When you use an agent to sell a property, you hope to close the deal as quickly as possible and at the discounted price. The operation also involves a commission intended to remunerate this service. What are the regulations regarding estate agent fees? How are these fees calculated? Who of the buyer or the seller must pay them? Are they negotiable?
What does the law say about estate agent fees?
In France, the real estate profession is regulated by the Hoguet law of January 2, 1970 . This basic legislative framework governs the conditions for carrying out activities related to operations relating to buildings and businesses: property rental, rental management, and transactions.
This law regulates the real estate professions such as the real estate agent, the administrator of properties or the real estate agent, obliging them in particular to take out professional civil liability insurance and to have sufficient financial security.
It also specifies that the real estate agent must be able to justify a mandate , a bilateral contract signed between the owner and the intermediary which constitutes the first stage of the future transaction. The professional can thus put the property on the market and find buyers in his place.
This document formalizes the relationship between the seller and his real estate agent ; it contains all the essential details for the sale, such as the asking price, the type of mandate (exclusive, simple, semi-exclusive), as well as the agency fees.
1 – Agency fees in the event of a real estate sale are free
These agency fees remunerate the agent in exchange for his services, which range from writing the ad to signing the deed of sale. They are only due in the event of an effective real estate sale, once the authentic deed has been signed at the notary.
Please note: agency fees should not be confused with transfer fees, generally called notary fees , which essentially include duties and taxes imposed by the State. The mandate itself does not entail any remuneration. The amount of the agency fees is clearly specified there, whether they are percentage or flat rate.
Unlike notary fees, the regulations do not regulate real estate agency fees during a sale , their fixing is free, the obligation relates only to their display. Only the costs related to a rental are subject to a ceiling by the Alur law (between €8 and €12 per habitable square meter depending on the location). In the legal jargon, we speak of fees and not of commissions.
2 – The display of agency fees
Since April 1, 2017, the Alur law has specified the terms and conditions for displaying real estate advertisements , regardless of the service concerned (sale and rental). A salutary transparency operation for consumers who can finally see more clearly about prices and the share going to intermediaries.
On all media, both physical and digital, the agency must indicate the price scale of its services (sales mandate, search for , management of rental properties). In the case of a real estate sale, the regulations require that the following information appear on any advertisement:
The sale price of the property including fees (Agency Fees Included or HAI) and excluding fees (net selling price), the first price must be entered in larger characters than the second;
The person responsible for paying the fees of the intermediary (seller or buyer);
The amount including tax of the real estate agent’s fees , expressed as a percentage of the value of the property excluding fees.
How to calculate the commission of a real estate agent?
When we talk about agency fees, we immediately think of the commission paid to the mandated real estate agent. However, these costs have a dual function: to remunerate the professional who takes care of the sale, but also to support the real estate agency.
The fees, since they must be named as such, will therefore contribute to paying the current expenses of the agency, including the salaries of the employees and the significant fixed costs because the agency very often depends on a franchised network, and the remuneration the professional in charge of the sale (expertise, visit, negotiation, signature at the notary).
Agency fees are very variable and represent between 3% and 10% of the price of the property , the national average being around 5%. The scale of fees is often decreasing : the percentage applied will be all the lower as the expected selling price is high.
For a property sold at €250,000 net seller with 5% fees, the HAI amount will be displayed at €262,500. The real estate agent will receive between 7% and 30% of the €12,500 in fees paid to the agency.
Who pays the agency fees when buying real estate?
The real estate agency will only receive its fees once the sale has been finalized via the notarial deed. In general, it is up to the seller to pay the agency fees , which seems logical since it is he who seeks the services of a professional to help him sell his property. But the two other scenarios are possible as long as they are stipulated in the mandate:
Fees payable by the buyer
Sharing of costs between seller and buyer.
If the agency fees are the responsibility of the buyer, the ad must clearly state this. Whether the fees are paid by the seller or the buyer, the seller will always receive the same net selling amount. On the other hand, the acquisition costs for the buyer will not be the same.
If the agency fees are the responsibility of the seller, the notary fees will be calculated on the HAI sale price (agency fees included). The calculation basis is therefore greater. If the buyer bears the remuneration of the agency, the notary fees will be calculated on the net seller amount.
Let’s take the example of an apartment sold for €250,000, with €15,000 agency fees and 8% notary fees (€20,000):
The seller bears the agency fees:
The buyer bears the agency fees:
the buyer pays €250,000 to the seller, €15,000 to the agency and €20,000 to the notary. He will have saved €1,200 in acquisition costs.
In both cases, the seller receives the same amount for the sale of his property. Generally, agency fees are the responsibility of the seller, more rarely the responsibility of the buyer, except in Brittany by tradition. Sharing costs between seller and buyer is rare in France.
Agency fees represent a significant cost, mainly for the seller, even if there is no obligation in this regard.