Washington, D.C. – A new Consumer Federation of America (CFA) report on residential real estate commissions in New York City – Diverse Real Estate Commissions: The New York City Residential Brokerage Anomaly – reveals huge differences in commission rates throughout the city. It shows that typical (median) rates paid to buyer agents range from 1% in parts of Brooklyn to 3% in Manhattan while typical total commission rates are 3% in Brooklyn and 6% in Manhattan. The gap in total compensation is even larger because homes in Manhattan cost more than homes in Brooklyn.
“At $72,000, total agent compensation on a $1.2 million Manhattan condo is likely to be three times higher than total agent compensation of $24,000 on a $800,000 condo sold in parts of Brooklyn,” noted Stephen Brobeck, a CFA senior fellow. Earlier research by CFA and others has shown that in almost all other cities, rates are highly uniform, typically ranging between 5 and 6%.
The report is based on an analysis of more than 2,000 recent home sales in Manhattan, Brooklyn, Queens, and Hempstead, Long Island; using published sources, and interviews with NYC real estate experts, brokers, and agents.
The most important reason for the differences in commission rates was the multiple listing service (MLS) through which the sale was made.
- The Real Estate Board of New York (REBNY) established the norm of 5-6% rates in part by requiring listing brokers to offer and provide equal compensation to buyer brokers.
- The Brooklyn MLS does not require listing brokers to offer any compensation to buyer brokers (and 10% do not). Most rates are 3 or 4%. An increasing number of 2% rates partly reflect double-ending (listing agent worked with both seller and buyer).
- The OneKey MLS, affiliated with the National Association of Realtors, operates throughout much of the city under NAR rules and requires listing agents to offer non-negotiable compensation to buyer agents, yet this fee can be lower than that of the listing agent.
Typical buy-side (buyer agent) rates in OneKey MLS sales lie between rates in REBNY and Brooklyn MLS sales. “It appears that Brooklyn MLS rates have put downward pressure on all commission rates in New York City except those charged on REBNY sales,” noted Brobeck. The report also analyzes the impact on rates of double-ending, home prices, type of home, service quality, and consumer expectations.
CFA urges New York consumers, especially those served by REBNY in Manhattan and brownstone Brooklyn, to insist on lower rates. “In most instances, those selling homes in Manhattan are being ripped off by high commission rates,” said Brobeck. “On the sale of a $1 million condo, agents rarely deserve $60,000 in compensation, the price of two new economy cars or one expensive one,” he added.
Contact: Stephen Brobeck, firstname.lastname@example.org