A class-action lawsuit filed in early November against the Real Estate Board of New York (REBNY) and 26 brokerages alleges brokers conspire to inflate broker commissions, taking advantage of inexperienced sellers. It argues that sellers using REBNY’s listing service, RLS, should not pay buyers’ brokers 2.5% to 3% commissions.
Contrary to the complaint, our analysis, based on over 20,000 for-sale listings created in the past 12 months, shows that buyer’s agent commissions, in fact, serve as a strategic tool and that sellers, including first-time homeowners, are able to negotiate the commission based on price and property type.
Using listing data from REBNY RLS and OneKey MLS, the RealtyHop team found that:
- Experienced, resource-rich sellers in prime areas like Manhattan often offer higher buyer’s broker commissions, typically around 3.0%. This results in commissions upwards of $30K on median-priced properties over $1M. [Figure 3]
- Sellers in more affordable areas, like the Bronx and outer Queens and Brooklyn, usually negotiate lower commissions, around 2.0%. These sellers, often first-time participants in the market, demonstrate an acute budget consciousness. [Figure 1]
- New developments tend to offer higher commission splits. For units built after 2020, the average commission is 2.49%, compared to 2.27% for properties built prior to 2020. [Figure 4]
- A New York co-op tends to pay the full 3.0% cooperating broker commission, even though co-ops have a lower price point than nearby equivalent condos. The higher commission reflects the significant increase in work required for a broker to sell a co-op apartment. [Figure 5 & Figure 6]
Before we further discuss our findings, it’s worth noting that this study focuses on buyer’s agent commissions, which equals half of the commonly known 6% real estate commission.
Real Estate Commission Data, Broken Down by Borough
Figure 1 below shows the median and average commissions by borough. In Manhattan, the median cooperating commission is 3%, whereas in the other three boroughs, the commission splits are commonly below 3%. On average, Manhattan home sellers agree to pay 2.9% co-broke commission, or $76,979.63.
Sellers near the lower end of the price spectrum pay lower commissions, particularly in the Bronx or outer Queens and Brooklyn. These sellers often only own one home and have never sold before, yet are budget conscious and clearly able to negotiate commissions down to 1.5% to 2.0% for the cooperating broker in the median case, with pricing below $400K and under $8K commission to the buyer’s agent.
Figure 1
Commission Split by Property Type
To better understand what determines buyer’s agent commissions, we further broke down the data by property type. Figure 2 below highlights the median and average commission percentage by the following property types: condo, co-op, single-family home, multifamily, and townhouse.
Figure 2
Single-family homes have the lowest average commission split of 1.7% among all property types. Condos, on average, have a higher commission split, which could be surprising to many, as co-ops generally require more work during the buying process. To answer this question, we have to factor in when a property was built and its location.
The Higher the Price, The Higher the Buyer’s Agent Commission
By breaking down the data into price ranges based on the list price, we found that, generally, higher-end properties tend to offer a higher buyer’s agent commission. For homes asking under $1M, the average commission is 2.19%. The split goes up to 2.57% for homes between $1.5M and $2M and 2.78% for homes over $2M.
Figure 3
Is it just that wealthy home sellers don’t care enough to negotiate? To answer this question, we further looked into when the property was built. Figure 4 demonstrates the median and average commission splits based on building age. Properties built after 2020 have an average buyer’s agent commission of 2.49%, the highest of all. This indicates that in a healthy market like NYC’s, most sellers successfully negotiate a lower than 3% cooperating commission. Those who pay the 3% split tend to be sponsors of new developments or luxury condos in prime neighborhoods in Manhattan and Brooklyn.
Looking at the data, the answer is clear: higher priced listings tend to offer higher commissions, despite the sellers often having more financial resources and knowledge and many more brokers willing to compete for the deal.
This finding directly contradicts the complaint against REBNY and the other 26 brokerages, which asserts that brokers and agents collude to harm everyday, unsophisticated homeowners. The market, in fact, functions as designed, and more budget-conscious sellers can successfully negotiate a lower commission and, therefore, a lower buyer’s agent fee. It’s the higher-end sellers that are willing to pay the 3% commission to buyer’s agents.
Co-Ops Tend to Offer Higher Cooperating Broker Commissions
There is one notable exception to the relationship between price and commissions: a New York co-op tends to pay the full 3.0% cooperating broker commission, even though co-ops have a lower price point than nearby equivalent condos. Figures 5 and 6 further illustrate this trend using listing data in the Bronx and the Upper East Side.
Figure 5
Figure 6
The higher commission reflects the significant increase in work required for a broker to sell a co-op apartment. A buyer agent must prepare the board packet, risk a co-op board rejection, navigate a more difficult financing application, and ultimately delay receiving payment due to longer closing times. In short, the brokers refuse to accept less commission for significantly more work, consistent with a healthy, functioning negotiation process between sellers, listing agents, and buyer agents.
Conclusion
Our analysis of the REBNY RLS and OneKey MLS data shows no collusion or monopolistic price-fixing practices between the brokerages or trade organizations that facilitate listing sharing.
The complaint claims that “this inflexible commission practice has become so ingrained in the system that people have either accepted its unfairness out of deference to tradition or do not understand the nature and economic implications of the commission fee.” In reality, every deal is a negotiation between the parties involved. The ability to advertise cooperating commissions via the RLS actually serves the seller as an effective marketing boost, allowing for more competition and favorable offers to help sell the property, not the result of malicious practices or information asymmetry.
Methodology
This report analyzes over 20,000 for-sale listings created between November 2022 and 2023 via the REBNY RLS and OneKey MLS. Given the MLS coverage and the significant differences between Staten Island and the rest of the four boroughs, Richmond County is excluded from this report. The majority of the listing data comes from RLS.
To find out underlying commission trends, we grouped listings by property type, price point, year built, and location. For more information, please email [email protected].
