Broker's commission

Broker’s Commission - The broker’s commission (also known as a brokerage fee) is the fee that a real estate broker receives for successfully brokering a purchase or lease agreement. It is payable only upon successful completion of the transaction-that is, only when a purchase or lease agreement is actually concluded as a result of the broker’s referral or brokerage services.

Legal Regulation Since December 2020

With the Act on the Allocation of Brokerage Fees in the Brokerage of Purchase Agreements for Apartments and Single-Family Homes, the legislature fundamentally revised the rules governing the allocation of commissions for the purchase of residential real estate effective December 23, 2020. The key provisions are found in Sections 656a through 656d of the German Civil Code (BGB).

The core principle: If the seller engages the real estate agent, they may no longer pass on the entire commission to the buyer. If a double commission is agreed upon-that is, a commission from both the buyer and the seller-the buyer’s commission must not exceed the seller’s commission. Furthermore, the buyer’s commission is only due once the seller has demonstrably paid their share. A pure buyer’s commission without a seller’s share is no longer permitted for residential real estate.

For rental apartments, the “principle of the party commissioning the agent” has applied since 2015: The commission is paid by the party who commissioned the real estate agent. In practice, this means that the landlord bears the broker’s commission if they have placed the order.

Commission Rates in Practice

The amount of the broker’s commission is not set by law but is subject to free agreement. However, market-standard rates have become established, which vary by region.

When purchasing real estate, the standard total commission in Bavaria is 7.14 percent of the purchase price including VAT, which is split equally-that is, 3.57 percent for the buyer and 3.57 percent for the seller. In other federal states such as North Rhine-Westphalia or Hesse, total commissions of 7.14 percent are also common. In Berlin and Hamburg, the total commission used to be up to 7.14 percent, which was borne entirely by the buyer-this has not been possible since 2020.

For rental transactions, the maximum permissible commission is two net base rents plus VAT, i.e., 2.38 gross base rents.

The real estate agent’s commission is always a gross amount including the statutory value-added tax of 19 percent. The commission becomes due upon the conclusion of the brokered contract and is generally payable immediately.

Tax Treatment of the Brokerage Commission

The tax treatment depends on the use of the property. For owner-occupied properties, the brokerage commission is not directly deductible for either the buyer or the seller. For rental properties, the buyer’s commission counts as incidental acquisition costs and increases the depreciation base. The seller’s commission can reduce the taxable profit as a disposal cost if the sale occurs within the speculation period (10 years).

For landlords who are re-renting a rental apartment and hire a real estate agent, the commission is immediately deductible as income-related expenses against rental income (§ 9 EStG). This applies both to the commission that the landlord must pay anyway under the buyer-pays principle and to any additional marketing costs.

Practical Tip for Property Owners in Nuremberg and Franconia

In the Nuremberg metropolitan region, the model of splitting the commission 50/50 with a total commission of 7.14 percent has become the standard. We recommend that sellers carefully review the brokerage contract before signing-particularly with regard to the term, the notice periods, and whether an exclusive listing or a standard brokerage agreement is being agreed upon.

A qualified exclusive listing with a clear scope of services provides planning security for both parties: The agent invests in professional marketing (property description, photography, viewings), and the owner receives the agent’s full attention. We’d be happy to advise you on which contract model is the best choice for your situation.

Frequently Asked Questions

When do I, as a buyer, have to pay the agent’s commission?

The buyer’s commission is only due once two conditions are met: First, the notarized purchase agreement must have been signed, and second, the seller must have demonstrably paid their share of the commission to the agent. Only after the agent has provided this proof must you, as the buyer, pay your share.

Can the real estate agent’s commission be negotiated?

In principle, yes, because the commission amount is subject to free agreement. In practice, however, market rates are relatively firmly established, so there is room for negotiation primarily with high-priced properties. It is important to note that, as of December 2020, any commission agreement for residential real estate must be in writing-a verbal agreement is no longer sufficient.

Can I deduct the real estate agent’s commission from my taxes?

For owner-occupied residential property, the real estate agent’s commission is not tax-deductible. When purchasing a rental property, the buyer’s commission counts as incidental acquisition costs and increases the depreciation base, meaning it is depreciated over the property’s useful life. When renting out a property, landlords can claim the brokerage commission paid as business expenses against income from renting and leasing.

What happens if the purchase contract is rescinded after the brokerage commission has been paid?

In principle, the broker’s claim to the commission remains valid, as they have provided their service (finding a contracting party). In practice, many brokers waive the commission or defer it in cases of rescission that are demonstrably not their fault. A repayment clause in the brokerage agreement is possible but not standard-check the agreement for such provisions before signing.

What is the difference between a qualified exclusive listing and a standard brokerage agreement?

In practice, a distinction is often made between a standard brokerage agreement and a qualified exclusive listing. With a standard brokerage agreement, the owner may simultaneously engage other agents or find buyers on their own. A qualified exclusive listing obligates the agent to market the property actively and professionally (photos, property description, showings, price negotiations), and obligates the owner not to hire other agents during the agreed term and to forward any incoming inquiries to the appointed agent. The exclusive agency agreement is generally more advantageous for sellers because the agent is willing to invest significant marketing costs. In the Nuremberg metropolitan area, exclusive agency agreements with a term of three to six months are the standard. We recommend carefully reviewing the contract term, the services included, and the provisions regarding early termination, and setting these out in writing.

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