- Understanding Real Estate Commissions
- Who Pays?
- Commission Splits For Property Types
- Commissions For Multiple Agents
If you’re an agent working in Dubai, you’re likely to have some questions about real estate commissions. In this article, we’ll cover some of the most common queries, including how commission works, what standard commission rates are and who pays it.
How Does Real Estate Commission Work
Property commissions are charged as a percentage of the property value. The commission is payable once the keys of the property are handed over to the tenant/buyer. Typically, there is a commission split between the real estate agency and the agent. In most cases, this split is 50:50.
This means that if the total commission for a property is AED 20k, AED 10k goes to the agent, and AED 10k goes to the agency. However, different agencies may follow different commission splits, depending on their operating procedures.
Who Pays Real Estate Commissions?
In the secondary market, the maximum commission which can be charged on a property sale is 2%; however, there are no established regulations around who legally must pay the commission.
The market norm in Dubai is that, typically, the buyer pays the entire real estate commission. In some cases, there may be a seller’s commission. However, it is not a fixed rate and is usually mentioned in the contract. No matter the agreement made, both the buyer and seller must be informed of the commission terms.
For Off-Plan sales, the commission is paid by the developer of the project, and the commission percentage can vary from developer to developer and from project to project. In some instances, the developer may have different commission agreements with different agencies as well.
How Much Is The Real Estate Commission?
Secondary Market
For secondary sales, the commission charged is usually 2% of the value of the property, unless otherwise stated in the contract. Additionally, an extra 5% VAT is charged on top of the commission amount. Payment is typically made by a manager’s cheque, which confirms the presence of the required amount in the buyer’s account.
For rentals, the commission is typically 5% of the value of the annual rent. In some cases, if 5% of the total annual rent is less than AED 5000, agents may charge a minimum flat fee of AED 5000.
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Off-Plan Properties
For off-plan properties, the commission may vary depending on the project, developer, and brokerage agreement. Typically, the range is between 2% to 8%.
Commercial Properties
For sales, the commission for commercial property is typically between 2% to 5% of the total purchase price. However, this percentage is not fixed and can be negotiated between the parties involved. When renting a commercial property, the tenant pays a commission fee which is between 5% to 10% of the annual rent amount.
What if multiple agents are working on the same property/listing?
In Dubai, Law No. 85 of 2006 governs the terms of brokerage fees and when agents are entitled to remuneration. According to this law, if multiple brokers are working on the same property or listing, the client must sign a contract with each broker, which is registered with the Dubai Land Department (DLD). This is a prerequisite to the agent being entitled to remuneration.
To ensure that an agent receives commission, it is imperative that a contract is signed and registered with the DLD. The contract should also specify the names of the agents, the property details, and the conditions for the provision of real estate services.
Collaboration is key in the real estate industry, and agents working together is highly beneficial for buyers and sellers. For rentals, multiple agents can represent the same listings however, for secondary sales, a maximum of 3 agents can represent a single property. In any case commission is given to agents who contributed to closing the deal. If two or more agents are involved, they should all be compensated. If only one agent manages to complete the sale, he/she alone is entitled to the full amount. To protect both agents, we recommend signing an Agent to Agent agreement before working together.
What is an Agent to Agent agreement (Form I)?
Form I is designed to protect an agent’s listings and clients. It must be completed in the event that two agents decide to work together. This ensures a professional relationship is established and gives each agent the right to compensation provided they contribute to the sale/rental of the property.
Understanding real estate commissions in Dubai is crucial for agents working in the industry. Commission splits, who pays the commission, and how much it is can vary depending on the type of property and the agreement made between the parties involved; however, as a real estate agent, being well-informed about these details will help you navigate the industry with confidence and ensure that you and your clients are protected.
For more informative articles, check out our library of resources on Content Corner. You can also register for an in-person training workshop at Bayut Academy, where our training team is dedicated to helping you acquire the skills needed to succeed in the competitive UAE real estate market.