How the mandate principle changes the real estate market

Three years after the reform of the brokerage fees, the so-called “ordering principle” for housing leasing, most of the rental apartments are rented out by hand. This is especially true of people who are new to a prospering city like Munich or Berlin.

The real estate agent advertises apartments, organizes sightseeing, makes leases, settles the apartments and handing over the apartments. But he also advises on legal regulations and framework conditions, checks whether landlords, tenants and residential property match each other.

Until the summer of 2015, this was a good deal for many brokers and landlords. Only the tenant had often disturbed the 2 net cold rent (plus 19% VAT). The salvation was the SPD with the so-called “ordering principle”. The one who should pay the commission, who has commissioned the broker.

Many landlords since renounce to the services of your broker in the rental. Thus, the law has led to the fact that now over 40% of rental apartments are no longer offered to the public. In particular, anyone who moves to Munich or Berlin now finds it harder to find a rental apartment. Instead of hiring a broker, the previous tenant recommends a friend as a rental successor. With partly serious consequences for several landlords. Free rental contract forms on the Internet and tips from colleagues are not always the first choice.
The rental market has become much more intransparent. In addition, fewer people are leaving their homes, as this would entail a considerable increase in rent – partly due to the media-effective discussion about the “rent-price brake”. Landlords who did not previously think they would be burdened by rent increases were now practically invited to do so.

And the rental to lower commissions. The cost of renting a small and cheap apartment is hardly less than for a large noble residence. Brokers who have managed to convince the homeowner of the added value of his service now often do so on much worse terms. Inquiries from brokers to brokers are meaningless. A dedicated broker therefore can not really work for the home seeker.

According to the will of socialists, communists and greens, this “ordering principle” will soon also apply to real estate sales. The purchase costs would hinder the acquisition of real estate, so the argument.
In fact, the purchase costs are high, especially in Berlin. There, 15% is added to most real estate sales for brokers, notaries, courts and real estate transfer tax.
The land transfer tax in 2018 is 3.5% in Bavaria, 6% in Berlin and 6.5% in Brandenburg.
Large brokerages as well as banks and savings banks, which dominate mainly the market for real estate agencies, take in Munich usually 6% commission (plus 19% VAT), each half of buyers and sellers. In Berlin, the buyer usually demands a commission of 6% (plus 19% VAT, ie 7.14%).
Socialists, Communists and Greens want to intervene as quickly as possible.
Of course not, the massively increased land transfer tax is reduced or even abolished, but the brokerage commission.

What are the consequences?

The cost of real estate acquisition will increase even more.
On the one hand, the brokerage market will be dominated even more by banks and savings banks, which are able to make their real estate offerings financially from their own home and make it even easier to set up home savings contracts and other financial products as a condition for brokering. Small companies will be pushed out of the market with the help of the legislature.
It goes without saying that real estate brokerage, as well as food, television and insurance, price the distribution costs and are ultimately paid by the end user. Your tailor also takes clothes for cleaning? Then you pay his commission and certainly at least 10%. As part of the purchase price of a property, however, a real estate transfer tax will be payable in future on the commission paid in, including VAT, a tax on the tax.
Higher purchase prices will not find acceptance? The banks will not give up their commission income, not in the least. As these institutions dominate the brokerage market, real estate prices will inevitably rise, and so will the tax revenues of the countries. Genial social.

The market is becoming more intransparent, but not as much as lettings. Hardly any tenant will want to find a new owner for the apartment he lives in, as often happens when recommending a new tenant. However, owners wishing to do without the work of a broker, distinct from professional marketing, will notice (too late) that the offer price has been set too high or too low. There are also professional investors who know how to impress and thus get their bargains. Also, the extensive documents that are available to provide a challenge for the not so experienced seller, which can lead to delays and thus to financial losses. Even to the detriment of the buyer, who might want to move in quickly and therefore otherwise oriented – but perhaps also finds this delay for him more suitable object. Flexible viewing appointments, individual appointments, interested parties who do not appear to the appointment, are late? Brokerage for the benefit of seller and buyer.

If brokers are forbidden to take commission from the buyer, there will be a longer period for the property owner to try to sell himself. Due to the low interest rates, the demand for real estate has risen sharply since 2008, while at the same time the supply has fallen massively due to a lack of alternative investment opportunities. It is already very difficult for brokers in Munich and Berlin to find property owners willing to sell, even without the cost of this all-round service.
The cost of office rent, staff, training, software, real estate scout24 & Co. are simply too high to be covered by rapidly declining business revenues.
Insolvency of small brokerage firms and layoffs of their employees will hardly outrage anyone who is not themselves affected. That is completely understandable, but not social.

Through innovation, flexibility and decades of experience we are armed against this politically populist market intervention.