Is a NY Attorney with a Broker License Entitled to Commission?

Is a NY attorney with a broker’s license automatically entitled to collect the buyer’s agent commission when representing her or himself on a residential real estate purchase in NYC? Full blog post: https://www.hauseit.com/ny-attorney-broker-license-buyer-agent-commission/

I’m Nick at Hauseit, based here in NYC. Check out our website https://hauseit.com to learn how to save money if you’re buying or selling real estate here in New York. We’ll discuss how to handle a job change during the co-op board approval process in the following video. So let’s get started!

Reduce Your Buyer Closing Costs in NYC: https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
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First, let’s start by answering the following question: why is it common to see attorneys representing themselves on residential real estate purchases of condos, co-ops and townhouses in New York and NYC specifically?

The reason is that lawyers who are admitted to the New York State Bar essentially receive a shortcut when it comes to obtaining a broker’s license in NY. Whereas other broker license applicants in New York must satisfy a litany of challenging requirements.

As a result, attorneys often apply for a broker’s license right before buying a home in NYC in the hopes of representing themselves, and by extension, collecting the buyer broker commission on a purchase. This creative strategy is largely the result of a search for ways to reduce buyer closing costs, which in NYC are ridiculously high.

In other words, an attorney who obtains a NY broker’s license and attempts to represent her or himself is essentially trying to obtain a buyer agent commission rebate in order to save money on closing costs.

Instead of being represented by a traditional buyer’s agent who agrees to rebate a portion of the commission (as would be the case under a traditional buyer agent commission rebate arrangement), the attorney seeks to represent her or himself and pocket the entirety of the buyer agent commission paid by the seller.

While this is a great idea in theory, it often fails in the execution stage. This is because many lawyers who attempt this strategy in NYC specifically aren’t aware that a listing agent has no obligation to split a commission with another licensed individual in the absence of a co-brokerage agreement.

NY licensing law does require a listing agent to cooperate with a buyer’s agent (and by extension, a licensed individual representing her or himself). However, attorneys often conflate this with a misguided assumption that listing agents are also required to co-broke (i.e. share) a commission.

Most likely, this inaccurate assumption stems from the prevailing custom in NYC specifically under which most agents agree to automatically split commissions. More specifically, all member agents of REBNY sign a universal co-brokerage agreement which obligates them to split (or co-broke) no less than 50% of the total commission paid by a seller with a cooperating broker.

In other words, automatic co-broking only exists as a result of REBNY membership. Most attorneys who apply for a broker’s license simply don’t realize that there is a second step involved in order to be automatically entitled to the buyer’s agent commission on a purchase: applying for membership with the Real Estate Board of New York.

Therefore, many attorneys with a broker’s license often start submitting offers in NYC while incorrectly assuming they’ll get paid a buyer’s agent commission. This can be a difficult scenario for a listing agent, as the agent will inevitably need to give a ‘reality check’ to the licensed attorney, and this could inadvertently offend the attorney/purchaser and result in retraction of an offer.

This scenario can also be harmful to the purchaser, as the act of representing her or himself and wrongly assuming the right to earn a commission could rub a listing agent the wrong way.

Ultimately, the most prudent course of action for an attorney looking to collect a commission on her or his purchase in NYC is to both apply for a broker’s license and apply for membership in REBNY. However, the latter is rather pricey and currently costs $1,650.

Therefore, we believe the most effective route for an attorney looking to collect the buyer agent commission on a purchase in NYC is to retain traditional representation from a buyer’s agent who offers a commission rebate.

This approach is advantageous for several reasons. First and foremost, this saves the attorney the cost and time associated with applying for REBNY membership. More importantly however, having a traditional representation structure reduces the risk of agitating or annoying a listing agent.

Reduce Your Buyer Closing Costs in NYC: https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
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Hauseit LLC, Licensed Real Estate Broker
Tel: (888) 494-8258 | https://www.hauseit.com
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