[Q&A] Brokerage Fees for Homes Over 600 Million Won to Increase Significantly... Effective from October

Brokerage Fees Drastically Reduced to 600 Million~1.2 Billion KRW Range
New Rate Applies from 'Main Contract Signing Date'

The brokerage commission burden that must be paid to licensed real estate agents during real estate sales and lease contracts will be reduced by up to half as early as October.

On the 20th, the Ministry of Land, Infrastructure and Transport finalized and announced measures to reduce brokerage fees and improve brokerage services. The core of the reform is lowering the maximum commission rates for sales prices over 600 million KRW and lease prices (based on Jeonse) over 300 million KRW. For example, the maximum commission for a 1 billion KRW house sale will decrease from 9 million KRW to 5 million KRW. Below are some Q&A to clarify questions about this reform.

- Which transaction price range will see the greatest reduction in burden under the new rate system?

△ Transactions between 600 million KRW and less than 1.2 billion KRW. For sales, the previous flat maximum rate of 0.9% for prices over 900 million KRW has been segmented and lowered to 0.5?0.7%. Particularly for leases, the rate for the 600 million KRW to less than 1.2 billion KRW range drops from 0.8% to 0.4%, about half. High-value leases over 1.2 billion KRW also see a reduction from 0.8% to 0.5?0.6%. For example, under the current rate, the maximum commission for a 600 million KRW Jeonse contract is 4.8 million KRW, but it will be lowered to 2.4 million KRW. The commission burden for an 1.1 billion KRW sales contract will also significantly decrease from 9.9 million KRW to 5.5 million KRW.

- When will the new rates apply for brokerage requests, preliminary contracts, and main contracts?

△ The new regulations are expected to be applied immediately upon the revision of the Enforcement Rules of the Licensed Real Estate Agents Act in October. It is important to note that the commission rates will apply based on the timing of the ‘new contract’. For example, even if a licensed real estate agent accepted a brokerage request or signed a preliminary contract before the revision, if the main contract date is after the revision, the reduced rates must be applied.

The Ministry of Land, Infrastructure and Transport will also distribute a ‘recommendation for revision of brokerage fee ordinances’ to all cities and provinces nationwide simultaneously with the legislative notice of the amendment. Even if a city or province does not revise its ordinance, the reform based on the Enforcement Rules revision will apply; however, if the ordinance is revised first, the new regulations can be applied even before the Enforcement Rules revision.

- Is the brokerage commission a fixed rate or a maximum rate?

△ It is a maximum rate. Only the maximum commission rates are set for each housing transaction price range, and the actual commission is determined through negotiation between the parties within that limit. Some licensed real estate agents previously argued that the maximum rate system caused unnecessary conflicts with clients and demanded a fixed rate, but this was not accepted. A Ministry official explained, "Introducing a fixed rate would reduce disputes but eliminate competition in the market," adding, "It would also make half-price commission services difficult."

- The liability limit for licensed real estate agents has increased from 100 million KRW to 200 million KRW. How does this benefit consumers?

△ This limit refers to the total amount of compensation a single licensed real estate office can pay consumers in damages within one year. The limit for corporations is higher, increasing from 200 million KRW to 400 million KRW. It is important to note that this is not a per-case guarantee amount. In other words, the more clients suffer brokerage accidents, the less compensation each individual receives.

- How is the licensed real estate agents’ duty to ‘verify and explain’ being expanded?

△ Licensed real estate agents have the duty to verify various housing-related details during brokerage and explain them to consumers. The government has expanded the scope of verification and explanation to include floor cracks and boiler service life, among others. Floor cracks have been a major source of disputes between parties but were previously outside the agent’s verification scope, drawing criticism. For multi-family housing transactions, which frequently have brokerage accidents, the verification and explanation documents now include specific rights relationships. Examples of undesirable facilities near the transaction property are also specified so consumers can more accurately check location conditions. If false information about the brokerage object is disclosed or the verification and explanation documents are not provided, the agent may face up to six months of business suspension as punishment.

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