Impact of 2024 NAR Settlement on NYC Real Estate Commissions
January 26, 2025 by Georges Benoliel
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The recent NAR settlement impact does not prevent NYC sellers from paying a commission to buyer agents, which means immediate, widespread changes to the brokerage commission structure in NYC are unlikely. Since the implementation of the NAR settlement on 8/17/24, operations in NYC have remained unchanged. Sellers cover the buyer agent commission on most listings, and most buyers continue to receive representation. Savvy sellers in NYC have historically discovered ways to minimize commission fees through 1% NestApple Full Service. Likewise, buyers have been able to reduce their closing costs with buyer agent commission rebates. The NAR settlement will slightly decrease buyer agent commission rates across NYC in the short term. Over time, it may cause a notable decline in the number of buyer’s agents, but any such transformation takes years to develop. Ironically, the NAR settlement may increase listing agent commissions in NYC, as discussed below.
NYC Changes Under the NAR Settlement?
All MLSs that opted into the NAR settlement agreement resulting from the Sitzer/Burnett lawsuit must implement several new policies by August 17, 2024:
- MLS cannot display compensation offers to cooperating brokers. Sellers can pay a buyer agent commission, but they cannot advertise this commission on the MLS.
- Listing and buyer representation agreements must indicate that commissions are not established by law, any Realtor® association, or MLS and are entirely negotiable.
- MLS participants must have a written agreement when representing a buyer.
- Written buyer agreements must also include specific provisions related to the settlement.
Most NYC real estate agents aren’t members of the NAR because they are REBNY members. They are not part of the National Association of Realtors. Nevertheless, the NAR settlement
still affects NYC.
This is because REBNY and several national brokerages operating in NYC opted into the NAR settlement. However, REBNY is still negotiating its settlement terms and is actively involved in litigation.
Near-Term Effects of the NAR Settlement on NYC Real Estate Commissions
In the near term, the NAR settlement will likely decrease buyer agent commission rates throughout NYC.
We’ve already observed this trend. Sellers who previously offered 3% may now choose 2.5%. Those considering offering 2.5% might lower it to 2% due to the NAR settlement and related media coverage. The NAR settlement has undoubtedly encouraged more sellers to consider forgoing a buyer-agent commission. This remains risky and uncommon since 75% or more of buyers are represented.
Let’s say you’re planning to list your NYC apartment for sale. Even if you strongly believe that sellers will no longer cover the costs for buyer’s agents in the long run, are you willing to test your hypothesis on your most valuable asset? Doing so will likely put your property at a disadvantage compared to competing listings that mainly offer a buyer agent commission.
Remember that there have always been occasional listings that did not provide any commission to buyer’s agents.
However, this is rare in areas like Manhattan or Brownstone Brooklyn and is typically limited to less central locations such as South Brooklyn or Eastern Queens.
Long-Term Outlook for NYC Real Estate Commissions Post-NAR Settlement
The NAR settlement has heightened the likelihood that the number of buyer’s agents in NYC will decrease over the long term. Ultimately, the NYC brokerage industry could shift toward a single-agent model, similar to the UK system. Commission rates remain significantly lower; usually, only one agent is involved in a transaction.
However, such a transition may take years to materialize.
Remember that there will always be buyers who actively seek out a buyer’s agent and are willing to cover the cost if necessary, much like some tenants in NYC who still choose to hire and pay an agent directly.
Could the NAR Settlement Increase Broker Commissions in NYC?
Ironically, the NAR settlement might lead to an increase in listing agent commission rates in NYC.
Here’s why: The presence of a buyer’s agent dramatically reduces the listing agent’s workload during a transaction. Suppose sellers stop paying the buyer agent’s commission, and buyers largely refuse to pay a buyer’s agent out-of-pocket, opting to go without representation. In that case, the listing agent must bear all this additional work.
Without a buyer’s agent, listing agents will need to take on the tasks typically handled by the buyer’s agent, such as educating the buyer throughout the transaction, setting expectations, and managing the board package for condo and co-op apartments.
This increased workload, especially for more complex transactions like co-ops, could make listing agents less willing to negotiate their commissions, particularly for lower-priced properties.
Other Impacts of the NAR Settlement on NYC Real Estate
We suspect the NAR settlement may lead NYC real estate attorneys to raise fees to manage the extra work. Transactional residential real estate attorneys in NYC typically use a flat-fee pricing model to represent buyers and sellers.
Moreover, the additional regulations and negative publicity surrounding real estate agents due to the NAR settlement may reduce the number of agents in the NYC brokerage sector. If listing agents face increased workloads without a corresponding rise in compensation, some may leave the industry altogether, creating a supply-and-demand dynamic that could push commissions higher.
If a buyer who would have chosen representation, had the seller been responsible for covering the commission, decides to go solo to avoid paying a buyer’s agent out of pocket, they are likely to depend more on their attorney for advice and guidance throughout the purchasing process. Despite the changes brought about by the NAR settlement, new developments will likely continue to offer high commissions to buyer agents.
Selling these properties requires extra effort, and higher commissions motivate buyer agents.
In South Florida, commissions for buyer agents in new developments can go up to 8%, while in NYC, developers frequently offer as much as 5%. Typically, the more challenging the property is to sell, the larger the commission suggested. Even with the NAR settlement in play, this pattern seems unlikely to change.
