29 Mar Understanding Real Estate Agent fees Germany and How to Save Money on This
Understanding Real Estate Agent fees Germany and How to Save Money on This!
On the Berlin (and German) housing market, investors and residents’ demand has been steadily increasing over the past 10 years. The main explanations behind this are growth in both population and numbers of households due to the increased attractiveness of the city. In addition, the economic performance is improving in the capital of Germany. Thus the purchasing power is increasing.
The purchases prices for an apartment in the center of Berlin are still “moderate” compared to London, Paris or New York. The positive expectations for the city and low interest rates make Berlin an attractive place for an investment. Still buying property is expensive so I suppose this is why this expat complained so bitterly about it. Too bad he hadn’t bought my book
Who are the different actors on the market and what are their roles.
Real Estate Agencies :
Real Estate Agencies or Maklers are necessary and exspensive middle-men in the Berlin and German market as direct transactions between private owners are somewhat rare. It should be noted that there is a difference between Berlin and the rest of Germany. The local culture & market conditions hasn’t led to a lot of small private owners but rather to several big-scale property management companies. Thus the culture to do deals between small private persons is not mainstream when it comes to buy an apartment in Berlin. When you move into the smaller towns and cities you’ll mostly see only local agents. Note: for Americans and Canadians used to an MLS (multi listing service) where one agent can sell another agents property this tends not exist here. Instead what you have are sites like immobilienscout24 where agents can list properties. Warning, if you do hire an agent to search for property could get stuck paying 2 commissions, tread carefully here. There is discussion of moving to an American model of having the owner pay the commission but at this point it’s still just that, an idea.
Steuerberater / Tax Consultant
As I talk about in my book The Complete Guide to German Property Investment a Steuerberater is an investors best friend, you want them involved early on in the process especially when it comes to setting the depreciation value of your property, after all it’s free money. A tax consultant can help you find the best system so, depending on your case, there are as little costs as possible owning or renting out the flat. They can often help you grasp you a better picture of what the total cost of ownership could be. Many variables come into the deal so it could be a good idea to spend a bit of money on a tax consultant to potentially save thousands in the future. It’s not a necessary to involve a tax consultant but it’s advised if you’re buying an investment property.
Anwalt / Lawyer
Lawyers are not necessarily involved in the process of buying an apartment in Berlin either but they can be helpful to draft a sales contract or even pre-sales agreement. Just as a tax consultant, they can also guide you through the different technicalities of owning and optimizing the costs of a flat. Some Steuerberater have a lawyers’ practice they work with, or even have one internally. In addition to analyze the contract, they can also represent the buyer at the notary. This is often the case if the buyer is not living in Germany or does not speak German. So a perfection option especially for investors as they have to come only once for selection the flat. The notary has to check if all parties involved understand the contract when he reads it in front of all parties involved. If a person who does not speak German wants to buy an apartment in Berlin without a lawyer an interpret has to be a the appointment at the notary.
Notar / Notary
In opposition to some countries, notaries in Germany don’t have a advisory role during the transaction. They stay neutral and are purely there to execute and make the transaction visible & official to the eye of the German state. They also make sure that all documents are valid and make sure the owners names are entered correctly in the land registry. Their fee depend on the value of the property. Don’t expect to understand any of their administrative German while making their deed, it’s purely formal that they enunciate orally all elements of the transaction and the contract.
Hausverwaltung / Property Management
While not directly involved in the process of buying a property the Hausverwaltung are the people who manage the building. In the US we would normally refer to them as the Condominium Management company. They are a valuable contact to have as they often provide all the documents (annual meeting minutes, previous years invoices etc) to prospective buyers. Those documents can give you good insight into how well the building is being managed. Most of the time however, the agency representing the seller has gathered those documents for the buyer already.
Here are 6 ways to save on the Makler commissions.
The biggest negative to buying in Germany is the cost. Not just the taxes (usually 6%) but also having to pay the commission which is another 6%. Now one point I should make before I start is the idea that the buyer not the seller should pay the commission is not set in law but is a cultural thing. Everything can be negotiated so you can insist on the seller paying the commission. Of course this works better in a buyers market rather than a sellers market.
Search for Provisionsfrei or commission free on google. Not surprisingly considering how the commission can add tens of thousands to the cost of buying a place websites promoting commission free properties are doing a booming business. Of course the commission is on top of the taxes and fees you already have to pay. There’s no getting around taxes!
“He who pays the piper calls the tune”
As mentioned when it comes to real estate transactions everything is negotiable, including who pays the commission. There is nothing in the law that says the buyer must pay or how much they should pay. If the buyer wants the sale they can pay the commission, or alternatively lower the price by the commission amount. It’s important to understand that this works best in a buyers or balanced market. Once a market tips over to a sellers market it becomes much hard to negotiate. It seems that the Germans are learning from the Canadians. Offer a short window for all interested parties and offers must be presented on the spot. Well this is mostly happening in the rental market (in Berlin or Munich) but it is starting to carry over into the property market. I’ve talked to several buyers who all said they had to move at (for the Germans) lighting speed to get an offer in. In this situation it is very difficult to negotiate and doing such will probably mean you’ll lose out on a great deal.
Bring competing bids. This works best when you’re in a quieter market and you’ve found several units that are of interest to you. You simply tell the agent or the owner that you have several other properties and you want either a 5% reduction or the seller to pay. Now before doing this I’d suggest discussing this with the Makler (if the owner is using one) first. If they are an older German they might consider this to be too uncooth. On the other hand unless the property sells he won’t make any money.
Update: the market especially around Frankfurt is not only hot but there is extremely limited supply. Everyone I talk to says that it is really hard to find anything, much less anything decent. So in this case it’s best to go with your best offer. Now this, again, is another example of how the German property market is different from markets. Inspite of it being a hot market even agents are struggling as now one is selling. It’s again one of the strange quirks of the German property market
Tip: Create alerts on Immobilien Scout, Immonet & Immowelt to get the latest offers. Simply create an account on Immowelt, Immonet & on Immobilien Scout), set search criteria to get alerts by emails as soon as a property matches your requirements. This way, you are sure to put a foot in the door early.
An Englishman’s Home Is His Castle
You rarely or ever hear a German comment that rent is paying the landlords mortgage but to those of us in the English world, the thought of paying rent horrifies us. But in Germany there is no shame in renting, a matter of fact it’s quite normal. In the first article I linked to, the person paid, probably, 120,000€ just in fees, and that’s before you even get to the downpayment. That sum of money might buy a decent rental property elsewhere. As I mention in my book, The Complete Guide to German Property Investment, in expensive markets like Munich it might be better to rent and buy an investment property elsewhere.
Get an appraiser (Gutachter). I’m surprised this isn’t used more but a seller and especially a German seller probably won’t listen to you if you tell them the property is overpriced but a report from a Gutachter will go a long long way! A Gutachter or appraiser is a neutral party whose job it is to establish a fair value for a property.
Buy off plan. Generally speaking new builds or off plan properties the real estate commission is paid by the builder. Unfortunately you still have to pay the taxes, there is no getting around this one!