Who pays a realtor commission when buying property in Dubai?

11.5.2022 | 11:48 am

Experienced realtors, specialists who help search for housing and prepare documents for a property transaction – are highly valued in Dubai’s and UAE markets. Now, when due to the pandemic, travelling across the world may be challenging, the realtor’s service has become especially important. In this article, you will find out who pays a commission to a realtor when selling an apartment or house, what is the amount of a broker’s commission and whether a realtor is required to present when signing a sale contract.

Table of contents:

How is the realtor service regulated in the UAE?

The real estate service in Dubai is controlled by Law No. 85 of 2006. The document regulates all aspects of the services provided by these specialists. For instance, it indicates the function of a real estate agent in Dubai as well as the most important nuances of their cooperation with the client.

So, according to this law:

  • The broker must sign a contract with a broker and the contract must be registered with the Dubai Land Department (DLD) – this is a precondition for the specialist to be paid;
  • If several brokers have been chosen to work under one contract, they are jointly responsible for the service delegated to them;
  • The brokerage agreement must contain the names of the parties, the characteristics of the property and the conditions for the provision of real estate services.

The law also clearly stipulates the financial obligations between the agent and their client. For example:

  • The broker is entitled to receive their remuneration after signing the contract of sale and registering it with the Department unless otherwise specified in the papers. If the contract is pending, the realtor is not entitled to payment until this condition is met;
  • The broker can only receive payment for their work from the party that authorized them to mediate the transaction. If such permission is granted by both parties, each of them shall be solely responsible to the broker for the payment of the remuneration due even if they decide that only one of them will pay the full remuneration;
  • The rule also works in the opposite direction. If several specialists participated in negotiations in the interests of one party, and their activities led to the purchase of how to win money at a casino slots, everyone is entitled to remuneration, and the amount must be divided between them in accordance with the contract. If the party entered into an agreement with several agents, but only one managed to complete the transaction, this agent receives the entire amount.

The document also states in which cases you may not pay the agent:

  • A broker loses the right to receive remuneration or to claim reimbursement of expenses if they act in favor of another party, thereby violating their obligations to the person they represent;
  • The agent is also not entitled to remuneration for their service if the latter did not lead to an agreement between the two parties. In this case, the broker also cannot claim compensation for expenses. The contract is considered concluded when the parties to the negotiations agree with all the conditions stipulated in it.

The control of such transactions in the emirate is carried out by the Real Estate Regulatory Agency (RERA), a division of DLD. To conclude the transaction, the broker must prepare and submit three forms of the contract: A, B and F:

  • Form A is an agreement between the realtor and the seller to list the property for sale. This document allows the owner to place the property on the market and ensure that no one, except for agents approved by him, will carry out promotion activities. Form A includes all details about the property, including financial details: maintenance fee, mortgage status, and payment schedules (if any);
  • Form B is an agreement between the agent and the buyer. This is one of the RERA forms that must be signed when a buyer appoints a professional to search for a property to purchase. This document must include information such as the type of property the buyer is interested in, its location, and the client’s budget and requirements. The form also mentions the conditions for terminating the contract and the amount of commission to the realtor;
  • Form F is a contract of sale, which specifies the details of the property, the price as well as the terms and conditions of the acquisition. The second name of this document is the Memorandum of Understanding. The parties sign form if the buyer has made a choice and the parties have agreed on a price. When the form is endorsed by both parties and witnessed by the realtor, it becomes a valid contract.

Do I need a real estate agent?

Emirati legislation does not oblige buyers and sellers of real estate to hire agents to conclude a transaction. The parties themselves can sign a Memorandum of Understanding, after that the buyer pays a deposit – about 10% of the total amount. Then, if it is a second home or resale property under construction, you must obtain a No Objection Certificate (NOC) from the developer. Without this document, it is impossible to register the transaction with the Land Department. In the Certificate, the developer confirms that he has no claims against the seller, who, in turn, has closed all his financial obligations.

Nevertheless, the participation of a broker in this process is desirable. An experienced realtor will not only select the best option matching the client’s budget and requirements, but also protect you from possible mistakes in preparing all the necessary papers as for those who are not familiar with the real estate market of the emirate, it can be difficult to understand all the intricacies.

Who pays a realtor’s commission in Dubai?

The amount of remuneration to the broker, as a rule, is 2% of the value of the property, unless otherwise provided by the contract. As a rule, an additional 5% VAT may be charged.

The realtor’s commission in Dubai is usually paid by the buyer. However, there are no clear rules in this regard – by agreement between the seller and the purchaser, the commission can either be divided between the two parties, or it can be taken over by the one who puts the property up for sale. If housing is purchased directly from the developer, then the agency fee is not charged.

However, this information is relevant if the parties are doing business with the same broker. If the interests of each participant in the transaction are represented by different professionals, they are remunerated by their direct employers. In other words, the agent’s commission when selling an apartment or villa falls on the seller if they hire a separate specialist to find a buyer.

The commission is paid to the agent, as a rule, when the keys are handed over. Payment is usually made by the so-called manager’s check: its difference from any other is that with its help the bank confirms the presence of the required amount in the account. The principal amount can also be paid in the same way – the buyer draws up a manager’s check in the name of the developer or owner.

Other additional fees may include:

  • Tax in favor of the Land Department – 4% of the property value + an administration fee of AED 580 (USD 157, CNY 1,052) for houses and offices, AED 430 (USD 117, CNY 780) – for land plots, AED 40 (USD 10, CNY 72) – for projects under construction;
  • Real estate registration fee. For property worth less than AED 500,000 (USD 136,100, CNY 907,400) – AED 2,000 (USD 544, CNY 3,6200) + 5% VAT; over AED 500,000 – AED 4,000 (USD 1,089, CNY 7,250) + 5% VAT;
  • Dubai Land Department Mortgage Registration Fee – 0.25% of the loan amount + AED 290 (USD 78, CNY 526);
  • Commission for processing the transaction – from about AED 6,000 (USD 1,600, CNY 10,800) to AED 10,000 (USD 2,700, CNY 18,100);
  • Fees for issuing a Certificate of No Objection – typically between AED 500 (USD 136, CNY 907) and AED 5,000 (USD 1,360, CNY 9,070).

Our real estate experts will help you buy your dream home

If you are interested in buying a property in Dubai or another emirate of the UAE, please contact Ax Capital real estate agency. Professional brokers will select an ideal property for you according to your requirements and organize the entire process of buying and registering property.