Is a NY attorney with a broker’s license automatically entitled to collect the buyer’s agent commission when representing her or himself on a residential real estate purchase in NYC?
The answer is not necessarily. We’ll explain why in this article.
First, let’s start by answering the following question: why is it common to see attorneys representing themselves on residential real estate purchases of condos, co-ops and townhouses in New York and NYC specifically?
The reason is that lawyers who are admitted to the New York State Bar essentially receive a shortcut when it comes to obtaining a broker’s license in NY.
Whereas other broker license applicants in New York (such as a Licensed Real Estate Salesperson) must satisfy a litany of challenging educational, experience and examination requirements, attorneys essentially get a free pass by way of not being required to fulfill any of these prerequisites.
An attorney who is a member of the New York State bar simply needs to fill out an application and pay $155 in order to become a Licensed Real Estate Broker.
In other words, attorneys who are admitted to the New York State Bar automatically qualify for a broker’s license in New York State.
As per the Division of Licensing Services Real Estate Broker Application:
As a result, attorneys often apply for a broker’s license right before buying a home in NYC in the hopes of representing themselves, and by extension, collecting the buyer broker commission on a purchase. This creative strategy is usually the outcome of a search for ways to reduce buyer closing costs, which in NYC are ridiculously high.
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In other words, an attorney who obtains a NY broker’s license and attempts to represent her or himself is essentially trying to obtain a buyer agent commission rebate in order to save money on closing costs.
Instead of being represented by a traditional buyer’s agent who agrees to rebate a portion of the commission (as would be the case under a traditional buyer agent commission rebate arrangement), the attorney seeks to represent her or himself and pocket the entirety of the buyer agent commission paid by the seller.
While this is a great idea in theory, it often fails in the execution stage. This is because many lawyers who attempt this strategy in NYC specifically aren’t aware that a listing agent has no obligation to split a commission with another licensed individual in the absence of a signed co-brokerage agreement between both parties.
To be clear, NY licensing law does require a listing agent to cooperate with a buyer’s agent (and by extension, a licensed individual representing her or himself).
However, attorneys often conflate this with a misguided assumption that listing agents are also required to co-broke (i.e. share) a commission.
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Most likely, this inaccurate assumption stems from the prevailing custom in NYC under which most agents agree to automatically split commissions. More specifically, all member agents of REBNY sign a Universal Co-Brokerage Agreement which obligates them to split/share (co-broke) no less than 50% of the total commission paid by a seller with a cooperating broker.
In other words, automatic co-broking only exists as a result of REBNY membership. Most attorneys who apply for a broker’s license simply don’t realize that there is a second step involved in order to be automatically entitled to the buyer’s agent commission on a purchase: applying for membership with the Real Estate Board of New York.
Therefore, many attorneys with a broker’s license often start submitting offers in NYC while incorrectly assuming they’ll get paid a buyer’s agent commission.
This can be a difficult scenario for a listing agent, as the agent will inevitably need to give a ‘reality check’ to the licensed attorney, and this could inadvertently offend the attorney/purchaser and result in retraction of an offer.
