Since New York City’s broker fee ban took effect earlier this summer, we’ve been keeping a pulse on the fallout.
Among the initial consequences were an immediate decline in listings available on StreetEasy, a drop in the number of rentals recorded on the residential listing service and a rise in rent prices as landlords tried to offset the cost of commissions they previously passed on to tenants.
As in other times of uncertainty, newcomers have emerged to capitalize on the shakeup. In the weeks since the law’s implementation, reporters at The Real Deal have been pitched on discount brokerages catering to landlords, artificial intelligence models used to identify rent-stabilized apartments and other initiatives aimed at breaking into the space.
Even firms that have been around for a few years have ground to gain in the new landscape. Openigloo, which started working with landlords about three years ago, said its landlord services, still in “beta mode,” have seen an uptick in users since June and is working with Silverstein Properties on leasing some of its portfolio.
Real estate is no stranger to the phenomenon — just two years ago, after the National Association of Realtors lost a landmark antitrust case, proptech startups jumped on the wave of changes headed for the industry, with new companies launching and established ones shelling out cash for marketing spends and reporting an uptick in inquiries.
One such company entering the scene post-FARE Act is Spotlight Realty, an upstart brokerage aimed at servicing landlords on the cheap using an AI-backed platform. The company was initially going to focus on the sales side, but its co-founder Raymond Allie pivoted to the rental side after the ban took effect.
“The goal is to change the way rentals are done in New York City,” Allie said.
Spotlight, which launched its rental platform just a week ago, is courting landlords to onboard their properties into the system and pay just a 4 percent fee on closed rental deals — significantly lower than the 10 to 15 percent commission tenants often paid under the previous system.
Allie said they can charge a smaller commission because most of the work is automated: responses to tenant inquiries, scheduling appointments and applications. Agents don’t have to do as much heavy lifting and can tackle more listings at once. It’s a volume play, and one that Allie said will benefit agents, especially new ones just getting their feet wet. Instead of straight commission, agents will get paid an hourly fee and a bonus after a lease is signed.
“At Compass or Corcoran, they’re going to put you on rentals anyway,” Allie said. He added that the firm will likely feed you one or two leads at the start, but at Spotlight, “we’ll give you all the leads. From the day you get here, you’ll be out doing stuff.”
The discounted commission model is one that hasn’t ever caught on in the city, with flat fee firms like the U.K.-based Purplebricks folding after just five years, despite the backing of a $117 million investment. But most of those firms were focused on the sales side, and with the rental market in flux, it’s possible that a new world order could allow for alternative models to take hold, as many landlords aren’t used to paying hefty fees or doing the work themselves.
Not so fast…
Deals are falling apart across the country, but New York City and a neighboring county are holding strong.
Nationwide, 15 percent of home sales were cancelled in July, the highest on record since 2017 and an uptick compared to the 14.5 percent recorded in the same month last year, according to a new report from Redfin, which tracked pending sales data on multiple listing services.
The report chalked the increase up to rising home prices, high mortgage rates and buyer hesitancy sparked by macroeconomic challenges. Cities such as San Antonio, Texas, and Fort Lauderdale, Florida, logged the highest percentages of collapsed deals, with buyers and sellers cancelling 23 percent and 21 percent of pending sales respectively. The locales at the top of the list are also areas that experienced development booms and where inventory has increased significantly, giving buyers more choices.
But the residential market in New York and a Long Island county fared significantly better last month, with Nassau County notching the lowest rate of cancelled contracts at just over 5 percent. Across the city, just 9.5 percent of contracts fell through. Both metrics were on par with year-ago numbers.
Nearby Newark, New Jersey, was among the 10 metropolitan areas with the lowest rate of cancelled sales, though it saw the largest uptick from July 2024, when just 7 percent of sales didn’t make it across the finish line compared to nearly 11 percent last month.
NYC Deal of the Week
The priciest deal to land in city records this week was a three-bedroom condo at 432 Park Avenue, which traded for $14.7 million, or $4,100 per square foot. The seller, whose identity is shielded by an LLC with an address in Edgewater, New Jersey, has been trying to offload the unit since 2017, when it listed for just under $20 million. It was last purchased for $16 million in 2016.
Unit 52C spans 3,600 square feet and has three bathrooms, corner living and dining rooms, 12-foot ceilings and views of Central Park and the Manhattan skyline.
Corcoran’s Carrie Chiang and Andres Perea-Garzon had the listing. Douglas Elliman’s Abraham Sarway brought the buyer.
Read more
StreetEasy listings drop by more than 1,000 day 1 of FARE Act passage
NYC’s broker fee ban disrupts rental data
Openigloo won over tenants. Can it do the same with landlords?
