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Clarity at last – the broker’s commission is being reorganized

From December 23, 2020, the law on the distribution of brokerage costs when brokering purchase contracts for apartments and single-family houses will come into force.

Michael Reiss, Managing Director Munich / Sotheby’s International Realty and Sven Johns, Mosler & Partner Rechtsanwälte answer the most important questions about the law and clear up misunderstandings.

What is the most important aspect of the new law for buyers and sellers?

Sven Johns: If a real estate agent works for both contractual partners, both must also undertake to pay a commission of the same amount in the future. The buyer always only pays what the seller pays. The broker is strictly committed to neutrality in this process.

What is the relationship between the broker and his customers in this case?

Sven Johns: He has identical obligations to both parties – the same fiduciary duties, the same disclosure duties. He is then strictly neutral in the purchase price negotiations. He only accepts the purchase price offers of the respective side and communicates them.

Did this also go down well with customers?

Michael Reiss: I don’t think so. Many think that the so-called ordering principle now applies in principle. The legislator introduced this in tenancy law six years ago. Since then, apartment seekers no longer have to pay a commission if the owner of the apartment orders the brokerage service and the latter then advertises it to the outside world. That’s just not the case with sales. Although the agent receives the marketing order from the owner, the seller and buyer still pay the same commission in the future.

How should the law be evaluated from a broker's point of view?

Michael Reiss: It is positive that there is now clarity for both sides. This gives security and a feeling of fairness.

How can the buyer control that the commission is actually shared?

Sven Johns: In the future, every brokerage contract must be in text form. Verbal agreements no longer justify a brokerage contract. The broker must now disclose what he has agreed with the seller. If he violates this obligation or has agreed something else, this can be a reason for forfeiting the commission or the agreements are ineffective.

Does the law also regulate the amount of the brokerage fee uniformly?

Sven Johns: No, the upper limit is still freely negotiable and not fixed. And of course every seller can negotiate the commission individually with the broker. But then it always applies that the buyer pays the same commission. Internet service providers in particular will probably now offer their services at different prices. Only the advertising statement – “Commission-free for the seller” – is no longer possible.
Michael Reiss: In Bavaria, we will continue to work with three percent plus VAT for buyers and sellers. This gives our customers clarity. I am convinced that this sentence is appropriate given our service and the benefit it brings to our customers.

Will this then lead to a re-evaluation of broker services?

Michael Reiss: I hope so. Only in Germany is the brokerage profession not regulated and only a low level of qualification is required. In the future, buyers and sellers will take a closer look at the training and quality of brokers. Our service goes far beyond the examination and preparation of the documents. The international network is crucial, especially for high-priced properties. Do I know the right customers? Can the sale be done discreetly? And does the broker recognize the development potential of a property, which then makes it interesting for new target groups? Our customers appreciate our diligent, highly professional, discreet and above all target-oriented way of working, so that a fair brokerage fee is not a problem for our customers. High-quality service is gladly paid.

Does the new law apply to all transactions or are there exceptions?

Sven Johns: It only applies if the buyer is acting as a consumer and not in the context of a commercial activity. And it only includes the sale of single-family homes (including those with attached apartments) and condos. In the case of apartment buildings, building plots and commercial real estate, it is also possible for the agent to conclude a different contract with the seller than the buyer.

What happens if the seller or buyer wants the broker to act solely in their interest and not remain neutral?

Sven Johns: Then you can of course continue to commission the broker unilaterally. As the seller’s representative, the latter will then agree on a purely internal commission – or, as part of a search order from the buyer, a purely external commission with the latter. In these cases, the commission is paid solely by the party who commissioned the broker.
Michael Reiss: Many customers choose this variant precisely because they can use our know-how optimally – also in the purchase price negotiation. For salespeople, for example, the time aspect often plays a role. You would like us to estimate the marketing duration in relation to the asking price. And it is important for buyers to be the first to be offered suitable properties.

The interview was conducted by Klaus Meitinger / Private Wealth Magazine

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