Q: I recently signed a contract with Compass to have them represent me in the sale of my Manhattan apartment. The contract provides for a commission of 5 percent, which includes the commission for the buyer’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, and then negotiate with the buyer or the buyer’s agent regarding that person’s commission?
A: Compass, a real estate brokerage, recently settled pending class-action lawsuits in which home sellers claimed that the company had violated antitrust law by requiring them to pay a commission to a buyer’s agent in order to list their homes for sale.
The settlement has yet to be approved by the courts, and Compass did not admit any wrongdoing. But it did agree to change its business practices and pay $57.5 million into a settlement fund. The deal followed a larger $418 million settlement by the National Association of Realtors, as well as separate settlements 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 anywhere else,” said Adam Leitman Bailey, a real estate lawyer in Manhattan. In practice, commission rates have not changed in New York City. Not yet, anyway.
There are two issues in your case. One is that you’ve already signed the agreement with Compass. The other is that it’s unclear what impact the firm’s settlement 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, instead of N.A.R. In January, REBNY changed its own policies about 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 amended after Jan. 1. So if you signed your agreement after Jan. 1, and your agent is a REBNY member, you would have dictated the offer of compensation for the buyer’s agent.
It sounds like you signed your agreement before Jan. 1, since your contract specifies a commission rate inclusive of the buyer’s agent. But the recent legal developments could put you in a good position to renegotiate. You could try to amend your agreement, structuring it in a way that reflects the goals of the settlements.
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