Are NYC Broker Commission Rebates Legal?

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As a NYC home buyer who may have just heard about the concept of a broker commission rebate, you are likely asking yourself: are NYC broker commission rebates legal?

Fortunately, buyer broker commission rebates in NYC are fully legal. In addition, broker commission rebates are not generally considered to be taxable income.

So, are broker commission rebates legal in NYC?

Broker commission rebates in NYC are 100% legal, despite what you may hear from traditional buyer’s agents and NYC listing agents.
New York is one of 40 states where receiving a broker commission rebate is permissible and encouraged by law. Specifically in New York City, broker commission rebates are 100% legal as per the Real Property Law which governs the state’s property market.

Real estate commission rebates are actively promoted by New York’s Attorney General and Antitrust Division as a means of increasing competition in the real estate industry and ultimately reducing overall real estate commissions when buying and selling real estate in New York City.

Broker commission rebates are rare in NYC because they are rarely offered by traditional real estate agents who are used to representing buyers without offering any discounts.

If you ask a traditional agent about buyer agent commission rebates in NYC, she or he will likely first say that rebates are illegal. If you point out that rebates are actually legal, a traditional agent will most likely refuse to offer any for of rebate.

Because the topic of broker commission rebates is a highly divisive subject among brokers in NYC, it’s especially important to make sure that any rebate you are receiving from your buyer’s agent is discreet.

After all, how can you expect a veteran listing agent to treat your offer fairly vs. other offers if the agent is offended that you will be taking away some of his or her commission on the deal? Will a seller be open to negotiating as much on the price if they realize that they are basically paying you commission?

How much can you save with a broker commission rebate in NYC?

The typical buyer agent commission rebate in NYC is $40,000 or more for a $2,000,000 purchase. On a $1,000,000 home, the size of a broker commission rebate can reach $20,000 or more. Requesting a buyer agent commission rebate is a great way to reduce your buyer closing costs, including the Mansion Tax. The exact size of your buyer broker commission rebate depends on a listing’s specific commission structure as well as the rebate percentage offered by your agent.

How does a buyer broker commission rebate work in NYC?

A buyer broker commission rebate is a discount paid to a buyer which comes out of the pre-negotiated commission amount a seller agrees to pay at closing. Sellers in NYC typically agree to pay a fixed commission of 6% which is intended to be split equally between the listing agent and a buyer’s agent. If the total commission is 6% and the buyer’s agent has agreed to rebate the buyer two-thirds (2/3rds) of what they earn, the buyer will receive a discount of (2/3)*3% = 2%.

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