Bill Ordering Principle – Realtor Broker Commissions

“Who orders, who pays too.” According to this so-called ordering principle is regulated since June 2015, who bears the cost of the broker in the brokerage of a rental apartment. Therefore, the one who has commissioned the broker always has to pay.
Federal Minister of Justice of the SPD presented in February 2019 a bill for the extension of the purchaser principle . In the future, the same regulation should also apply to purchase real estate .

 

In concrete terms – what changes with the bill?

In concrete terms - what changes with the bill?

The law should cause the purchase costs for real estate purchasers to fall. In particular, young families should be relieved when buying a home. In most cases, the buyer pays the costs of a broker, although he works on behalf of the seller. In addition, the buyer must also bear the notary costs and the real estate transfer tax, which may be depending on the residential area between 3.5 and 6.5 percent of the purchase price. According to Reporter, a real competition with fair prices is to be created again with the orderer principle in real estate brokerage.
The bill for the buyer principle therefore provides that in the future the party will pay the broker who commissioned him. So, if the broker is ordered by the seller , he must also pay the brokerage fee . The other way around, of course, the buyer must pay the costs if he has concluded a contract with the broker.

In addition, the bill contains other proposed changes:

  • All brokerage contracts must be issued in writing in the future
  • As seller, the seller negotiates the amount of the brokerage commission – there is no cap
  • Additional costs , such as those charged by the seller for mediation by the broker, are prohibited
  • Violations of the law can be punished with fines

The Institute of German Business in Cologne states that broker commissions have fallen in countries where the ordering principle is already practiced. As sellers bear the costs alone, they compare and negotiate more and choose the cheapest brokerage deal.

Critical voices – disadvantages resulting from the draft law

Critical voices - disadvantages resulting from the draft law

Brokers fear with the extension of the ordering principle high sales losses . But also owner associations or the real estate association IVD criticize the draft of the Minister of Justice. The orderer principle would not exonerate buyers, as the broker commission would be offset by the seller in the future with high probability on the sales price. In addition, the bill was not in the interests of consumer protection , since the advisory service for the real estate purchaser fell away.
But what about the balance sheet of the ordering principle for rental apartments , which has been in force since 2015? According to the Federal Ministry of Justice, landlords have been paying brokerage commissions since their introduction in about 98% of cases. However, many landlords are looking for their own tenants now to save the brokerage fee. This means that some apartments in popular portals are no longer available and it is difficult for prospective tenants to find an apartment. In addition, some landlords try to save the brokerage costs indirectly – for example, higher compensation payments .

 

Brokerage commissions in Germany

Brokerage commissions in Germany

In an international comparison , real estate brokerage commissions in Germany are particularly high . They are unlike commissions for the rental not legally determined and thus freely compatible. The customary commissions here are between 5.95 and 7.14 percent of the purchase price. Berlin, Hamburg, Bremen, Brandenburg and Hesse – here the buyer pays this sum, even if he did not commission the broker. In the remaining federal states, the amount is split between the buyer and the seller, but usually the buyers pay the higher share here as well.
In many of our neighboring countries brokerage commissions are already paid exclusively by the seller as principal, including France, the Netherlands or Switzerland. Some European countries have also set a cap on brokerage costs . This is usually between 2 and 5 percent.

Whether and when the law is actually passed is still unclear and remains to be seen.

Leave Your Comment Here