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Sellers, not buyers, should pay brokerage fees: German justice minister

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Sellers, not buyers, should pay brokerage fees: German justice minister
Photo: DPA
11:57 CET+01:00
The SPD has announced a move to tackle rising property prices by requiring sellers to pay agent fees, although not all are convinced by the plan.

From increased demand to dwindling supply, there are a number of underlying reasons for the skyrocketing costs of buying a home in Germany. 

SEE ALSO: Where in Germany it now pays to buy a home instead of renting

While agent fees are in many cases an afterthought for new home buyers - sale prices are advertised without agent fees - they can significantly increase the cost of buying a home. 

In Germany it is customary for buyers to pay agent fees, even where the agent has been organised by the seller. Over 500,000 homes change hands each year, with two-thirds involving a broker. 

Agent fees can be as high as 7.14 percent of the overall price. For an apartment costing €500,000, that works out to an additional €35,700 - with the seller usually organizing the agent as a mere formality.

SEE ALSO: It's not that hard: the beginner's guide to buying a home in Germany

‘Whoever decides to order the broker should pay'

SPD has announced a plan to shift the cost from the buyer to the seller as a means of reducing the overall purchase price. 

Federal Justice Minister Katarina Barley (SPD) said that the goal of the plan was to more evenly spread the burden by requiring whoever organised the agent to pay. 

"Owning a home is becoming increasingly difficult for young people and families to finance, and buyers often have to bear huge brokerage costs, even though the seller has hired the broker," Barley told the Süddeutsche Zeitung.

“Whoever ordered (the agent) should pay”, she said.

Not without precedent

While the idea may seem revolutionary, it is not without precedent in German real estate. 

Since June 1st, 2015, landlords rather than tenants must pay brokerage fees, provided that they have engaged the broker themselves. 

SEE ALSO: Plan emerges to socialise homes across Berlin to tackle rising rents

With rising rents and heightened competition for available apartments also a major concern across the country, the move has reduced the costs associated with renting in Germany - while also discouraging competition among tenants' agents. 

A blow for brokers and sellers but a boon for buyers

The Ministry of Justice estimates a cost of ten percent of sale costs - roughly €600 million - for brokers as part of the plan, while revenues will also decrease as a result of lowered commissions.

For buyers however, the savings are expected to be significant. The Ministry estimates that the plan will save buyers roughly €3 billion should it be completely implemented. 

The Justice Ministry has forwarded the plan to other departments to continue the consultation process.  

Interior Ministry 'unconvinced' by the plan

Marco Wanderwitz (CDU), the Parliamentary State Secretary at the Ministry for the Interior, said that tests completed at a recent summit on housing costs with Chancellor Angela Merkel (CDU) showed the plan was not a convincing way to reduce housing costs. 

"This instrument is unfit and there are many other instruments that would be far more conducive to relieving upward pressures on the costs of home ownership,"  Wanderwitz said. 

Wanderwitz suggested changes to the real estate transfer tax system would be more effective in stabilizing rising house prices. 

SEE ALSO: Buying property as an investment in Germany: Taxes and tenant rights

 
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The Local is not responsible for content posted by users.
Arman Flint - 25 Feb 2019 19:23
So sellers just pass on the brokerage fees in the initial purchase price.

Judge must have been a gender studies major.
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