I don't know where any one gets the idea we are 'trying to trick the listing agents??'

Sellers, developers and listing agents love us. Why you ask? We get the deal done efficiently, transparently with a happy client and it doesn't cost them a penny. I have an amazing group working with me, one has a degree in accounting the other was a professor at Brooklyn College (also an alt rock super-star:)

I love real estate and I think the brokerage community has never been better and more diverse! And I have been at this since 1990...

Keith Burkhardt
www.theburkhardtgroup.com

Perhaps luxury broker will care to divulge who he/she is.

LuxuryBroker - I don't understand why a selling broker would care or try to direct a sale elsewhere. That person's compensation would be the same if there is a buyer's broker in either scenario. What is the "trick" that you are referring to.

The Selling broker should actually prefer a buyer's broker providing a refund because if all else is equal that buyer could pay a higher price than another identically situated buyer who is not receiving the rebate.

@TeamM exactly. We all know the majority of deals get done in New York City with two Brokers involved. And since I am the broker, I don't have to give a portion of my commission to 'The Firm, ' I rebate it to my client. And I can tell you 100% we have clients bid more money because we're rebating a portion of our commission back to them. It's really a win-win for everyone.

And as 300 Mercer said if your broker that focuses on buy side clients only in this current day and age, you'll have to distinguish yourself from the crowd as all the information required to do a deal is available with the click of a button. PWe have to remember that all agents essentially take the same 75 hour licensing course. So it's not real difficult to become a licensed agent and hit the ground running. It's very critical you interview a number of brokers to find one that will be able to provide you with an effective level of service. And there are many very good brokers out there these days. However there are an equal amount of Clunkers that will add nothing to your experience.

Keith Burkhardt
Tbg