It’s not an easy market for sellers in NYC at the moment with sales slowing and conditions favoring buyers.
On top of that, sellers in New York City also pay the broker commission for the entire transaction and depending on what you negotiate with your agent, it’s generally 6 percent of the sales price.
That’s a significant chunk of money, but working with a broker for the sale of your NYC apartment is the norm here, and usually, when you find a buyer, they will have their own agent, and the two agents will split the broker’s fee equally. This scenario—where each party is represented—is called co-broking, and the Real Estate Board of New York has guidelines on broker ethics when it comes to the commission fee and the emphasis is on transparency.
[Editor’s Note: An earlier version of this post was published in February 2015. We are presenting it again with updated information for September 2019.]
Matthew Hughes, a broker with Brown Harris Stevens, says co-broking makes sense. “Your broker is your point person, the person who introduces you to a real estate attorney, or to a contractor if you want to do renovations. It is good to have someone who has experience and has done many transactions before, to guide you expertly through the entire process.”
However, as with all big financial transactions, there are line items that can be negotiated. Sellers and buyers might both be incentivized to use the commission fee as leverage to get a better deal.
Hughes says many buyers feel empowered by the resources at their fingertips—like comps and other data, and believe they will be more attractive to a seller’s agent if they are unrepresented. There’s also the possibility that if the seller’s agent isn’t splitting the fee, the buyer may be able to negotiate on price.
Some think they are more likely to win a bidding war if they don’t have a broker. If the seller’s agent sees he or she won’t have to split the commission they might work harder to pull off that deal. Hughes says “sometimes working with one broker can benefit both the seller and buyer,” but the priority is transparency and the buyer should know they can bring on representation at any point during the transaction.
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More often than not, however, Hughes says, it’s the broker who benefits from there being a single agent involved in the deal.
“[The buyer is] doing a lot of work without any experience in the hopes of saving maybe 1 or 1.5 percent but just because you are unrepresented does not mean the seller is necessarily going to take less,” he says.
As a seller, particularly in the current market, you want as many eyes as possible on your property.
Hughes says there are situations when a seller’s broker doesn’t share the listing with the broker community, or they will put it up on their website and are unresponsive if there’s interest from a buyer with representation. Keep in mind: A seller’s agent should be looking out for the seller’s best interest.
It’s possible that sellers might want a sole broker for privacy reasons but Frederick Peters, CEO of Warburg Realty, says he strongly advises clients against this, saying that’s a recipe for possibly leaving “substantial amounts of money on the table.” Peters says he’d always prefer to sign a confidentiality agreement rather than limit the pool of possible buyers by ruling out co-broking.
As a seller, you should also be wary of trying to reduce the commission for your agent.
Peters points out a reduced commission means fewer fees to split, and less incentive to put the work in for the client. “In brokerage as in life, you get what you pay for and if you find an agent who is willing to radically reduce the amount they are going to be paid, the service will probably be commensurate with the price,” he says.
Previous versions of this article contained reporting and writing by Virginia K. Smith
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