Broker’s commission, real estate consultancy fees, courtage… It may be known by many names, but one thing is for sure; if you are buying a property in Germany using the services of a real estate consultant, you will most likely be charged a commission. This fee is paid to the real estate consultant for successfully referring the buyer to the property they wish to purchase. How much you will be charged varies from state to state, city to city, and even agent to agent, but in Germany this is, on average, between 3.5% and 7% of the purchase price, plus VAT on top. However, changes are being made to the provision for commission, and it is certainly possible to find commission free apartments in Berlin, and throughout the rest of Germany. This is even becoming increasingly standard in parts of the real estate industry. In this article, we will explain the situation in a little more detail, and tell you what to look out for.
The legal situation
Broker’s commission in Germany is not regulated by law. Rather, the amount and its distribution between buyer and seller has become "naturalised" over the decades, and differs from state to state. The amount of the commission can, in fact, be negotiated (despite what most real estate consultants would have you believe). In some cases, the buyer pays the commission in full, in many others it's split between buyer and seller and in some instances, agents receive their commission exclusively from the seller.
Germany and Europe
In Berlin and Brandenburg, the entire broker’s commission - including VAT - of 7.14% is completely at the expense of the buyer. Similarly, in Hamburg (6.25%), Hesse (5.95%) and Bremen (5.95%) the buyer usually takes over the whole amount of the commission. In most other federal states, such as Thuringia, buyers and sellers usually share the broker's commission equally: each party pays 3.57%.
This may seem more even-handed and equitable, but commission in Germany is often twice as high as in many other European countries. In Austria it is 3-4%; in Belgium or Sweden, commission is 3-5%. In concrete terms, this means that for a property worth €500,000, a real estate consultant in Austria receives between €15,000 and €20,000, plus due taxes. In Germany, on the other hand, a consultant would receive up to €35,000 of the purchase price - not including VAT - for their services.
This commission is partly behind the fact that the number of first-time buyers - i.e. those buying a house or apartment for the first time in their lives - has been declining in Germany for years. Younger buyers in particular are becoming more and more reluctant, simply because they lack the equity they need to buy property, and it is particularly difficult to find commission free apartments in Berlin and other big cities.
This has not gone unnoticed, and rising real estate prices and the associated rise in additional costs has caused this to become a political issue. For the first time ever, the German government wants to regulate the brokerage commission for real estate purchases nationwide. A bill was passed in 2019 agreeing to reorganise the distribution of payment of the commission, and stating who has to pay what proportion. It is hoped that ensuring that the seller has to pay part of the commission will give them a stronger incentive in the future to negotiate the fee down. There are 500,000 real estate sales per year in Germany, with real estate consultants involved in 60% of the deals. It is thought that the reform could save buyers up to €3 billion Euros.
As a general rule, in places where the seller pays the broker’s commission, the rates are lower. In Ireland, for example, a statutory “ordering principle” applies, meaning that the party who “orders” the services of the consultant, is responsible for paying, with the usual commission being between 1% and 2.5% of the purchase price. In the Netherlands, too, the “ordering party” pays, and brokers receive a maximum of 2% of the purchase price as commission.
Other factors are at work as well. In the UK, commission is usually paid by the buyer, yet the average commission is less than 1.5%, and has been falling for several years. A large contributing factor to this is the fact that more and more brokers are working online, lowering their costs and increasing transparency in their work. As more real estate consultancy and transactions in Germany are carried out online, we can expect commission rates to fall there too.
We’ve already said this, but it’s important to state again; the amount of broker’s commission is entirely based on tradition, there are no legal specifications stating how much commission can or should be charged. Because only the purchase price is presented when looking at property, it can be easy to overlook something like a commission for the real estate consultant, at a relatively small 7%. Yet on our hypothetical €500,000 apartment, that 7% is €35,000. If you add the land transfer tax, notary fees and land register costs on top of this, then you’re looking at additional costs of almost €80,000, on top of the purchase price of the property. It is usually difficult to arrange financing for these costs, and you will most likely have to pay these out of your pocket. This makes the commission free apartments in Berlin offered by EverEstate all the more advantageous. Why not take a look at some of our properties and maybe find your new dream home?