Why Are New York City Real Estate Commissions so High? | Hauseit NYC (2024)

Quirks of London Real Estate Agents vs. NYC Real Estate Agents:

Sliding Scales

It’s not uncommon in the UK and London for the real estate agent percentage commission rates to be on a sliding scale based on the sale price. If the property sells for a higher amount, then the commission rate steps up in bands. Conversely, if the property sells for aprice on the lower end, then the real estate commission rate would bracket down. This is not common in NYC, however we think it’s actually a great idea because it incentivizes listing agents to maximize proceeds for the seller.

The real problem with NYC full-service listing agents is that they have no real incentive to sell your home at the best possible price. NYC agents with 6% Exclusive Rightto Sell listing agreements would prefer a quicker sale at $1.5 million to a sale at $1.55 million which takes 3 months longer.

Why? Simply put, the agent prefers to get paid 6% ASAP on $1.5 million (earning $90,000) than spending an extra 3 months and risking the expiration of the listing agreement just to earn an extra $3,000 in commission for himself or herself.

Commission based on Asking Price

Believe it or not, in the UK some real estate agents attempt to charge a commission based on the asking price instead of the listing price. This nifty little trick is definitely not something we’ve heard of in NYC or ever want to see!

Sales Tax

Commission rates in the UK may be quoted either inclusive or exclusive of VAT (value added tax, or the rough equivalent of sales tax in the UK). Since the current rate of VAT in the UK is 20%, it’s critical for UK home sellers to know how their commission rate is being quoted. Otherwise, 1% could turn into 1.2% and 2% could turn into 2.4%, etc.!