One of the most frequently asked questions about Korean real estate transactions from U.S. clients is brokerage fees.
In the past, I was surprised to hear that our client paid hundreds of millions of Korean won as a real estate brokerage fee to sell the inherited Korean real estate (house). In fact, the client said that since he had left Korea for several decades, he entrusted the sale of the property to a distant relative in Korea. If the client had known the following information, or had consulted with me in advance, I thought he would have paid a more reasonable brokerage fee.
In the United States, the brokerage fee rate is not specifically stipulated by law, and the brokerage fee is set by agreement between the Realtor (or Real Estate Agent) and the customer. Currently, in the LA area, it seems that the brokerage fee is usually set at about 5-6% of the transaction amount (or 4-5% for high transaction amount).
On the other hand, in Korea, there is an upper limit on brokerage fees by law. Specifically, Article 32 of the Licensed Real Estate Agents Act, Article 20 of the Enforcement Decree of the same Act, and [Appendix 1] stipulate in detail the upper limit rate of housing brokerage fees according to transaction details (sale/exchange, lease, etc.) and transaction amount. For example, in the case of buying and selling a house of 1.5 billion Korean won or more, 0.7% of the transaction amount is set as the upper limit of the brokerage fee, and the specific brokerage fee is determined by agreement between the customer and the real estate agent.
At first glance, if you look at the brokerage fee rate alone, the brokerage fee in Korea seems lower. However, in my view, since the scope of work and responsibility of realtor in the U.S. are larger than realtor in Korea, it seems difficult to determine whether it is expensive or cheap only based on the brokerage rate alone.
As I said above, the final brokerage fee for the U.S. or Korea will be determined by agreement. Of course, there is a common market price, so the scope of the agreement is not wide, but, when you are going to sell or buy a house in Korea, I think it is necessary to set the brokerage fee knowing that the upper limit is set by law.
There are many things to consider regarding real estate transactions in Korea, but today, I have introduced you to the Korean real estate brokerage fee that is helpful if you know the basics.
We, K-Law Consulting, have the only Korean law lawyer (Jinhee Lee) registered as a foreign legal consultant with the State Bar of California and will provide optimal guidelines for resolving issues and disputes related to Korean real estate transactions, management, and taxes. Please feel free to contact us at any time (E-mail: lee@k-lawconsulting.com / Phone: (424) 218-6562). Thank you.
Comments