On 14 May 2020, the German Bundestag debated and passed the law on the ‘Distribution of Brokerage Fees in the Procurement of Sales Contracts for Flats and Single-family Houses’. The law was confirmed by the German Bundesrat and published in the German Federal Law Gazette on 23 June 2020. The law became legally effective upon promulgation in the German Federal Law Gazette and will enter into force six months later, i.e. on 23 December 2020.
The law marks the first time payment for brokerage services is regulated nationwide. This means that brokerage costs will usually be split 50/50 between buyer and seller.
In Berlin, Brandenburg, Hamburg, Bremen and Hesse in particular, the law will lead to changes since 100% of commissions have been paid by buyers until now. There has been no legal provision until now and it has been common practice in Berlin in particular to charge the buyer what is known as an external commission of 7.14% of the purchase price.
What’s the idea behind the law and what does it mean for buyers?
To buy a property, you have to pay additional purchase costs in addition to the purchase price for the property.
In Berlin, these ancillary purchase costs currently total around 14.5% of the purchase price. As a rule, these costs cannot be financed and must be paid for with equity. This law was developed to reduce these additional purchase costs. This means that ancillary purchase costs in Berlin can be broken down as follows:
- 6% tax on the transfer of land
- 57% brokerage fees (incl. 19% VAT)
- 1.5% to 2% notary and court fees (depending on additional fees)
Unfortunately, it is probably out of the question for legislators to decide to reduce the land transfer tax.
What will the rules look like in future?
For all sales contracts concluded after 23 December 2020, the provisions of the new law will apply.
The law on the ‘Distribution of Brokerage Fees in the Procurement of Sales Contracts for Flats and Single-family Houses’ (purchaser principle) consists of the following:
- All contracts between brokers and buyers/sellers must be in writing.
- As soon as a broker begins acting on behalf of a buyer and a seller, both parties have concluded a brokerage agreement with them and the broker mediates a purchase agreement, the brokerage fee is payable by both parties at 50% each.
- Of course, the possibility of a 100% internal commission always remains.
The law applies to all property that serves as a living space. Commercial properties and residential properties with multiple units are excluded.
What does the purchaser principle mean for sellers?
Beginning on 23 December 2020, all sellers nationwide will have to pay at least 50% of the brokerage fee to be paid. This will make the sellers pay even more attention to the broker’s performance, i.e. us as your estate agent in Berlin. This will lead to market consolidation.
Why should you seek advice?
Property represents considerable value and in most cases is not just a flat or a house. After all, property is also an investment or even a retirement plan. The value of a property alone makes it necessary to have a good advisor at your side. Whether you’re buying or selling. But when it comes to sales, many mistakes can be made that can reduce possible profit.
The purchase price
It is extremely important to correctly assess the value of a property. This is because a property whose value has been incorrectly assessed can lead to losses.
Too high a price leads to an extended selling period and a high level of awareness among interested parties. However, this awareness means that a property will generally need to be reduced in price in order to reach new prospective buyers. This may result in the desired purchase price not being attainable. The result is a downward spiral.
A lower purchase price results in high demand with many interested parties wanting to buy your property. Negotiations and discussions conducted professionally with all interested parties can result in an upward spiral since demand determines what you will be offered.
No matter what strategy you want to implement as a seller, professional marketing is of critical importance. A professional synopsis, high-quality photos, a 360° tour, advice on any necessary renovations, credit checks on prospective buyers, property viewings, advice on the purchase contract and, above all, checking all the necessary documents are just a few of the most important services we at ADEN Immobilien offer every customer.
Estate agents in Berlin from 2021 onwards
At ADEN Immobilien, we welcome these changes to the law. We have always acted as an intermediary between, or consultants for, buyers and sellers. The law reflects our business and our understanding of what estate agents in Berlin do.
We are happy to assist you in the sale of your property.
ADEN Immo GmbH
Brandenburgische Str. 32
10707 Berlin, Germany
Tel.: +49 (0)30 61 67 51 15