Before you decide to buy or sell a home, you must know the costs involved in the process. In the New York real estate market, one of the costs to consider is realtor fees. But how much can you expect to pay? Can you negotiate these fees and rates? And what is the average commission rate for realtors in New York?
Read on to find out all the ins and outs of real estate agent commissions and fees in New York before you jump into the market.
New York Realtor Average Commission
Realtors work on commission. They make a percentage of the home they help sell or purchase. Each realtor has their own rate and vary on how willing they are to negotiate that rate.
FastExpert conducted a survey to uncover the average rate charged in each US state. We found that the average real estate agent commission for New York state in 2022 is 4.66%.
It is widely known in the real estate industry that the accepted average real estate commission rate is around 4-6%. This means half goes to the selling or listing agent and half to the buyer’s agent. Naturally, this can change by location and market conditions.
New York Real Estate Earnings are Based on the Home Sale Price
There are often a lot of questions about selling a home. People often wonder how much listing agents earn in commission from selling residential properties.
Historically speaking, realtors have traditionally worked on a percentage of the sale price of the property sold. They provide the services of listing the property for sale, marketing, and closing the sale.
For example, if a residential property is sold at a price of $1 million, and the commission rate is set at 6%, then the total gross commission which is paid on the sale is $60,000.
This gross commission amount is paid at the time of closing the property. The actual payment to theis normally handled through an escrow company. They take responsibility for overseeing all of the financial and legal transfers which result from the sale.
Some homeowners may feel that $60,000 is a high real estate agent commission to pay for selling their house. It would seem incredibly high if the entire $60,000 went to a single real estate agent. But it is usually split between all parties involved. That’s right, the seller usually pays the real estate agent commission for the buyer’s agent as well as their own listing agent.
Real Estate Agents Have to Share
While some sales in real estate involve a single broker handling the entire sale from listing to closing, this can sometimes save money but it isn’t usually the case.
Typically, some multiple agents and brokers would ultimately receive a portion of the $60,000 commission. There could be as many as four, or in some cases, even more. This can include a listing agent, a buyer agent, licensed real estate brokers, and other parties that split the average real estate commission.
There are Two Types of Real Estate Licenses
Every real estate company is required to have at least one person who holds a broker’s license. One of those broker’s licenses is designated as the ‘broker of record’. This individual is often the owner of the company and collects broker fees.
Most companies also have several sales agents working under the broker of record. Most of these sales agents will hold a sales agent’s license.
Sales agents have traditionally worked on a profit-sharing arrangement with their brokerage company, or a ‘split,’ where a portion of any commission earned by a sales agent is shared with the broker. These splits can be any arrangement that is mutually agreed upon by both parties.
Buyer’s and Seller’s Agents Divide Real Estate Fees
The real estate industry is known as an industry of cooperation. In the majority of residential sales transactions, agents and brokerage companies cooperate in the selling of a house.
One company may be the one that represents the seller and lists the house for sale in the market. Still, quite often, it is another company, or at least another agent who represents the party who ultimately buys the house.
So, when one brokerage lists a house and another brokerage represents the buyer, the $60,000 commission is divided in half, with each company receiving $30,000.
Then each $30,000 is further reduced according to each agent’s split. So, if both agents worked on a 50/50 split with their respective brokerage companies, each agent would receive a $15,000 commission.
These commissions can be whittled down even further if referring agents are involved. For example, if the buyer relocated to a new state, they may have been referred to the local agent by an out-of-state agent. In this case, the buyer’s agent may owe a referral fee to this out-of-state agent, paid out of his $15,000 commission.
In Real Estate, 6% is the Standard Commission
The model of charging 6% commission and splitting the earnings between all the parties involved has really been the standard way of doing things in the real estate industry for about 100 years. However, the past several decades have started to shake things up with discount brokerages and agents renting a desk and keeping 100% of the commission earned.
Some brokers have devised systems that abandon the standard 6% commission with a reduced commission structure.
Another model which has been introduced into the marketplace is the flat fee model. But what has really shaken things up are the 100% shops. In the 100% broker/agent offices, agents rent a desk in a broker’s office for a flat monthly fee in exchange for certain agreed-upon services. These arrangements allow the sales agent to retain 100% of his commissions.
6% Isn’t Required, But it Remains the Norm
The National Association of Real Estate Exchanges, later known as the National Association of Realtors, was formed in 1908. It was created to foster cooperation amongst people engaged in the marketing of real properties. Five years later, it adopted a code of ethics and the term ‘Realtor’ to distinguish its members from non-members. In 1919, states began to issue licenses to real estate professionals who had passed a proficiency examination.
Somewhere, somehow in the early years of the industry, a commission standard was put in place at 6%. This standard remained in place until 1950 when a supreme court decision found real estate brokers to violate anti-trust laws due to ‘price-fixing’ real estate commissions. The National Association of Realtors officially abandoned its 6% standard, but individual brokers did not.
Today, even though real estate commissions are technically negotiable, very few homeowners/sellers are willing to haggle with listing agents. Most of them go along with the historic 6% standard.
The Seller Usually Pays Realtor Fees In New York
In New York, like practically every other U.S. real estate market, the homeowner/seller pays the realtor fees out of the proceeds from the sale of the property.
This means that they are paying for their agent as well as the agent of the Buyer.
It may not seem fair but remember, the seller is the one who sets the price of the home and, ultimately, the amount they are willing to take for it. So they have the ability to build that cost into the final sales price, which means the buyer is technically paying the agent fees.
Who pays real estate agent commissions is something that a seller may have the option to negotiate in a market that favors the home seller. Often times motivated buyers will offer to pay fees as a way to sweeten their offer.
You Get What You Pay for With a Discount Brokerage
Over the past 25 years or so, some brokers have begun offering discount commission rates. They may advertise a 2% rate or even a 1% rate. But their advertising is often deceiving.
A broker who offers a 1% or a 2% commission is offering ala carte services. These commission rates often do not include listing in the local real estate board’s multiple listing service.
In other words, the listed property will not be exposed to other potentially cooperating realtors. And at a 1% or 2% rate, there is not a sufficient financial incentive for a cooperating buyer’s agent to show the property to his clients.
At such a low commission rate, the only marketing exposure the property will likely receive is a yard sign and a listing on the broker’s website. The property might also get listed on national databases, such as Zillow.com and Realtor.com. There probably won’t be any open houses, brochures, print advertising, or any showings and cooperation from other agents.
Investigate the Services Offered
Like so many other products and services, you get what you pay for. After a discount broker lists a house in the MLS, they’ll install a yard sign and list it on their website and hopefully on Zillow and Realtor.com. Any additional marketing will usually be at the seller’s expense.
How Much Do Real Estate Agents Earn in New York?
Now you know the amount each home seller is likely to pay and how their fee is divided among the parties involved. But when it comes to individual realtors, how much do they end up making if they are working in New York?
Average Real Estate Agent Salary in New York State
According to Forbes Magazine, realtors in New York state earn the highest salaries of any U.S. state. Agents in the Empire State earned an average of $102,310 in 2017. This was considerably higher than Texas, which came in #2 at $72,480 per year.
Real Estate Agent Commissions in New York City
According to Glassdoor, real estate agents in New York City earn an average in commissions of $124,638 per year. According to Career Explorer, the median earned real estate commissions in New York City is $116,460 per year. The highest-paid agents earn $326,000+, and the lowest-paid agents earn around $42,000.
Real Estate Agent Commissions in Westchester County, New York
According to Indeed.com, real estate agents in Westchester County, New York, earn $99,031 per year on average in commissions. Simply Hired pegs the average Westchester County commissions a bit lower at $94,301. Zip Recruiter lists the average real estate agent commissions in Yonkers, NY, the largest city within the county, at $84,862 per year. According to Glassdoor, agents in White Plains earn a median of $104,954 per year.
Real Estate Agent Commissions on Long Island, New York
According to Indeed.com, real estate agents in Long Island, NY, a town on Long Island, earn an average of $97,679 per year. Simply Hired pegs the average annual commissions on Long Island somewhat higher at $98,713. Another source lists the average real estate agent commissions on Long Island at $93,343 per year.
Real Estate Commissions in Rochester, New York
According to Indeed.com, real estate agents in Rochester, New York, earn an average of $76,769 per year in commissions. Zip Recruiter pegs the average a bit lower at $75,221 per year. The Economic Research Institute claims average commissions for Rochester agents to be somewhat higher at $80,976 per year.
Real Estate Commissions in Syracuse
According to Indeed.com, real estate agents earn an average of $80,771 per year in Syracuse, New York. Zip Recruiter claims the average commission rate to be a bit higher at $84,862 per year.
Real Estate Commissions in Albany
If you want to know the average annual commissions for real estate agents in Albany, New York, the answer will depend on who you ask. If you ask Glassdoor, they’ll tell you it’s $50,555 per year. On the other hand, if you ask salary.com, they’ll tell you the average is lower at $44, 230. If you’re looking for a more optimistic estimate, Indeed.com claims the average to be $83,558 and Zip Recruiter claims the average to be $74,848.
Rentals in New York
Who Pays Realtor Fees for Rentals in New York?
Renting apartments in New York City involves paying rental broker fees. These fees are paid by the tenant, in almost all circumstances. New York City is somewhat unique compared to other urban rental markets throughout the U.S. In most other weaker rental markets, landlords pay the brokerage commission fees for their rentals.
This is mainly due to two factors. First, the New York rental market is demand-driven, so apartments don’t stay on the market very long. For that reason, landlords can pass the brokerage fees off onto their tenants. Also, in other urban markets, tenants often rent directly from property owners and managers, without rental agents being involved. But the rental market in New York is so large that renting through a broker ‘middle man’ is more the rule than the exception.
Not all rentals in New York City have broker fees. If the landlord has a lot of vacancies, he may offer his units on a ‘no fee’ basis. This is especially true in neighborhoods like the Financial District which have a large supply of available rentals. And even in New York, some apartments are rented directly between landlord and tenant.
When tenants are faced with paying the broker fees, there is usually little, if any, room for negotiation.
The rate is usually agreed upon between landlord and broker before the unit is offered to a prospective tenant. However, on luxury units, which rent over $6000 per month, since the percentages can get very high, there is usually room to negotiate. Units that are slower moving are also more negotiable since the agent would rather make a deal now, rather than wait on another tenant offer.
Landlords will sometimes agree to pay the broker fees as an inducement to attract tenants. But by and large, the responsibility for paying broker rental fees in New York City lies with the tenants.
Finding Your Ideal Real Estate Agent
Hiring a real estate professional to help you sell your home, or to help you find your new home, is a huge life decision. Your home is your nest, your place of refuge, the nursery for your newborn children. It is the headquarters for your life. For many families, it is also the largest investment they will ever make.
When you interview a real estate agent, make sure you ask them about the services that they and their company will provide. Then compare. There are many knowledgeable, professional, hard-working agents to choose from. Good luck, and enjoy your new home.