Unveiling the Dynamics of Real Estate Commissions in NYC: A Comprehensive Analysis

In the realm of real estate, where commissions for buyers' agents take center stage, a New York City-based listing service embarked on a quest to unravel the intricacies of agent earnings.

The Verdict: It's a nuanced landscape.

RealtyHop's investigation revealed a noteworthy trend: with the exception of co-ops, the percentage offered by sell-side agents to their buy-side counterparts increased with the asking price. This pattern held firm in boroughs boasting higher home prices, as disclosed in the study unveiled this Tuesday.

Report author Shane Lee explained, "Every home is unique based on location and its distinctive features. What we're contending is that the fee is a reflection of the effort invested."

The study scrutinized buyer's agent commission offers across 20,000 listings on the Real Estate Board of New York's RLS and OneKeyMLS in Manhattan, the Bronx, Brooklyn, and Queens over the past year.

Just a month ago, REBNY and 26 residential firms faced a class-action antitrust suit regarding broker commissions. This legal wave followed a Missouri verdict implicating two brokerages and the National Association of Realtors in colluding to control buy-side commissions, resulting in a $1.78 billion judgment and a cascade of copycat lawsuits.

The complaint against REBNY, filed by an Upper East Side home seller, alleges that the trade group inflated commissions by mandating listing brokers to offer compensation to buyer's agents. Although REBNY amended its rules in October to prohibit sell-side brokers from offering compensation, the industry still grappled with a surge in antitrust litigation across the nation.

While RealtyHop's report claims to debunk collusion allegations, the evidence presented leaves room for interpretation.

For homes listed under $500,000, buyer's agents earned an average commission of 2.2% and a median of 2%. In contrast, homes asking $2 million and above fetched an average of 2.8% and a median of 2.5%.

"Luxury homes sometimes command higher commissions because of the additional work involved," noted Lee.

The report highlighted variations in buyer's agent commissions across boroughs, aligning with price differentials. In Manhattan, where the median asking price is $1.4 million, buyer's agents earned an average commission of 2.9% and a median of 3%.

Queens, with a median asking price of approximately $690,000, saw a median buy-side commission of 1.5% and an average of 1.8%.

However, co-op transactions emerged as a glaring exception to the correlation between price and commission percentage. Despite a median sale price of $545,000, co-op buyers' agents received a median commission of 2.5%. In contrast, single-family or multifamily houses with higher median prices ($739,000 and $1.08 million, respectively) garnered a median commission of just 1.5%.

"The co-op market offers a higher rate due to board approval, making the process lengthier," explained Lee.

Condo deals proved lucrative for buyers' agents, earning the highest average commissions at 2.6%, aligning with the relationship to asking prices.

Studies like RealtyHop's could potentially become a pivotal aspect of brokerages' defense in pending antitrust cases, suggesting that negotiation dynamics ultimately dictate commission outcomes.

"In the realm of single-family homes, the lower commission rate for buyer's agents reflects the relatively straightforward transaction process from start to end," emphasized Lee.