A Slip Could Backfire... How Did Real Estate Agents Become the 'Public Enemy'?

Conflicts Over 'Brokerage Fees' Escalate Amid Soaring House Prices
Consumers: "House Price Unchanged, So Why Are Brokerage Fees Higher?"
Frustrated Agents: "We Just Followed the Regulated Rates..."
Government, Neglecting Conflicts, Proposes Late Improvement Plan
Brokerage Fee for 1 Billion Won Apartment Reduced from 9 Million to 5.5 Million Won

A price list is posted at a real estate agency office in Songpa-gu, Seoul. Photo by Jin-Hyung Kang aymsdream@

# Mr. A, who completed a jeonse (lease) contract, was told by a licensed real estate agent that "in addition to the brokerage fee, a 10% VAT must be paid." Without much suspicion, Mr. A paid the 10% to the agent. However, he later found out that the agent was a simplified taxpayer exempt from VAT. Mr. A requested a refund but was refused.

# Mr. B tried to purchase an apartment through a licensed real estate agent, but the deal fell through due to mismatched contract terms. The agent demanded a fee for their effort, claiming that there were tangible and intangible costs involved in introducing and mediating the property.

# Mr. C was about to finalize an apartment sale contract, but the seller suddenly unilaterally canceled the contract without any special reason. The agent demanded brokerage fees, stating that it is customary to receive brokerage fees from both parties even in case of contract cancellation, and Mr. C reluctantly paid the amount.

Complaints and proposals related to housing brokerage fees have surged, with 3,370 cases filed in the national complaint portal alone over the past two years, indicating a significant increase in disputes and grievances caused by 'brokerage fee conflicts.'

◆ Burden of Brokerage Fees Amid Soaring House and Jeonse Prices

In particular, dissatisfaction with brokerage fees has grown due to the sharp rise in house and jeonse prices. Brokerage fees have different maximum rates depending on the transaction amount. In Seoul, for sales, the rate is 0.4?0.6% for amounts under 900 million KRW and 0.9% for amounts above 900 million KRW.

When the median price of apartments in Seoul was below 500 million KRW, brokerage fees were about 2 million KRW. However, under the Moon Jae-in administration, the median price exceeded 900 million KRW, causing brokerage fees to surge to around 8 million KRW.

Consumers complain, "The house hasn't changed, nor has the quality of brokerage services, so why are brokerage fees this high?" The frustration and stress from soaring house prices seem to be directed at licensed real estate agents.

Licensed real estate agents argue that the criticism over brokerage fees is unfair. They say they have only charged fees according to the law and provided services, yet they are being vilified as 'public enemies.' The increase in brokerage fees is due to the regulated fee rates, not because they arbitrarily raised fees or gained unfair profits.

Apartment complexes in the Gangnam area as seen from a Seoul Metropolitan Police Agency helicopter on the 10th. Photo by Kang Jin-hyung aymsdream@

◆ Are Licensed Real Estate Agents Really Public Enemies?…Government Neglects Conflict

However, there are criticisms that the government’s neglect and irresponsibility lie behind these conflicts.

Conflicts related to additional brokerage services, as seen in the cases of Mr. A, B, and C, often arise due to insufficient regulations.

Even if it is later confirmed that a licensed real estate agent is a simplified taxpayer, there is no regulatory basis for consumers to receive a refund. Similarly, there are no related regulations regarding the burden of brokerage fees when a final contract is canceled. Although conflicts frequently occur in this area, there is a lack of legal guidelines.

Last September, a post titled "An Open Letter to President Moon Jae-in to Create a Real Estate Transaction System Without Agents as Part of the Korean New Deal Policy" was posted on the Blue House national petition board.

The petitioner claimed, "The government is trying to shift all responsibility for the repeated failures of real estate policies onto honest licensed real estate agents," and argued that "the government misled public opinion with false information as if agents were raising house prices and engaging in illegal activities, ultimately vilifying them as public enemies."

The petitioner pointed out that the government should first eradicate illegal and illicit acts that cause consumer harm. Based on data from the Real Estate Society, the petitioner stated, "As of 2018, licensed real estate agents handled only 60% of total transactions, while over 1.51 million transactions were direct deals between parties, illegal transactions by unregistered agents, or consulting transactions." He added, "The reality is that the government does not make practical efforts to eliminate these unregistered agents but neglects the issue, shifting all responsibility onto honest licensed agents and vilifying them as social evils."

◆ Government’s Late Improvement Plan… Brokerage Fee for 1 Billion KRW Apartment Reduced from 9 Million KRW to 5.5 Million KRW

At last, the government has decided to establish guidelines regarding real estate brokerage fees. In particular, brokerage fees are expected to decrease, reducing the burden on buyers and sellers.

On the 9th, the Anti-Corruption and Civil Rights Commission prepared a proposal to improve brokerage fee rates and recommended the Ministry of Land, Infrastructure and Transport to implement the improvements. The Ministry plans to complete the rate revision by July at the latest, using the recommendation as a reference.

If the rates change according to the Commission’s strong recommendation, the brokerage fee for a 1 billion KRW apartment sale will decrease from the current maximum of 9 million KRW to 5.5 million KRW.

◆ Brokerage Fee to be Paid Only by the Party Responsible for Contract Cancellation

Along with this, the Commission will formalize the scope of additional services provided by agents beyond the statutory brokerage services and establish regulatory grounds for separate fees that consumers can choose to use.

To address agents’ complaints about not receiving compensation for effort when a transaction contract is not finalized, a basis will be created to pay brokerage and mediation fees within actual cost limits, considering the number of mediation attempts.

There have been repeated complaints about cases where landlords implicitly renew contracts but tenants move out before the renewal expires due to personal reasons, and landlords shift all brokerage fees for the new lease contract onto tenants. Regulations will be established to address this.

The issue of who should pay brokerage fees when contract cancellation is caused by one party or both parties has no existing regulation and will be resolved.

Although it is customary on-site to receive brokerage fees from both parties, the Commission will prepare a plan to have the party responsible for contract cancellation bear all brokerage fees.

Additionally, regulations will be set regarding the payment basis and amount of brokerage fees when a jeonse contract expires and is renewed or when a new contract is made with a new landlord.

Kim Hyung-seok, Director of Land Policy at the Ministry of Land, Infrastructure and Transport, said, "We plan to form a practical discussion body to reduce the brokerage fee burden felt by the public, and we hope that reasonable institutional improvements can be derived through active participation and communication with the industry."

This content was produced with the assistance of AI translation services.