How not to make a mistake when calculating real estate agency fees?
When considering investing in real estate, it is crucial to factor in real estate agency fees into your budget. The agency fee is paid by the seller at the end of the transaction and represents the fees for the services rendered by the real estate agency. Their amount varies according to several criteria, such as the location and size of the property, as well as the services provided by the agency. However, it is possible to estimate real estate agency fees using a few key elements. In this article, we will examine in detail the factors that influence the amount of real estate agency fees and how to calculate them accurately.
Real estate agency fees: definition and usefulness
Agency fees: kézako?
Agency fees apply to any real estate purchase, as soon as a professional acts as an intermediary between the seller and the buyer. They represent the agency's fees for the service rendered. This remuneration allows him to pay his expenses. These include the fixed costs added to the service of the agent who has made a sale or signed a rental contract.
The origin of agency fees
Agency fees cover, among other things:
- Travel ;
- Organization of housing visits;
- Drafting of leases ;
- Monitoring ;
In the case of a real estate transaction, the role of the agency is twofold:
- Guarantee the seller to find a buyer more quickly at the expected price;
- Facilitate the deed to the purchaser by accompanying him until the signature at the notary.
In return, the agency thus grants itself a commission on the amount of the sale.
Agency fees are essential to cover the expenses of your real estate agent. There are different ways to calculate them.
How are agency fees set?
The real estate agency fees are an important charge to take into account when buying or renting a property. They are usually calculated as a percentage of the sale price or rent and are paid by the seller or owner. But how exactly are they fixed? In this section, we will examine how agency fees are regulated for the rental and sale of real estate, and give you practical information to better understand the commission schedules.
For the location
In the case of a rental, agency fees are calculated according to the size of the accommodation . They are governed by the Alur 1 law (law for access to housing and renewed urban planning). This price varies according to the geographical location of the property.
In areas where the demand for accommodation is very high, such as in Paris, they are regulated. They cannot exceed 12 euros per square meter. The amount goes down to eight euros for non-tensioned areas.
Example of calculation of agency fees for rental :
|Real estate agency||Rented area||Duration of the lease||Agency fees|
|Agency 1||50 m²||1 year||12% of the annual rent excluding charges|
|Agency 2||70 m²||2 years||Fixed price of 1 200 €.|
|Agency 3||40 m²||1 year||1 month's rent excluding charges|
|Agency 4||60 m²||3 years||8% of the three-year rent excluding charges|
|Agency 5||80 m²||2 years||10% of the annual rent excluding charges|
In this example, real estate agencies are compared according to the area rented, the duration of the lease and the agency fees applied. This table helps you understand the different forms of agency fees that exist.
Concerning the real estate sales, the amount of the expenses is freely fixed by the agency . In the vast majority of cases, it is a percentage of the selling price (rate) around 6%. Or it is a lump sum known from the beginning of the transaction. You can consult the scale of the different real estate agencies before making an offer.
When it is a rate, it is generally degressive: the higher the price of the property, the lower it will be.
Good to know: Transparency of scales
The Consumer Code and the Decree of June 29, 1990 on the advertising of transaction fees require real estate professionals to display their commission scale in a visible and understandable way at the entrance or in the window 2 .
When to pay agency fees?
The sum of the agency fees is due only in the event that the agency has successfully sold the property entrusted to it. Agency fees are therefore only paid when the sale takes place through the signing of the authentic deed at the notary.
Real estate agency fees: who should pay them, the seller or the buyer?
The agency acts as an intermediary between the buyer and the seller. Concretely, it is at the service of both parties. It is therefore legitimate to ask who should pay the agency fees. Moreover, there is no law stipulating who has the duty to do so.
However, it is most often the seller who calls on the agency to help him sell his house. It is therefore customary for the seller to pay the agency fees. This is why you will generally see on the advertisements an FAI price (for Agency Fees Included).
When buying real estate, the buyer must also pay acquisition costs. These include notary fees and taxes. Agency fees are calculated on the basis of the amount paid by the buyer to the seller . If you buy a property, it may be interesting to pay the agency fees. These will be deducted from the sale price, and could lower your notary fees.
Reduce real estate agency fees: 3 effective levers to know
In a market as competitive as real estate, you are inevitably tempted to compare agencies according to the fees applied.
Wanting to make the most savings or conduct a negotiation remains a comprehensive approach. However, this tactic will not ensure that you end up winning.
In the event that several agencies are in competition for the same property, it will be easier to obtain a reduction in agency fees . However, the real estate agent who reduces his commission may be incompetent. It is therefore sometimes counterproductive to seek only the price advantage.
However, here is how you could get a reduction on your agency fees :
- 1) Deduct the amount of the furniture from the sale price
By deducting the value of certain furniture or equipment left in the house, you can reduce the sale price of the property and therefore the acquisition costs.
As the notary fees represent a percentage of the sale price, these will be lower. For example, suppose that the notary fees amount to 8%.
If you manage to deduct €10,000 worth of furniture (equipped kitchen, cupboards, light fixtures, etc.) from the purchase price of an apartment in Collioure amounting to €180,000, you will only pay 8% of €170,000 ; i.e. €13,600 instead of €14,400.
- 2) You refer to an effective agency to accelerate the sale
Rent to pay, bridging loan, charges… when you want to sell your home, time is precious. The longer you take to sell, the more money you lose. This is why using an experienced and efficient agency from the start will save you money.
- 3) Give exclusivity to your agency
From the buyer's point of view, a property displayed in a single agency gives the impression of rarity. This attracts attention, especially as the agency puts more emphasis on a property for which it has contracted an exclusive mandate.
In return, buyers are often wary of goods present everywhere with a different price depending on the advertisements. They feel like the seller is having a hard time selling and that's hiding something.
A property bound by an exclusive mandate reassures them and above all reduces their margin of negotiation, because they will have seen only one estimate of the selling price.
Note: Signing directly with the seller when you are under an agency contract is a bad idea
If an agency accompanies you on a visit and you decide to sign directly with the seller, you risk serious criminal penalties.
In summary, here are the 3 points to remember about the calculation of real estate agency fees:
- They are used to remunerate the services of an agency;
- Their amount is regulated in the case of a rental, but free in the case of a real estate transaction;
- The agency fees are paid when the sale is completed and can be charged to the seller or the buyer.