In May 2020, the Bundestag decided for a reform of the real estate commission. This is to take effect already at the end of 2020. The aim of the change in the law is to relieve the burden on the real estate buyer by reducing the purchase costs.
- The status quo before 23.12.2020
- What does this new law on real estate commission mean?
- Does it make sense to wait to buy?
- Is this law good for me as a new homebuyer?
- For which type of property does the new law apply?
- When will the new law on real estate commission come into force?
- Are there any exceptions to the new regulation?
- A brokerage contract requires the written form
In this article, we explain what you need to know about the law and what it means for your real estate purchase.
The status quo before 23.12.2020
Up to now, it was in the hands of the states to decide who has to pay the real estate agent and to what extent. There wasn't a standardized structure for Germany.
In Berlin, Brandenburg, Hamburg, Bremen as well as Hessen the real estate buyer had to carry the real estate commission alone. As a result, in some states, the purchase costs were more than 15 percent of the purchase price.
This is now to change thanks to the “Gesetz über die Verteilung der Maklerkosten bei der Vermittlung von Kaufverträgen über Wohnungen und Einfamilienhäuser” (§§ 656a to 656d BGB). Find out what impact that has on buyers and the home buying budget in our new study about home affordability in Germany.
What does this new law on real estate commission mean?
In short, the new law regulates the distribution of the costs of the real estate commission.
From 24.12.2020, it will no longer be possible in Germany that the buyer has to bear the real estate commission on their own. Even today, the real estate broker is already active for both seller and buyer - this should now also be uniformly reflected in the distribution of costs nationwide. With the new law, both parties pay the real estate commission in equal parts - the fee is thus divided by two.
If the real estate agent waives the costs for one party, he cannot demand a commission from the other party either. The agent can therefore not work for one party for free and demand a commission from the other party. Such agreements are illegal. To ensure this, the seller has to prove first that he has paid his share before the other party is asked to pay.
Does it make sense to wait to buy?
In our opinion, the law will likely result in an increase in property prices across states like Berlin, equivalent to the share of 3.57% that the seller has to pay.
If the seller is now expected to pay for the real estate broker, we may see a shift to more private sales, but we expect the shift to be moderate. Instead, we expect properties that are sold through a real estate broker to be sold at a higher price so that the seller indirectly charges the buyer anyway.
Is this law good for me as a new homebuyer?
In general, yes. This law distributes the cost of the real estate broker, which in Germany is extremely significant already. As a borrow, when buying a home, you are almost always expected to cover the additional purchase costs with your savings. When the purchase fees are less, you will be able to afford a higher property price.
To see what you can afford, you can use our affordability calculator.
For which type of property does the new law apply?
The new law applies to both single-family homes and apartments.
When will the new law on real estate commission come into force?
The new distribution of the real estate commission will come into force on 23 December 2020.
This means: For all purchase contracts concluded after 23.12.2020, the real estate commission will be paid equally by seller and buyer. This also applies if the contract for selling the property between the owner and the agent was concluded before 23.12.2020.
Are there any exceptions to the new regulation?
The new law on the distribution of commission protects the home buyer. Therefore, the seller and owner always pay at least 50 percent of the real estate commission. An imbalance at the expense of the buyer is not possible. However, the seller can suggest that he/she pays the agent's commission alone. In this case, the buyer will not incur any costs at all.
There is an exception if the buyer is not acting as a consumer or natural person. As soon as the buyer has the status of a legal entity (joint-stock company, limited partnership, limited liability company), the old rules continue to apply. In this case, it is still possible - depending on the state - that the buyer bears the commission alone.
A brokerage contract requires the written form
The new law also stipulates that a brokerage agreement must exist in writing. Both an email to instruct the real estate agent and a written document are accepted. Oral agreements and a contract by handshake are no longer valid.