What is the typical commission structure of residential real estate deals in New York City?
In New York City residential real estate deals, the seller typically pays 6% of the purchase price to his or her broker, which is split with the buyer’s broker if the buyer has a broker. On some listings, the commission may be 5% if the seller negotiates the lower rate with his or her listing broker. Buyers do not pay commissions or fees to their brokers.
If a buyer does not have a broker, do sellers typically reduce the purchase price to reflect the savings of not having to pay a commission to the buyer’s broker?
If a buyer does not have a broker, the seller’s broker will typically take the entire commission, and buyers without representation are generally unable to reduce the purchase price, leaving buyers frustrated and paying more than is necessary. Leveraging the Digs rebate is an excellent way to achieve the same result and have full-service representation and expert guidance at the same time. We can typically be brought in at any time, even after the desired unit is targeted (with the exception of (1) new construction – see this FAQ, and (2) some sales listings with non-REBNY brokers – see this FAQ .
As a buyer, I have been doing my own searches, visiting open houses and making offers on my own for a while. Why should I now hire Digs Realty?
Digs provides high-level representation and consultation to its buyer clients on every transaction. We bring to the table deep market knowledge, years of industry experience as well as a comprehensive understanding of all aspects of the deal. We add significant value, even to our most sophisticated clients, will shepherd your transaction over the finish line, and, on top of all that, we will write you a check for up to 2% of your purchase price after closing.
No. All services that Digs provides are 100% free to the buyer. There are absolutely no hidden fees. The buyer’s broker’s commission is paid by the seller or the seller’s broker at the closing. Not only will you get full-service buyer representation for free, but Digs will pay you up to two thirds of the commission that it earns at the closing.
Is Digs a full service buyer’s broker?
Yes. Every buyer who works with Digs receives a full service experience. One of the differences between working with Digs and a conventional broker is that Digs will tailor its services during the client’s search phase to cater to the client’s specific needs. Digs has clients who are completely independent during the search phase, those who need much more hand-holding from the beginning and dozens more in between those two extremes. Regardless of what a client wants during the search phase, every Digs client receives the same top tier professional service from and after the point at which a unit is targeted for bidding (including a pricing analysis, bidding advice, expert negotiation, etc.). Click here to view the Services we offer buyers.
Absolutely! Since the price of most of the City’s new construction is not negotiable, working with Digs is often the only way a buyer can obtain a discount on the purchase price. Please note, however, that working with a broker on the purchase of a unit in a new development or conversion is different than it is with resales. If you are interested in purchasing a unit in new development, it is very important that you do not reach out directly to the listing agent or attend an appointment at the sales gallery without us. Even if you advise the agents that you are working with Digs as your broker, unless we reach out on your behalf and attend all appointments with you, you may not be able to take advantage of our services or the rebate.
Yes, commission rebates are unambiguously legal in New York State. In April 2015, Section 442 of New York’s Real Property Law was amended to carve out commission rebates from the provision which otherwise prohibits splitting commissions with an unlicensed broker. This amendment codified what was already deemed a legal practice by the Department of State and the Attorney General’s office, which had each previously issued opinions, letters and/or decisions agreeing that a licensed broker could offer rebates to their clients as an incentive for using its services. The operative section reads as follows (with the new amended language in underline):
“Except when permitted pursuant to the foregoing provisions of this Section, no real estate broker shall pay or agree to pay any part of a fee, commission or other compensation received by the broker, or due, or to become due to the broker to any person, firm or corporation who or which is or is to be a party to the transaction in which such fee, commission or other compensation shall be or become due to the broker; provided, however, that nothing in this section shall prohibit a real estate broker from offering any part of a fee, commission, or other compensation received by the broker to the seller, buyer, landlord or tenant who is buying, selling, exchanging, leasing, renting or negotiating a loan upon any real estate including the resale of a condominium or cooperative apartment. Such fee, commission or other compensation must not be made to the seller, buyer, landlord or tenant for performing any activity requiring a license under this Article.”
See also this press release from the New York State Attorney General encouraging buyers and brokers to take advantage of commission rebates Find link here.
Is the commission rebate taxable?
In a private letter ruling issued in connection with a case brought by a national brokerage firm to specifically address whether commission rebates are taxable, the IRS determined that commission rebates are generally not taxable as ordinary income, but rather reduce the buyer’s cost basis in the property. For example, if a buyer receives a $20,000 rebate on a $1,000,000 purchase, then in the eyes of the IRS, the buyer would have only paid $980,000 for the property. Although private letter rulings are only binding on the party to whom the ruling is issued, Digs operates pursuant to the IRS’s guidance in this ruling and does not issue clients a 1099 in connection with the rebate. Since we are not accountants or tax professionals, we always advise clients to consult with a tax professional with respect to the tax implications of the rebate. The IRS ruling can be found here.
Yes. We represent clients all over New York City and have worked on a number of deals for townhouses in deep Brooklyn and Queens. It is very important, however, that you reach out to Digs at the beginning of your search and let us handle all communications. While most brokers in NYC (including all agents at the major brokerage firms) are members of REBNY and are contractually obligated to work with each other and adhere to the same ethical standards, there are brokers in these neighborhoods who are not members of REBNY, are unprofessional and do not operate with the same cooperative spirit. It is extremely important that we conduct all communications directly in order to encourage these brokers to recognize us as your broker on the transaction.
I am really independent but want a commission rebate. When do I need to get Digs involved?
While we understand that the advent of websites like StreetEasy make it possible for everybody to be independent during the search phase, it is important to engage Digs as early in the search process as possible. We can add the most value if you get in touch with us very early in the process. If you find out about us later in your search, we are always happy to get your call at any stage and will step in if it is possible and appropriate. Please see the Q & A regarding new construction and sales listings with non-REBNY brokers, where it may not be possible for us to get involved after you’ve initiated contact with the seller’s broker.
How much will I really save by hiring Digs to represent me?
A lot!!! Click here to see how much you will actually save. One of my clients purchased a condo in a building that allowed 10% down. The buy-side commission was 3% and the purchase was in excess of $1,000,000, so his rebate was 2% of his purchase price. With 90% financing to take advantage of today’s historically low interest rates, my client received 20% of his down payment back in cash at closing – that is real money.
Is Digs a full-service brokerage? Will you market my apartment any differently than the large/well-known brokerages?
Digs meets or exceeds the industry standard in all areas of a real estate sale. From the very beginning when we come to your home to evaluate it for sale to our detailed written proposals in which we provide a transparent window into our pricing and marketing strategy, you will appreciate the time, thoughtfulness and professionalism we put into our work. We go to great lengths to learn everything there is to know about a building to prepare ourselves for a sale – so much so that more than one managing agent has told us that she has never seen a listing broker pay for a custom questionnaire or read board minutes! This is the level of care we think should be the industry standard, but, unfortunately, too often it is not. Our marketing materials are professionally designed and produced using high quality materials and all interactions with buyers are handled by Dan Gotlieb, an experienced broker with years of experience, rather than a junior salesperson who does little more than open a door. Dan thoroughly vets all buyers’ finances before offers are presented to our sellers and handles all negotiations in an effective and professional manner. Dan will also ensure that any board application packages are complete and professionally prepared to avoid potential hiccups with the board.
Does Digs ever act as a dual agent representing both the buyer and seller in a transaction?
No. When we handle a sale, we have an undivided loyalty to the seller and represent the seller 100% throughout the transaction. The buyer’s interests are often diametrically opposed to the seller’s interests in a real estate transaction, and, accordingly, we strongly believe that there is no ethical way for a broker to represent both sides. In our opinion, it is an unwaivable conflict of interest. If a buyer is not represented by their own broker, they will represent themselves on the transaction and will not be represented by Digs.
How much will I really save by hiring Digs to sell my home?
A lot!!! Digs structures its commission arrangements with sellers to pass substantial cost savings through to them. On a recent sale of ours, our client saved over $150,000 relative to the standard 6% commission paid on real estate transactions.
Are brokers from other firms willing to work with you?
Yes. Digs Realty is a member of REBNY. With such membership, all other REBNY brokers (virtually all brokers in Manhattan and brownstone Brooklyn) are contractually obligated to cooperate with us and split their commission 50-50 with us, and vice versa. As a result, buy-side brokers have no concerns bringing their clients to our sales listings, and we have never had a problem engaging a sell-side broker who is also a REBNY member (See Q&A about non-REBNY sell-side brokers, who we sometimes encounter in deep Brooklyn and Queens).
Does going with a "discount broker" mean I am compromising on anything?
That depends on the “discount broker” you hire. When you hire Digs, you will compromise on nothing. We pride ourselves on being the very best at what we do. Skeptical? Check out what some of our clients have said about us here. We are also happy to connect you with current or former clients, who can share their experiences with you. The majority of our clients are referrals and repeat clients, which is a testament to our client satisfaction.
Why do you offer reduced commissions and rebates? Are you not as good as other brokers who take 6%?
We designed our rebate and discounted commission model to address a need in the marketplace. Initially, Digs was just representing buyers, with the goal of making homeownership in NYC more affordable while still providing sophisticated high level representation (with 2% cash back at closing, our clients are able to buy apartments they might not otherwise be able to afford). After a few of our buy-side clients asked us if we would sell their current homes for them for less than a traditional broker would charge, we couldn’t ignore that the need was clearly there on the sell-side as well. While we think we’re awesome and are worth every penny we earn, we don’t think anyone should have to pay $240,000 to sell their $4,000,000 home. The prevailing commission structure may be necessary to support the immense overhead of the large brokerage entities that dominate the industry here in NYC, but we have proven that the cost of providing competent, effective and efficient brokerage that meets or exceeds the industry standard in all areas is not nearly as high as those companies charge.
I hate brokers. Why should I hire you anyway?
We dislike a lot of brokers too, but not all. Some brokers are honest, hard-working, put the needs of their clients above everything else, and will go to unimaginable lengths to help close the right deal for their clients. We put ourselves in that category. A large number of our clients come to us, and the first thing they say is that they hate brokers, think we are useless and would prefer not to work with us, but they will just for the rebate or for the discount commission. They think they could do it themselves, and that we won’t add any value beyond the extra money in their pockets. While we would love it if all our clients came to us and embraced us with open arms, given our business model, this is not typically the case (we tend to attract the broker-hating community). However, while many of our clients begin our relationship together with a huge hurdle for us to surmount, without fail (if we can be so bold) we always do. When your deal closes, you will be glad you hired Digs, you will be grateful for the tangible and intangible value we add, and like many of our clients, you will (hopefully) consider us friends.
Should I reach out to brokers on my own to see apartments that are not listed for open houses?
No. The prevailing etiquette in the market today is that listing brokers expect that buyers’ brokers handle all communication and scheduling and attend all appointments for private showings. Accordingly, if you want to work with Digs, it is important that you reach out to us as early as possible to commence the working relationship. Typical protocol is that you would send us a listing with a request for a private showing with several days and times that you are available and Digs will arrange and accompany you on the appointment. If you find Digs after having reached out directly to the listing broker, in most cases, Digs will still be able to step in and represent you (with the exception of (1) new construction – see this FAQ, and (2) some sales listings with non-REBNY brokers – see this FAQ), so it never hurts to reach out to see if we can still provide our services and offer you our commission rebate.