How Is a Broker's Commission Impacted if a Co-op Board Requires a Higher Purchase Price?

Nick at Cribfox (https://www.cribfox.com) reveals how a broker's commission is affected if a co-op board requires a higher sale price vs. what's listed in the original purchase contract.

A co-op board generally has the authority to reject a buyer if the board thinks the price is too low. The co-op board wants to protect preserve the values in the building, and sometimes this means that a deal comes across their desk and they just don't like the sound of the sale price. They think it'll devalue other properties in the building. Learn more: https://www.hauseit.com/nyc-co-op-board-reject-buyer-low-sale-price/

We recently had a transaction where the agreed-upon sale price was $495k. The buyer agent commission was 2.5%, which came out to $12,375. However, the co-op board stipulated that the deal would only be approved at a price of $525k. The commission on $525k is $13,125, which is $750 more than the amount based on the original sale price.

The buyer and seller still wanted to move forward, so the lawyers drafted an amendment to the contract to show the new sale price. There are some implications for doing this as outlined in the Hauseit article above. The primary drawback is that the higher contract price results in higher closing costs, such as the Mansion Tax, NYC and NYS Transfer Taxes and the co-op flip tax. The buyer and seller agree on responsibility for these overages, and the seller typically credits the buyer in the amount of the increase in the purchase price.

When the co-op board requires the purchase price to be increased, the broker commission is still calculated based on the original price agreed upon between buyer and seller.

When you send your commission invoice to the lawyers prior to closing, please make sure that it's on the originally negotiated purchase price as shown in the original unamended contract.
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