Commissions in Spain – When 5% Is Not Enough
"One reason for high commissions is that often they are split between more than one agent, one agent has the listing, the other brings the buyer."
What is it with commissions in Spain? How is it possible that 5% commission is not enough for many estate agents? One reason for high commissions is it’s unlikely the buyer contacted the local agency direct. Consequently, there will be more than one party with an outstretched hand. Intermediaries are bad news when it comes to commissions. It might be a three way split or even more.
Secondly, it is common for real estate agents to ask a seller what net figure they want to achieve. They then feel free to load that figure, quoting the buyer an asking price way above what the seller requires. The difference is the agent’s commission. Subsequently, the seller discovers at the notary what the buyer is actually paying assuming, of course, the seller attends the notary. But by then it is too late and if they don't attend it is unlikely they will ever find out. Anyway, the agent will counter their objections, reminding them they did get the amount they wanted. Anything on top, even if it is an outrageous sum, is for the agent.
And to avoid any unpleasantness at the notary it is common for the agent to suggest the seller gives them power of attorney. As a result, the agent represents the seller at the notary so they don’t appear. So, they will never find out what has been going on or how many intermediaries are involved.
In fact, a seller should be suspicious if their selling agent suggests this. It may be an indicator that the agent prefers they don’t attend the notary for completion. Sellers should insist on a proper valuation, agree the asking price and rate of commission but in a market where so many people are from overseas it is very easy to be persuaded otherwise.
It is common for buyers to trust an agent of the same nationality. They assume the shared cultural background protects them. How naïve! The worst case I know personally involved a Russian who paid €850,000 for a €500,000 apartment. He used a locally-based Russian agent who pocketed the balance, after she paid off the bank valuer who provided a valuation of €925,000 to justify the mortgage. Indeed, there are so many similar stories that, eventually, savvy Russian buyers refused to have anything to do with Russian agents.
Finally, a general comment on agency commissions in Spain. It is only in the overseas sector that 5% is considered normal and then only in the resale segment. And perhaps it is more realistic to say that 5% is considered the minimum, rather than normal. I regularly get emails from agents offering a share of 7% or 8% for the introduction of a buyer. Typically, the agent introducing the buyer will get the lion’s share, the listing agent drops their share to 2% or 3%.
In the new-build sector developers usually build 10% into their price lists and it can be more. When buyers are asked for an initial 30% stage payment in the case of off-plan property the agent expects their commission to be paid then. As a result. they will have been paid long before the buyer gets the property.
But in the Spanish domestic resale market commissions are rarely more than 3%. Even that is considered high in comparison with, for example, the U.K. and Scandinavian countries. However, many sellers in Spain resent high commissions, especially when many agents offer a very poor service. Consequently many decide to have a go themselves. That’s the reason there are so many “Se Vende” signs on the gate. And, of course, as property finders working for the buyer, The Property Finders can access these properties. As a result, you get to deal with the seller direct. The only way a buyer can be absolutely certain that their interests are being protected is to use their own agent. Click for more information about our Fees and take a look a look at Case Studies to find out how The Property Finders work.
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