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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 most significant costs to consider is the commission rate that you’ll pay.
We conducted a survey to uncover the commission rate in each US state. We found that the average real estate agent commission for New York state is 4.66%, which is lower than the national commission rate of 5.57%.
Your real estate agent does a lot of behind-the-scenes work so that you’re able to have a successful and smooth transaction. Don’t be blind when completing your real estate transaction. It’s essential to understand what the commission is and what services you can expect to receive.
Work with the Right Realtor
It’s also critical to choose the right agent for you. FastExpert makes it easy to find quality real estate agents that will advocate for you. As the nation’s leading real estate service that connects sellers and buyers with top-rated real estate agents, we make it easy for you to find the best agent and arrive at your home.
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.
- Understand the Average Realtor Commission Rate in New York
- Commissions are Shared Between Realtors and Brokerages
- Elements That Affect the Commission Payment
- The Seller Usually Pays Realtor Fees In New York
- You Get What You Pay for With a Discount Brokerage
- How Much Do Real Estate Agents Earn in New York?
- Rentals in New York
- Finding Your Ideal Real Estate Agent
Understand the Average Realtor Commission Rate in New York
What is a commission rate?
Commission rates, also known as realtor fees, are the payment for the services rendered to either buy or sell a home. The commission rate is a percentage of the purchase price of the home and is determined by the real estate agent.
Yet, realtors generally stay within a commission rate range of 4-6%. Be sure to discuss the commission rate with your real estate agent prior to working with them. Each realtor has their own rate and varies on how willing they are to negotiate that rate.
Oftentimes the real estate agent’s flexibility on the realtor fees will be impacted by their experience, the number of homes on the market, and the general condition of the housing market.
What is the average commission payment for a New York Home?
According to Redfin, the median sale price of a New York home is $485,000. With an average commission rate of 4.66% in New York, the total commission payment would be $22,601.
Understandably, the city of New York has a relatively higher median sale price at $765,000. Manhattan’s hot housing market experiences an even higher demand which results in a median sale price of $1.2 million.
A higher sales price also produces a higher commission payment to the realtor. With a 4.66% commission rate, the total payment for a typical home in New York City would be $35,649. A Manhattan home would yield a commission payment of $55,920.
Yet, the total commission payment does not go to one realtor.
Commissions are Shared Between Realtors and Brokerages
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.
There are four parties involved in every real estate transaction: the listing agent, the listing agent’s brokerage, the buyer’s agent and the buyer’s agent’s brokerage. Therefore, the commission payment is divided among the parties involved.
If a home sells for $500,000 and the commission rate is 6%, the total commission paid is $30,000.
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.
The payment is then divided equally between the brokerages, with each receiving $15,000. The brokerage will keep half of that and give the other half to the representing agents. Therfore, each entity would receive $7,500.
This general example provides a foundation for understanding how commission payments work and how the individual real estate agent is paid. However, there can be a lot of variety within this structure.
In addition, 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 the commission.
Elements That Affect the Commission Payment
The payment that a realtor receives is impacted by a variety of elements, including the type of real estate license, experience, commission rate, the purchase price of the home, and the state of the housing market.
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.
The broker can also act as a sales agent, and would, therefore, keep the brokerage fees and the agent fees.
Costs go into running a brokerage, and not all brokerages are like Selling Sunset. However, brokers typically earn higher incomes than sales agents.
>>AGENTS ANSWER: Is it better to work with a broker?
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.
Working on a team is beneficial for most agents. Even experienced agents find that working in a team helps their business.
The average real estate commission that the realtor keeps is between 50-90%. Oftentimes the commission split between the brokerage and realtor will vary with experience and sales. Individuals with more experience and higher sales will often get to keep a higher percentage of the commission.
In addition, realtors that generate more business for the brokerage, typically keep a larger percentage of the commission.
In Real Estate, 6% is the Standard Commission
The model of charging a 6% commission and splitting the earnings between all the parties involved has been the benchmark in real estate transactions for 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 (NAR), was formed in 1908. It was created to foster cooperation amongst people engaged in the marketing of real estate 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.
In addition, NAR developed a commission standard of 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 given commission rate.
The Seller Usually Pays Realtor Fees In New York
In New York, like 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 can also contribute to paying the listing agent’s and buyer’s agent’s realtor 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.
>>AGENTS ANSWER: Who pays the commission?
You Get What You Pay for With a Discount Brokerage
Over the past several decades, some discount brokerages have begun offering reduced 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 often offering ala carte services. These commission rates often do not include a listing in the local real estate board’s Multiple Listing Service. In other words, the listed property will not be exposed to other cooperating realtors.
In addition, the listing agent may be willing to accept a discounted commission rate; however, the buyer’s agent will still expect the standard 2-3% of the commission.
Ultimately, the seller will like still pay a commission rate of at least 4% and may receive a lower sales price due to less marketing and more days on the market. While the discount commission may seem attractive, the seller may not save money on the transaction.
Investigate the Services Offered
Like so many other products and services, you get what you pay for.
Before working with an agent, interview them and understand what services you’ll receive with the realtor fee. Your realtor is critical throughout the home transaction process, and it is essential that you are in agreement with how the process is handled.
How Much Do Real Estate Agents Earn in New York?
When it comes to individual realtors, how much do they end up making if they are working in New York? The sale price of the home significantly impacts the salary that an agent earns. Let’s take a look at some of the real estate commission earnings across 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 commission 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 brokerage commission fees for their rentals.
The New York rental market is different 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 the landlord and the broker before the unit is offered to a prospective tenant. However, on luxury units, which rent over $6000 per month, 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’s 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.