Why are Flat Fee MLS Listings Rare in New York City?

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NYC flat fee MLS (Multiple Listing Service) listings are still very rare despite advances in technology and the city having the highest home prices and highest real estate commissions in the nation.

Is it because it the market is too profitable for NYC brokers to offer discounts? But why are discount services so rare when there are over 30,000 real estate agents in NYC alone and not enough listings?

NYC flat fee MLS (Multiple Listing Service) listings are rare for the following reasons:

NYC’s real estate industry is controlled by only a few major brokerage companies, creating an oligopoly for consumers

Aspiring real estate agents enforce the status quo, refuse to discount commissions and ‘dream big’

NYC doesn’t have a traditional MLS, so it’s more challenging to offer FSBO sellers a NYC flat fee MLS service

NYC Flat Fee MLS Reason One: Lack of Commission Competition

Although NYC has over 50,000 agents and many thousands of listings at any given time, the industry is far less competitive than it may appear from the surface. This is because a large proportion of all agents and listings are controlled by a handful of large and dominant brokerages in the city.

While a real estate salesperson license in NYC is very easy to obtain, each new salesperson is required to associate with a brokerage in order to conduct business.

Here lies the source of the industry’s lack of competition (and lack of discount services like a NYC flat fee MLS listing package):
Licensed real estate salespeople at these major brokerages aren’t simply permitted to discount commissions.

Every listing agreement or deal requires approval and sign-off by a managing broker at the firm.

These large, traditional brokerages have unwritten policies which severely limit or altogether prohibit offering any form of discount or reduced commission services.

NYC Flat Fee MLS Reason Two: Agents Enforce the Status Quo

The traditional school of thought suggests that although the vast majority of licensed real estate agents don’t close any deals in a given year and price fixing at 5-6% in real estate sales commissions per given sale only benefits a handful of stars, the masses of agents who don’t close deals still protect the status quo because of hope that they could potentially become one of these high earning star agents.

As a result, even though the system they are helping enforce does not benefit them, these young and aspiring agents go out of their way to enforce the status quo by refusing to budge on prices and boycotting discount brokers (i.e. any NYC flat fee MLS company).

This theory has merit because as home prices rise during every economic cycle, the number of licensed real estate agents increase in almost perfect correlation with home prices. Yet, even as the number of agents increases, technology advances and prices rise the typical NYC real estate commission has barely budged.

NYC Flat Fee MLS Reason Three: Lack of an Official NYC Multiple Listing Service (MLS)

An alternative explanation for why NYC flat fee MLS listings are so rare is because NYC doesn’t have an official MLS nor a dominant NAR (National Association of Realtors) affiliated local trade organization in New York City.

While there is a Manhattan Association of Realtors (MANAR) which operates the Manhattan MLS, it is not very popular and many of the major NYC brokerages have refused to join it.

As a result, the dominant trade group and inter-brokerage database is operated by REBNY (Real Estate Board of New York), which is a private NYC based real estate association.

REBNY operates an inter-broker database called RLS (REBNY Listing System) which is purely a back-end database. REBNY residential brokerage members must use an approved “RLS vendor” such as Nestio, OLR, RealPlus or RealtyMX to view and submit listings to RLS. While REBNY membership is open to all brokerages that operate in NYC, it is still subject to a membership review process.

For example, a REBNY application asks for the signatures of two different Principal Brokers of two current REBNY member firms. As you can imagine, part of the reason why NYC flat fee MLS listings are so rare could be because historically, NYC flat fee MLS brokers have had a difficult time being admitted to REBNY. As a result, NYC flat fee MLS brokers are typically unable to list in RLS which is the defacto MLS, or inter-broker database, in NYC.

Another benefit of being in REBNY especially for brokerages with a lot of home buyer clients is that mandatory co-brokerage agreement that must be signed by each member.

Hauseit LLC, Licensed Real Estate Broker
Tel: (888) 494-8258 | https://www.hauseit.com
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