Commission Split

Commission Split - The commission split refers to the 50-50 division of the real estate agent’s commission between the buyer and seller when purchasing residential real estate, as required by law since December 23, 2020. The regulation is enshrined in Sections 656a through 656d of the German Civil Code (BGB) and put an end to the previously regionally varying practice in which, in many federal states, the buyer had to bear the entire commission alone.

Legal Basis and How It Works

The law on the distribution of brokerage fees for the brokerage of purchase agreements for apartments and single-family homes came into effect at the end of 2020 and has a clear goal: to reduce the incidental purchase costs for buyers of residential real estate in order to make the purchase of real estate-especially for owner-occupancy-more affordable.

An overview of the key provisions: According to Section 656c of the German Civil Code (BGB), in cases of dual agency (where the broker acts for both the buyer and the seller), both parties bear the commission in equal shares. Any agreement to the contrary that places a greater burden on one party is invalid. Under Section 656d of the German Civil Code (BGB), the initial client (typically the seller who first engaged the real estate agent) may pass on a portion of their commission to the other party-but no more than half. The initial client therefore always pays at least 50 percent of the total commission. Furthermore, the commission claim against the other party does not become due until the original client has demonstrably paid their share.

According to § 656a BGB, the agreement regarding the broker’s commission must be in written form-a verbal brokerage contract for residential real estate is invalid. An email or message suffices; notarization is not required.

Important: The commission split applies exclusively to purchase agreements for apartments and single-family homes when the buyer is a consumer. It does not apply to commercial real estate, multi-family homes (three or more residential units, provided sold as a whole), undeveloped land, or rentals. For rental apartments, the “buyer-pays” principle (§ 2 (1a) WoVermRG), in effect since 2015, applies instead.

Standard Commission Rates in Bavaria and Franconia

In Bavaria, the 50-50 commission split had already established itself as the market standard even before the new legal regulations. The standard total commission is 7.14 percent of the purchase price (gross, including 19 percent VAT), divided into 3.57 percent for the buyer and 3.57 percent for the seller. This places Bavaria in the upper range compared to the rest of Germany-in some states, total commissions of 5.95 percent are common.

The commission is generally negotiable-the law only stipulates the split, not the amount. In practice, the commission amount can be negotiated, particularly for high-priced properties or in market situations with high supply. Please note that the real estate agent’s commission is not considered part of the acquisition costs for tax purposes if the property is owner-occupied and is therefore not tax-deductible. For rented properties, the commission can be accounted for as incidental acquisition costs through depreciation.

Practical Tip for Nuremberg and the Metropolitan Region

In the Nuremberg metropolitan region, the standard market commission is 3.57 percent per party. We recommend that both buyers and sellers carefully review the commission agreement before signing the brokerage contract. In particular, it should be clearly stipulated whether the broker is acting as a dual agent or has been exclusively commissioned by one party-as this determines which legal provision (§ 656c or § 656d BGB) applies.

Sellers in Nuremberg should note that the commission can only be collected from the buyer once the seller has demonstrably paid their own share. We therefore advise paying your own share of the commission promptly after the purchase agreement has been notarized, so that the real estate agent can also settle the buyer’s side and the transaction proceeds smoothly.

Frequently Asked Questions

Can the seller cover the entire real estate agent’s commission for the buyer?

Yes, this is permitted. The law only protects the buyer from paying more than half-not the seller. The seller may therefore voluntarily cover the entire commission, for example, to make the property more attractive to buyers and achieve a higher purchase price. However, an agreement in which the buyer pays more than half of the total commission is invalid.

Does the commission split also apply when purchasing a multi-family home?

That depends on the type of property and the buyer. Sections 656a through 656d of the German Civil Code (BGB) apply only to the purchase of apartments and single-family homes if the buyer is a consumer. When purchasing an entire multi-family home (three or more residential units) or when the purchase is made by a commercial investor, the commission split does not apply-in these cases, the commission can be freely agreed upon between the parties. The purchase of a single condominium unit within a multi-family home, however, falls under the new regulation.

What happens if there is no written brokerage agreement?

Since December 2020, a brokerage agreement for the sale of apartments and single-family homes must be in writing (Section 656a of the German Civil Code). A brokerage agreement concluded solely verbally or through conclusive conduct is invalid as to form-in this case, the broker has no claim to a commission, even if they have successfully brokered the property. We recommend that both buyers and sellers insist on a written or email-documented commission agreement before working with a broker.

Is the real estate agent’s commission tax-deductible when purchasing a property?

When purchasing a owner-occupied property, the real estate agent’s commission is not tax-deductible-it is classified as a private incidental purchase cost. The situation is different for rental properties: Here, the commission is classified as an incidental purchase cost, increases the tax base for depreciation (AfA), and thus results in long-term tax savings. With a purchase price of 400,000 euros and a commission of 3.57 percent on the buyer’s side (approximately 14,280 euros), the depreciable portion of the building increases accordingly. With a marginal tax rate of 42 percent and a useful life of 50 years, this results in an annual tax savings of around 120 euros-amounting to nearly 6,000 euros over the entire useful life. Investors in the Nuremberg metropolitan region should therefore document the commission separately as incidental acquisition costs in the purchase agreement and include it in the return calculation.

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