How to Save on Real Estate Agent Commissions

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There is no legal standard or cap on real estate agent commissions. The amount of commission is generally negotiated between the buyer and seller with the real estate agent, and varies based on market practices and property types. This article will explain how to calculate real estate agent commissions, how buyers and sellers can handle commission matters, and will also share strategies for saving on commissions.

1. Is it necessary to pay a real estate agent commission when buying a property?

Not necessarily. If buyers wish to save on expenses, they can search for properties listed by owners themselves through online platforms and negotiate directly with the owners. Similarly, sellers can also choose not to go through a real estate agent and list their properties online themselves.

2. How to Calculate Real Estate Agent Commission?

Hong Kong law does not specify the amount of real estate agent commission, which is usually determined through negotiation between the buyer, seller, and the real estate agency. However, there are some customary practices in the market regarding commission payments, which may vary depending on the type of property.

• Primary Market Properties: For new properties, the agent commission is typically borne by the developer, meaning buyers do not need to pay. The commission is generally 2.5% of the transaction amount. However, some developers may offer higher commissions based on sales conditions, up to 10%, or provide rebates as a way to effectively reduce the selling price.
• Secondary Market Properties: In the secondary market, the real estate agent commission is usually 1% of the transaction price, paid by each party (buyer and seller) separately. Therefore, the agent can receive a total commission of 2%.

3. Can real estate agent commissions be negotiated?

Commissions can be negotiated lower, but since sales are generally commission-driven, excessively low commissions may affect the success rate of transactions.

4. Are There "Industry Standards" for Real Estate Agent Commissions in Hong Kong?

There is no fixed commission rate for real estate agents in the market. According to the guidelines of the Hong Kong Estate Agents Authority, agencies should independently determine commissions and avoid collusion with competitors, as this would violate the Competition Ordinance. Additionally, most Hong Kong real estate agents act as dual agents, requiring them to safeguard the interests of both buyers and sellers during commission negotiations.

5. How to Save on Real Estate Agent Commission?

If you wish to avoid paying agent commissions, both buyers and sellers can choose to handle the transaction themselves without involving a real estate agent. Property owners can list their properties on online platforms or use methods like street signage to find buyers. While this approach saves on agent fees, it requires handling tasks such as preparing property details, contacting potential buyers, and arranging viewings independently.

Alternatively, buyers can look for properties listed directly by owners ("For Sale by Owner") to save on commissions. However, this method may increase risks during the transaction, as the absence of a professional real estate agent could leave both parties facing legal and procedural challenges.

6. Points to Note When Paying Real Estate Agent Commissions

If a real estate agent is involved in the transaction, the buyer should negotiate and agree on the commission with the agent in advance. The rebate agreement should be clearly recorded in the appointment contract and confirmed with a signed acknowledgment by the agency's senior management to protect the interests of both parties. It is important to note that rebates are legal as long as they comply with regulatory requirements. Do not rely on verbal promises of rebates from agents to avoid losses.

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