Commission Calculator New York State 2021CASAPLORERTrusted and Transparent
What Are Real Estate Commissions?
Real estate commissions are the fees you pay to your real estate agent for their services. It is usually calculated as a percentage of the selling price of the property. In New York State, the standard real estate agent commission is 6% of the property price , but in practice, the commission can range anywhere from 5% to 6%. The total commission will be divided between the buyer and seller agents 50/50. Along with selling, there is a 12% to 15% commission associated with renting a property.
New York State Real Estate Commission Calculator
How is the Real Estate Commission Split between the Buyer and Seller Agent?
The average total real estate commission in New York is 6%, the commission is split between buyer and seller agents with each receiving 3%. In most cases, the buyer or seller agent you hired does not receive the entire 3% of the real estate commission. If the agent is employed by a brokerage firm, the firm also receives part of the commission, it is in the range of 40-60% of the commission received by the agent. This percentage split between the agent and brokerage is determined by negotiations and can depend on how much business the agent brings to the firm. Therefore, taking an average of 50% between agent and brokerage, they essentially receive 1.5% of the 3%.
The flow chart provides an easier explanation of the division of real estate commission between different parties. If the final home sale price is $500,000, the total real estate commission paid is $30,000, as it is 6% of the home price. This $30,000 is further split between the seller’s agent and the buyer’s agent, which is 50-50 in most cases, hence each receives $15,000. If the agent works with a brokerage firm (the typical case), then each brokerage firm also receives about 50% of what the agent received, hence the $15,000 is split into half or $7,500. Therefore, it is important to realize that the real estate commission, although is a large chunk of the home price, goes to several different entities in the home sale process.
Who Pays the Commission?
The real estate commission is paid by the seller of the home. For example, if the home price is $500,000 and the commission is 6%, the total commission would be $30,000. Therefore, the seller receives $470,000 ($500,000 - $30,000).
$500,000 Property Selling Price Example
As a Buyer of the Home, do I have to pay the Real Estate Commission?
No, the real estate commission is paid by the seller of the home, the buyer does not directly pay any commission to their agent. This might seem great at first, but it is important to realize that although the buyer agent fee is not paid by the buyer, the seller often includes the real estate commission into the asking price. Therefore, indirectly the buyer and the seller share the real estate commission fee. There can be an exceptional circumstance where the seller may decide not to pay the real estate commission for the buyer agent, in this case, the buyer will have to cover the agent’s fee. In this case, the agent will let you know beforehand.
As a seller can I Negotiate the Real Estate Agent Fee?
Yes! The real estate agent fee can be negotiated with the agent as there is no legally set real estate agent commission rate set by the Department of the State of New York . Negotiating with the agent is best because the real estate commission makes up a large portion of the home sale process. However, it is important to keep in mind, a lot of the fee that is received by the agent is used in the process of selling the home, such as online marketing costs, open house material, supplies and mail marketing material, etc. Hence, it is best to discuss with the agent the services that are offered and then negotiate the commission fee.
As a buyer, can I Negotiate the Real Estate Agent Fee?
In most cases, no, the simple reason being that you do not directly pay any of the agents in the home buying process.
What is the Cash Back Rebate in the Real Estate Commission?
There are real estate agents that might offer a cash back rebate after closing. Essentially the buyer agent pays back a certain amount of the commission to the buyer once the home is bought. This is a strategy used to attract more customers and can be a viable option for home buyers who are on a budget. If the agent offers a 30% cash back rebate and the commission they earned on a $500,000 home is $15,000, they will give back 30% or $4,500 to the buyer once the home is bought.
Do I have to pay taxes on the Real Estate Agent Commission?
No, the taxes are not paid by the seller or the buyer of the homes. The taxes are paid by the agent and the brokerage separately.
Who sets the commission rate?
There is no set requirement for real estate commission according to the Division of Licensing Services . As there is no legal requirement, the real estate commission is set by market conditions and individual negotiations, in New York, you can expect to pay at least 6% as commission.
What are the different types of Real Estate Commissions?
There are two different types of real estate commission payment methods:
- Percentage of the Home Price – In this payment method, the real estate agent fee moves in conjunction with home price, as the home price increases, the agent fee also increases. This payment method can motivate the agent to try to get a higher price for the seller as they also receive a bigger cut. For example, on a $500,000 home, 6% agent fee is $30,000 ($500,000 * 6%), whereas on a $600,000 home the 6% fee equates to $36,000 ($600,000 * 6%), which is $6000 or 20% more.
- Fixed or flat fee – A set fee is paid to the real estate agent for their services, such that changes in the home price do not impact agent commission. For example, if the fixed fee is $25,000, it does not matter if the home is sold for $500,000 or $600,000
Which Type of Real Estate Commission is Cheaper?
Fixed or flat fee commission tends to be cheaper than the percentage type on average. However, it is important to note that the commission is used by the agent to cover the costs of selling the home such as good photography, marketing expenses, and other supplies. If the agent receives a fixed fee, they might not be incentivized enough to get a higher price for the home as they do not earn more if the home is sold for a higher price.
What does it mean to Double-End a Real Estate Commission?
Double-ending a real estate transaction is when one agent represents both buyer and seller in the transaction. The single-agent receives the entire commission. There is a conflict of interest as the agent cannot satisfy the needs of both the seller and buyer. The seller wants the home to sell for the highest possible price, whereas the buyer wants to buy it at the lowest possible price; how can one agent satisfy both these contradicting goals? Therefore, in most cases, dual agency is not advisable or used. Some states have declared this form of real estate commission as illegal.
In New York, double-ending a transaction, or dual agency, is legal.
Who regulates the Real Estate Licenses in New York?
The Division of Licensing Services part of the Department of New York regulates the real estate licenses in New York.
What are some other Fees while Selling a House?
Closing costs are some of the highest in New York state ranging from 3.5% to 5% of the home price. Closing costs can include transfer taxes, balance on mortgage, legal fees, and any recording fee etc.