Q: I recently signed a contract with Compass to have them represent me within the sale of my Manhattan apartment. The contract provides for a commission of 5 percent, which incorporates the commission for the client’s agent. Does the recent news about real estate commissions and which party pays them mean that I can demand to pay only 2.5 percent to Compass as my agent, after which negotiate with the client or the client’s agent regarding that person’s commission?
A: Compass, an actual estate brokerage, recently settled pending class-action lawsuits by which home sellers claimed that the corporate had violated antitrust law by requiring them to pay a commission to a buyer’s agent in an effort to list their homes on the market.
The settlement has yet to be approved by the courts, and Compass didn’t admit any wrongdoing. But it did conform to change its business practices and pay $57.5 million right into a settlement fund. The deal followed a bigger $418 million settlement by the National Association of Realtors, in addition to separate settlements by brokerages including Anywhere Real Estate, which owns brands similar to Century 21 and Corcoran.
The bottom line: Commissions on home sales usually are not set by law and are negotiable. “However, there isn’t any requirement to scale back commissions payable to brokers in New York and anywhere else,” said Adam Leitman Bailey, an actual estate lawyer in Manhattan. In practice, commission rates haven’t modified in New York City. Not yet, anyway.
There are two issues in your case. One is that you just’ve already signed the agreement with Compass. The other is that it’s unclear what impact the firm’s settlement can 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, as a substitute of N.A.R. In January, REBNY modified its own policies about who pays commissions to agents. The recent 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 recent rules apply to agreements signed or amended after Jan. 1. So when you signed your agreement after Jan. 1, and your agent is a REBNY member, you’ll have dictated the offer of compensation for the client’s agent.
It appears like you signed your agreement before Jan. 1, since your contract specifies a commission rate inclusive of the client’s agent. But the recent legal developments could put you in an excellent position to renegotiate. You could attempt to amend your agreement, structuring it in a way that reflects the goals of the settlements.
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