Q: I recently signed a contract with Compass to represent me in the sale of my Manhattan apartment. The contract provides for a 5 percent commission, which includes the buyer's agent's commission. Does recent news about real estate commissions and who pays them mean that I can demand to pay only 2.5 percent to Compass as my agent and then negotiate with the buyer or buyer's agent regarding that person's commission? ?
TO: Compass, a real estate brokerage, recently settled pending class action lawsuits in which home sellers claimed that the company violated antitrust law by requiring them to pay a commission to a buyer's agent in order to list their homes for sale.
The deal must still be approved by the courts and Compass did not admit any wrongdoing. But he agreed to change his business practices and pay $57.5 million to a settlement fund. The deal followed a larger $418 million settlement by the National Association of Realtors, as well as separate deals by brokerages including Anywhere Real Estate, which owns brands such as Century 21 and Corcoran.
The bottom line: commissions on home sales are not set by law and are negotiable. “However, there is no requirement to reduce commissions payable to brokers in New York and elsewhere,” said Adam Leitman Bailey, a Manhattan real estate attorney. In practice, commission rates have not changed in New York City. Not yet, anyway.
There are two problems in your case. One is that it has already signed the agreement with Compass. The other is that it's unclear what impact the company's deal will have on local home sellers.
In New York City, most agents are affiliated with the Real Estate Board of New York, the local real estate trade organization, rather than the NAR. In January, REBNY changed its own policies on who pays commissions to agents. The new rules state that only sellers (not their agents or a brokerage) can offer a commission payment to a buyer's agent. The buyer's agent can negotiate the offer or reject it outright.
The new rules apply to agreements signed or modified after January 1. So if you signed your agreement after January 1 and your agent is a REBNY member, you would have dictated the compensation offer to the buyer's agent.
It appears you signed your agreement before January 1, as your contract specifies a commission rate that includes the buyer's agent. But recent legal developments could put him in a good position to renegotiate. He could try to modify his agreement, structuring it in a way that reflects the objectives of the agreements.
To receive weekly email updates on residential real estate news, sign up here.
