Broker services constitute a significant portion of real estate expenses
As "Russkaya Germaniya" notes, additional costs when purchasing real estate, in full accordance with German law, usually amount to quite substantial sums: we are talking about the cost of notary services (Notargebühren), registering the buyer's name in the land register (Grundbucheintrag), and paying the property transfer tax (Grunderwerbsteuer), which varies from one federal state to another and can reach 6% of the purchase price.
To these multi-thousand "incidental costs" is often added the broker's commission (Maklercourtage). This is at least 3.57% of the transaction amount, including VAT; in some states, this commission can reach 7.14% of the transaction amount. The buyer must pay the broker the agreed amount immediately after signing the purchase agreement – even though in most cases the seller orders these services.
With an average price of purchased housing equal to 250,000 euros, the buyer has to count on approximately another 25,000 euros in additional costs, with a significant portion being broker services.
In the near future, this situation should change: the Bundestag has made a historic decision to change the principle of paying broker commissions. Starting in 2021, the burden of paying brokers in real estate transactions must be borne equally by the buyer and the seller – if the seller ordered these services. Only after the seller has paid half of the commission, documented, must the buyer contribute their share.
Thus, the common practice of paying broker fees entirely at the buyer's expense will be ended. In Berlin, Brandenburg, Bremen, Hamburg, and Hesse, this practice is even enshrined in state laws; in other federal states, various schemes apply: sometimes de facto the seller and buyer split the broker's fee, sometimes in different shares, but most often in the remaining 11 states, the broker's commission falls on the buyer.
The federal government explains the changes made to the law on real estate transactions and broker fees as a concern for reducing the financial burden on future homeowners.
Interhyp, one of Germany's largest intermediaries providing mortgage financing services, estimates buyers' incidental costs at 9-16% of the property's value, depending on the federal state. For example, in Berlin, the legislative changes will reduce additional costs for future real estate buyers from over 15% to 12%, in Brandenburg from 15.5% to 12%, in Bremen and Hamburg from 13% to 10%, and in Hesse from 14% to 11%.
Interhyp gives the following example: for the state of Berlin, with a transaction amount of 400,000 euros, splitting the broker's fee equally between seller and buyer will allow the latter to save 3.5% – 14,000 euros.
However, the decision adopted by the Bundestag is only half-hearted. Previously, the Ministry of Justice expressed an intention to achieve for purchase transactions the same rules that have been applied for several years in rental housing: the broker's services are paid for by the one who ordered them. The Ministry of Justice did not succeed in fully shifting the broker's commission to the seller; probably, then most purchase transactions on the housing market would take place without a broker at all. Interestingly, the presence of a broker, despite the commission that transaction participants will split in half in the near future, does not automatically mean less favorable conditions for the buyer than in a direct deal.
Immowelt, one of Germany's largest real estate search portals, comparing data on residential real estate offered for sale in 2019 in several large German cities (apartments from 40 to 120 square meters), provides the following data: in 9 out of 11 cities, apartments listed by brokers are cheaper than those offered directly by private sellers, bypassing the intermediary. In Hamburg and Munich, the difference is 4%, in Nuremberg and Leipzig – 11%, in Berlin – 13%, Stuttgart – 14%, in Dortmund it reaches 20%, and in Essen – up to 32%. Only in Cologne and Frankfurt were homes and apartments offered by private sellers cheaper than those put up for sale by brokers – by 7% and 11%, respectively.
"Brokers have sufficient experience to correctly assess the value of the property put up for sale and set a price at which the property will sell quickly enough," explains Immowelt CEO Kai-Nicolas Ziegler. "Private sellers often overestimate their own property."
However, as experts note, in direct deals starting with inflated prices, the seller's concessions can be significantly larger than when a broker is involved and the property is initially correctly valued.