Navigating NYC's New Real Estate Commission Rules
What Brooklyn and Manhattan Sellers and Buyers Need to Know
As of August 17, 2024, some major changes were rolled out for real estate commissions in NYC, following a $418 million settlement by the National Association of Realtors (NAR). These new rules are designed to give buyers and sellers more control and transparency in the process. But what do they really mean for you if you’re buying or selling in the Brooklyn or Manhattan markets?
No More Automatic Commission Splits
Traditionally, sellers in NYC paid a 5-6% commission, which was automatically split between their agent and the buyer's agent. This fee was typically built into the listing price, which some argue may have inflated home prices.
With the new rules, sellers now negotiate separate commissions for their own agent and—if they choose to—a buyer’s agent. This gives sellers more flexibility, but if you decide not to offer a commission to the buyer’s agent, it might limit your pool of potential buyers. More on that below!
Commissions Won’t Be Listed on MLS
Another big change: commissions are no longer listed on the Multiple Listing Service (MLS). In the past, some agents might have steered their clients toward properties that offered a higher commission. Now, without commission details displayed, buyer’s agents must focus solely on finding the best property for their clients, not on the payout. We don’t use the MLS in New York City but this rule applies to our listings services as well.
Buyers Must Sign an Agreement with Their Agent
If you're buying a home in NYC, there’s a new step in the process: before touring homes, you’ll need to sign a written agreement with your buyer’s agent. This agreement outlines exactly how the agent will get paid. If the seller doesn’t cover the fee, you may need to negotiate or even pay it yourself.
The good news is that this commission is fully negotiable, and it’s important to know that a buyer’s agent can’t be paid more than what you’ve agreed to, even if a seller offers more.
While it might feel strange to sign an agreement with your agent before viewing homes, many brokerages (including mine) offer different types of agreements—some just for specific properties—so you can ease into the process without feeling locked in right away.
Seem Confusing? Here Are 5 Key Takeaways:
Separate Commission Offerings:
In the past, sellers paid a 5-6% commission, split between the listing and buyer’s agents. Now, sellers will negotiate their commission to their listing agent and then choose whether to offer a customary 2-3% to the buyer’s agent, a lower amount, or no commission at all.Buyers May Have to Cover Commission Gaps:
If the seller offers a lower commission or none at all, the buyer’s agent may ask their buyer to make up the difference. It’s important to negotiate these terms upfront - before seeing properties.MLS Listings Won’t Show Commissions:
Agents can no longer see commission details on MLS listings, reducing the risk of “steering” buyers toward higher-paying properties. We don’t use MLS in New York City but the same rules apply to all our listing services.Buyers Must Sign a Representation Agreement:
Buyers will now need to sign a representation agreement with their agent before starting the home search. This agreement outlines how the agent will be compensated, making everything clear from the start.Negotiation Is Key:
The good news is that everything—from commission rates to terms of the representation agreement—is negotiable. Each brokerage may have its own agreements, so make sure you understand the details before signing.
Should Sellers Still Pay Buyer’s Agents?
In competitive markets like Brooklyn and Manhattan, it’s still in a seller’s best interest to offer a commission to buyer’s agents. Here’s why:
Smoother Transactions
NYC real estate is complicated enough with co-op boards, condo rules, and tight timelines. Offering a commission ensures that the buyer’s agent is motivated to keep things on track, reducing the risk of small issues turning into deal-breakers.Local Expertise Pays Off
Buyer’s agents who know the ins and outs of neighborhoods like Park Slope or Tribeca can guide their clients through the complexities of pricing, negotiations, and market trends. This often results in faster and smoother transactions for sellers.Attracting More Buyers
Offering a commission to buyer’s agents ensures your property reaches the widest audience possible. In highly desirable neighborhoods, a larger buyer pool can lead to quicker sales and better offers.
What’s in It for Buyers?
As a buyer, you might wonder if you still need a buyer’s agent under these new rules. The answer is a resounding yes.
A skilled buyer’s agent is essential for navigating NYC’s unique challenges—like co-op board approvals, complex condo financing, and fierce bidding wars. Your agent will guide you through each step, helping you avoid costly mistakes and ensuring you’re well-represented in negotiations.
While these changes might make the process seem a little more complex, they actually give you more clarity and control over where your money is going. The new rules are designed to make agent commissions fully negotiable, so you’ll know exactly what you’re paying for, with no surprises.
How Will These Changes Impact the Market?
Initially, some buyers might feel hesitant about signing binding agreements with agents. However, many brokerages, including mine, are offering more flexible, short-term contracts to help ease concerns and build trust before fully committing.
In the long run, these changes could drive more competitive commission rates, benefiting both buyers and sellers by lowering costs.
That said, mortgage rates are still the key driver of affordability in NYC real estate, so their impact will likely overshadow these changes in the short term. Over time, however, this shift should create a more transparent and consumer-friendly market where both buyers and sellers have greater control and flexibility.
In Conclusion…
While the new commission rules are shaking things up in Brooklyn and Manhattan, working with an experienced agent remains your best strategy. Sellers who offer fair compensation to buyer’s agents will see smoother transactions and a broader buyer pool, while buyers will benefit from having a knowledgeable agent to navigate the complexities of the NYC market.
If you’re buying or selling in NYC, let’s talk about how these changes impact your next move. I’m here to help!
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As the real estate landscape evolves, especially with new commission rules, it’s more important than ever to have an experienced agent by your side. With over 15 years in NYC real estate, I bring expert knowledge, personalized strategies, and a commitment to making your buying or selling experience smooth and successful. Let’s connect and achieve your goals together!
