Understanding New Regulations: Hiring a New York Buyer’s Agent
Intro
You may or may not have heard about the National Association of Realtors (NAR) in recent news. If you have, don’t worry—I won’t write a thesis on it.
Instead, I aim to share information regarding what to expect from a buyer’s agent when purchasing a property in New York.
While the NAR settlement coverage makes it seem like the real estate industry was flipped on its head, many things will remain the same. One of the main changes is a higher level of transparency. We will see improved communication between clients and RE professionals.
NAR settlement implications: How does this affect NY buyers?
As a result of the NAR settlement, all homebuyers of residential property in New York are required to sign a contract with a buyer’s agent before touring homes.
The contract, also known as an exclusive agreement, buyer agreement, buyer exclusive (and too many other renditions), should outline the agent’s responsibilities/duties, compensation, duration, and general search criteria.
Previously, the only requirement was for buyers to sign an agency disclosure statement upon or before visiting the first property. If you’ve ever attended an Open House in the State of New York, you may have seen this page before.
This statement is different from the contract you’d have with a buyer’s agent. In fact, the disclosure statement itself starts with “This is not a contract.” The purpose of the agency disclosure statement is to make prospective home buyers and sellers aware of the different types of representation.
However, the buyer agreement/contract is a written commitment between the buyer and their agent.
What does a New York buyer’s agent do?
Should you hire a buyer’s agent?
Roles & Responsibilities of a Buyer’s Agent in New York
Real Estate Agent Roles: The three types of representation
A Buyer’s agent is a real estate agent who has a fiduciary responsibility to you, the buyer. This means they must secure you the best deal with the best possible price and terms. They owe the opposing side honest and fair treatment, per NYS law, but they are loyal to you.
Before we dive deeper, below is more information on two different types of agent representation.
Seller’s Agent
A common misconception is that you can get a ‘better deal’ by working directly with a Seller’s Agent (aka listing agent). As seen on the agency disclosure form, a seller’s agent is hired by a seller and, therefore owes the seller ‘undivided loyalty.’
While the seller’s agent still owes honesty and fairness to buyers, their job is to have all buyers compete with one another to benefit the seller ultimately.
Broker’s agent
A broker’s agent is not contracted by a buyer or seller customer and instead, works directly with a buyer’s agent or seller’s agent.
One way to think of it is the broker’s agent is like a subcontractor hired by the general contractor (aka buyer’s agent or seller’s agent) to assist with a project.
You, the buyer or seller, only deal directly with your agent (not the broker’s agent).
I thought that was all they did…
Finding properties and negotiating are widely known as a real estate agent’s core responsibilities when representing a buyer.
That’s all you’ll see on photos for marketing material, photos of realtors with their clients at a property looking at a clipboard or an open-concept living space. Property showings are most of what you see on social media.
Negotiations in the form of loud phone calls & tense meetings make up most of what you’d watch on a Real Estate reality TV show.
Let’s discuss what happens before, between, and after those two responsibilities.
Homebuyer Consultation
Your homebuying journey should begin with a consultation. Here, your agent will assess your needs, learn about your long-term goals, and provide a road map to get there. Your consultation is where you first begin to discuss your budget/price range, criteria, and timeline. It is also your buyer agent’s responsibility to answer all your questions and ask a few of their own.
Your initial consultation will lead to a list of action items, such as obtaining a pre-approval, scheduling a follow-up call, and signing disclosures and agreements.
The Search
The Multiple Listing Service, aka MLS
Once you are ready to view properties, your agent will send you properties via email and/or text. Property searches can be set up automatically using your criteria. Some MLS platforms can email you listings once they hit the market, every 6 hours, or once daily.
As part of your auto-generated list of properties, you will receive notices when a property’s ‘status’ has changed.
Examples of MLS Statuses are:
- New or New Listing: Properties that have just hit the market or have not changed their status to any of the other options
- CS or Coming Soon: Properties that will be listed as “New” within the next two weeks
- PC or Price Change: The most common price change is a price reduction. Sellers can also decide to increase asking prices based on improvements made to the property, higher demand than expected, or other reasons.
- TOM or Temporarily off-market: This status can be used for a couple of weeks before it needs to go back on the market, relisted as TOM, or taken off the market.
TOM is used for several reasons, i.e.:- There will be no access for showings for more than 48 hours (some exceptions apply)
- The seller has received many offers and wants to discontinue showings
- An offer has been accepted, but the property is not yet “UC.”
- Extended scheduling
- UC, Under Contract, or Pending: The property is no longer on the market because the Buyer and the Seller have signed a legally binding purchase agreement/contract.
- BOM or Back on the Market: The property was UC or TOM, and the listing is once again active.
- CL or Closed or Sold: The title has been transferred, and the property has been officially sold.
- EXP or Expired: The listing could not attract a willing and qualified buyer and remained on the market until its listing expiration date.
- Withdrawn: The property was removed from MLS. This typically occurs when a seller has changed their mind about selling. Sometimes, the offers received are well below the seller’s expectations, and other times, the seller has a pressing matter that demands their attention.
- EXT or Extended: The seller has decided to keep their property on the market longer despite the expiration of the original listing agreement.
As you receive auto emails, you can communicate with your agent regarding which properties you’d like more information on or would like to tour. Your agent will then answer your questions, obtain additional information if necessary, and schedule a tour/showing. This will continue as you seek an option worth making an offer on.
Outside of the MLS
While the MLS is a helpful tool for efficiently finding and analyzing properties, there are other platforms to consider.
Many homebuyers are active on websites like Zillow, redfin, realtor, streeteasy, trulia, and others. Therefore, buyers are encouraged to share any attractive options that may not have been on the MLS auto-generated list. Your agent will also scan these sites for additional inventory.
Off-market inventory
Another responsibility during the home search process is identifying potential off-market opportunities.
Buyer’s agents mainly find off-market properties via:
- Homeowner relationships
- Past clients
- Real Estate Investors: House-flippers
- Real Estate Investors: Wholesalers
- Real Estate Investors: Developers
- Other Real Estate Agents within the buyer agent’s network
- FSBO or For Sale By Owner
- Expired Listings
- Networking events
Comparative Market Analysis or CMA
Before making offers on properties, buyers are presented with pricing options and recommendations from their buyer’s agent. The pricing options are derived from market research, often called a CMA.
CMAs take into account:
- Similar properties that are actively listed/on the market
- Similar properties that have recently become unavailable, i.e., Under Contract, expired, withdrawn, Temporarily off the market, etc
- Similar properties that have SOLD
Once you review your options and discuss how you’d like to proceed, it’s ‘offer time’!
Negotiations
Finally, we’re here… let’s talk about getting the deal!
Offers and counter offers
Your buyer’s agent will draft an offer for you to sign. The offer will be your first formal step in the negotiation process. Outline the price and terms you have discussed with your agent. Other standard terms used for offers in New York are “binder” and “purchase agreement.”
It is important to note that offers in NY are NOT legally binding. As mentioned in the ‘MLS Status’ section above, a purchase agreement is only legally binding when both parties have reviewed and signed a contract of sale with their attorneys.
Offers typically include:
- Pre-approval letter/proof of funds
- Buyer’s name & Signature
- Property address
- Purchase price
- Contract deposit amount
- Total down payment amount (cash purchases excluded)
- Loan amount (cash purchases excluded)
- Proposed contract signing date
- Proposed closing date
- Attorney’s information
- Escalation Clause (if applicable)
- Offer Acknowledgement Form (if applicable)
- Other terms/conditions/contingencies, i.e.:
- Inspection
- Appraisal contingency
- Financing contingency
- Clean title
- Seller’s concession
- Vacancy
- And more
After you submit an offer, your agent will follow up to hear a decision or counteroffer from the seller. Counteroffers are discussed amongst all parties until both parties agree on all terms.
Accepted Offer and Home Inspection
When an offer on a property is accepted, buyers either move forward to sign a purchase contract OR conduct a home inspection. Most offers involving bank financing include a contingency for a home inspection.
At the home inspection, the inspector mainly focuses on assessing the property by determining the condition of the:
- Roof
- Chimney
- Garage
- Exterior
- Attic
- Structural components
- Plumbing
- Electrical system
- Heating system
- Appliances
- Interior
Once the inspection is complete, additional terms may be negotiated. Contracts are reviewed and signed once all parties are ready to move forward.
Post Contract
After the contract is fully executed, things slow down considerably. The majority of what happens is now behind the scenes. Your agent will communicate regularly with you, the lender, the attorney, and the seller’s representatives.
The buyer’s agent coordinates the appraisal. Agents update buyers as the property is appraised and the title report is reviewed.
Typically, buyers do not revisit the property until the week of closing, when a final walkthrough is conducted.
Some exceptions are:
- Buyer revisits to take measurements
- Buyer revisits with a contractor
- If an additional inspection is required, i.e.:
- HUD Consultant
- Mold/Asbestos/Termite specialist
- Structural Engineer
Closing and Post-Closing
New York Agents are not required to attend closings. Since NY is an attorney state, all closing documents are reviewed by your attorney before signing. This process can take as little as 30 minutes and last multiple hours. All will depend on whether any documents were pre-signed before closing and whether any discrepancies arise.
Your buyer’s agent may still attend for moral support, a quick photo opportunity, or drop off a closing gift.
While there are no required post-closing responsibilities for buyer’s agents, great agents will stay in touch to:
- Recommend vendors
- Share updates on the market
- Become your ‘Google’ for all things real estate
Qualities to look for in a New York Buyer’s Agent
There are over 30,000 real estate agents on our local MLS board alone. That’s not all; our board is just 1 of 4 main MLS boards that service the NYC metro area, so there are plenty more agents.
How do you choose a buyer’s agent?
A great agent will produce results while saving you time and money.
Before we discuss qualities to look out for, keep in mind that many buyer agreements/contracts have clear cancellation policies. Some, including ours, state that either party can cancel the agreement with written notice. If you’re unhappy with your agent, you can send an email, and the agreement will be nullified.
Now, let’s dive into what you should look for in a buyer’s agent.
Understanding Buyer Agreements / Contracts
What is a buyer agreement?
A buyer’s agreement is a contract between a buyer and their agent representative outlining the duration of their relationship, terms, and services included, and the compensation to be paid at closing.
This contract sets expectations for everyone’s roles and responsibilities at the onset of the relationship to avoid misunderstandings.
Types of buyer agreements
Exclusive Agreement
This type of buyer agreement states that you exclusively work with the designated buyer’s agent and any team members that are associated with them. Examples of team members are administrative staff and showing agents.
The exclusive agreement also states that the buyer will receive assistance from their agent to view properties, negotiate deals, and provide other services throughout the process. Both parties agree upon the agreement’s start date and expiration date.
By exclusively working with this agent, you have a contractual obligation to compensate them (at closing) should they successfully assist with acquiring a property. We will discuss compensation and what it means to ‘earn’ compensation later in this article.
Non-Exclusive Agreement
A single-property or non-exclusive agreement is very similar to an exclusive agreement but differs in duration. Under non-exclusive agreements, buyer’s agents assist buyers with touring properties, negotiation, and advocacy services throughout the purchase process.
Sounds like an exclusive agreement.
That’s because the representation is basically the same.
Here is the difference: Non-exclusive agreements only tie a buyer and buyer’s agent together for one or more properties. The subject or target property would be stated in the agreement.
If the buyer wants to tour additional properties, another non-exclusive agreement must be drafted and fully executed.
This can become tedious and time-consuming. In a competitive Real Estate market like New York’s, every minute counts, which is why most buyers prefer to enter an exclusive agreement versus signing multiple non-exclusive agreements each time they want to see a property.
Terms outlined in the Buyer’s Agreement
Properties
This is the section where your criteria is added to the agreement. The type of property, geographic location, price range, amenities, ‘must have’s’, and more details related to your criteria will be specified.
If you still need to learn what your criteria are, no worries! That is why you hired a dedicated buyer’s agent. They will begin your search with various properties and condense it as time passes.
Length of Agreement or Duration
Duration, like compensation, is negotiable. In our eight years of experience, most clients have felt comfortable with 60-90-day agreements.
Others prefer shorter timeframes, from 30 to 45 days, which is also acceptable, depending on the agent’s preferences.
Many updated buyer agreements since the NAR settlement include language that allows either party to cancel the agreement upon receipt of written notice.
This clause is most comforting to prospective buyers concerned about being “locked in” to a lengthy agreement with someone who has yet to prove themselves to be a worthy buyer’s agent.
Responsibilities
The buyer agent’s main responsibility is to assist a homebuyer in finding, negotiating, and closing on a property with the price and terms most favorable to the buyer.
Included in that primary responsibility are:
- Consulting the buyer on the current market and historical trends
- Searching for properties both on and off of the open market
- Conducting analyses (or CMAs) for properties of interest
- Negotiating the best deal possible
- Guiding client to the closing and post-closing stages
How does the Compensation / Broker Fee work in New York
A broker fee is due and payable upon a successful closing. This means that under most buyer agreements, there is no retainer fee or up-front cost. Some exceptions may apply, but in our experience, retainer fees are very rare.
The buyer’s agent compensation can be an exact dollar amount or percentage of the property’s total purchase price.
Once your broker fee is agreed upon, your agent’s next responsibility will be to find a way to limit your expenses for the upcoming closing. One of the ways to do this is to negotiate, on your behalf, to have their commission paid for by the seller.
For example, if the agreed-upon commission is $20,000 and the property of interest is a $1,000,000 property, your agent can structure the deal so that the seller pays the commission.
In that scenario, the offer would state that the total purchase price is $1,000,000, but the seller is ‘netting’ (or taking home) $980,000.
Under new rules, post-NAR settlement, some transactions may require a signed agreement in which the seller confirms their willingness to pay the buyer agent’s commission/fee. This is another step toward improving transparency for buyers, sellers, and other parties involved in the sale.
Main takeaways:
- Commission payable to your buyer agent is negotiable between you and the agent
- Buyer agent commission is earned upon the full execution of a sales contract
- Buyer agent commission is payable upon a successful closing
- Buyer commission can be negotiated into your offer for a property. i.e.:
- The seller can partially pay for it
- The seller can fully pay for it
- It can be included in the purchase price via a seller’s concession
- Deducted from the gross purchase price
Cancellation
Canceling an exclusive or non-exclusive buyer agreement requires written notice by either the buyer or the buyer’s agent.
The only exception is if the buyer and buyer’s agreement have worked together on a property already under contract. Once the property is in contract between the buyer and seller, the agent earns a commission.
How does compensation work?
Broker compensation in New York is typically included in the total sale price of the property. In most cases, it is either deducted from the seller’s net proceeds or included in the purchase price as a seller’s concession.
Let’s get into the three most common ways buyer agent compensation is paid in NY.
Broker commission is deducted from the seller’s net proceeds
The scenario most commonly seen at closings is one where the seller collects their proceeds after all deductions have been made. Deductions or expenses include State transfer taxes, city transfer taxes (if the property is in Queens, Brooklyn, Manhattan, Staten Island, or the Bronx), attorney fees, filing fees, and broker commissions.
For example, if the property sells for $1,000,000 and the total broker commission is 6%, the seller will net $940,000 minus all other expenses listed above.
If the 6% commission is to be split between the seller’s agent and the buyer’s agent, separate checks are written to each broker.
The great thing about buyer representation is that your buyer’s agent is responsible for securing the best deal and terms for you. This includes negotiating on your behalf to have the seller pay the buyer agent commission.
The Buyer Agent’s commission is paid via a seller’s concession
Aside from requiring buyer agreements, the recent NAR settlement also changed rules related to buyer agent compensation.
- Sellers are no longer required to offer compensation for buyers’ agents
- Seller’s agents are no longer to advertise co-broker or cooperating broker compensation
- BUT… Sellers can still offer seller concessions, which can go towards:
- ‘Buying-down’ the purchaser’s mortgage interest rate
- Paying all or a portion of the purchaser’s closing costs
- Compensating the buyer’s agent
Seller concessions help reduce buyers’ closing costs without reducing the property’s sale price. In some instances, sellers offer credits at closing that contribute to the buyer’s costs.
For example, if the property sells for $1,000,000 and the buyer wants a $30,000 concession towards closing costs and/or broker commission, the seller would net $970,000 minus seller agent commission, transfer taxes, and other expenses.
The buyer would borrow the same amount, $1,000,000 minus their down payment, but their concession and other expenses would reduce the seller’s take-home amount. This is another way to have the seller pay your agent’s commission.
Buyer pays the buyer agent
While this is not the most common scenario, we may see an increase after the NAR settlement has taken effect.
As the previous sections show, many sellers will still instruct their agents to offer cooperating compensation. Though it cannot be publicly advertised on all platforms, sellers and sellers’ agents can disclose a concession amount for the buyer to use.
If no concessions are offered, buyers will pay their agent directly via check at closing. Some banks have instituted ways to allow buyer clients to borrow or finance commission and closing costs.
Whether you are paying via certified check or as part of your loan, here is an example:
For a $1,000,000 property where the seller wants you to pay your agent, you would offer $1,000,000 minus agent commission. Let’s say the commission is 3%. Your offer would reflect a $970,000 net-to-seller amount, of which the seller would still have to pay their broker, transfer taxes, attorney fees, etc.
Seem familiar?
That is because the numbers can work out almost identically no matter who is “paying” commissions. The borrower’s total loan amount and the seller’s take-home (net) amount would be similar in all three scenarios above.
Outro
Do you need a buyer’s agent to purchase a property in New York?
Short Answer: No, you do not.
You can purchase a property by working with the seller’s agent. Please remember the seller’s agent owes full representation and loyalty to the seller, not you.
You can also pool advice from property owners, the internet, and this article to DIY.
Slightly longer answer: You should hire a great buyer’s agent to assist when you purchase a property.
A great agent with experience, market knowledge, resources, valuable contacts, and negotiation skills will…
- Save you hours each week from scheduling, due diligence, follow-up, and documentation
- Save you weeks – months from your property search by systemizing & expanding it
- Save you years by leveraging their experience and helping you avoid pitfalls
- Save you 5-6 figures with high-level negotiation
- Save you some headaches… not all!
If you’d like to read more about the NAR settlement and its implications for consumers, click here.
Thanks for reading!
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February 3, 2025[…] The National Association of Realtors (NAR) settled to resolve a series of class-action lawsuits. Realtor rules were re-written, resulting in more client-agent transparency when discussing commissions. This settlement has not significantly impacted the values, home prices, or average total closing costs for buyers and sellers. […]