Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
When I place an order to buy Microsoft stocks, I am being charged $4.95; when I shop for a hotel, an insurance or a plane ticket, I can choose and compare between thousands of options and with Amazon Prime, I no longer pay for shipping. The internet has reduced inefficient middlemen in most industries; why haven’t real estate brokers in New York been affected?
As a Frenchman, I am particularly shocked by the high 6% real estate commissions paid in New York.
The average commission paid to brokers in the United Kingdom, Australia, France and Belgium ranges from 1 to 3 percent. Prices in the NYC may rise and fall, trends may come and go, but one number remained unaffected: the “standard” six percent broker commission. With 6%, NYC has the highest real estate commission rate in the world and even within the United States. If you try to negotiate, brokers will tell you that “6% is standard” and “this is the way it is in New York”. Maybe if you are a friend or a family member, they will go down to 5%… lucky you!
The national U.S. average real estate commission charged by real brokers to sell a home stands at 5.36%. In the U.K., real estate brokers charge 3.25% and in France it ranges from 2 to 4%. In the center of London, brokers charge 1.7%. In London or Paris it’s common for real estate agents to charge a lower fee for more expensive apartments, brokers, generally, do not accept that in New York. To make matters worse, in London or Paris the average commission is lower than what it is in the rest of the country. How do you explain this? Real estate in London and Paris is considered a safe and liquid “asset class”, in other words, it is easy to sell. For instance, it is easier to sell a studio by the Eiffel tower than a farm in Normandy; this is the reason why the agent trying to sell the farm needs to charge more.
The same rationale should apply to NYC real estate but it does not. It turns out that real estate in NYC is actually higher than in the rest of the country, when the market is more liquid and transparent. In New York most real estate opportunities are available on public domains such as Zillow and StreetEasy, properties move fast, inventory is always high and demand is constantly growing.
Technology has changed the way business is done in ways that were unimaginable a decade ago. Experts say that residential real estate practices should adapt and evolve now that buyers and sellers have unlimited access to property listings and other information that was once hard to get.