What Is the Typical Commission for a Real Estate Agent in Dubai?

Navigating the process of buying or selling a home can be a daunting task, especially when dealing with real estate in a foreign country. As a result, many expatriates in Dubai often turn to professional real estate agents for assistance. It is advisable to engage an experienced specialist who is well-versed in local legislation, possesses knowledge of prominent developers and their projects, and ultimately ensures the transaction is conducted with the utmost safety. This article provides you information how to interact with real estate agent in Dubai. Continue reading to understand how to formalise your relationship with a real estate agent and determine the expenses associated with their services.

• Establishing a Formal Relationship With Your Agent
• Who Pays for Agency Services?
• How Much Are Agency Services in Dubai?
• Deals Without a Real Estate Agent

Establishing a Formal Relationship With Your Agent

Brokerage services in the Dubai real estate market are subject to strict regulations. The law prescribes the duties of a real estate agent, establishes rules for client interactions and other nuances. The Real Estate Regulatory Agency (RERA) oversees real estate transactions, requiring both agents and property sellers/buyers to enter into mandatory contracts. These contracts, similar to the contracts for property sales, must be registered with the Dubai Land Department (DLD). Fulfilling these requirements is an essential condition for the agent to receive their compensation. In cases where multiple brokers are engaged under a single contract, they share joint liability for the services provided.

The contract between real estate agent and the seller for listing a property for sale should include the following details:

• Full names or company names of the involved parties.
• Comprehensive property information, including the property type, area, and address.
• Verification of the absence of utility debts, maintenance costs, and any relevant mortgage status accompanied by a loan amortisation schedule (if applicable).

This document enables the seller to list the property on the market, ensuring that only the approved broker has the authority to advertise the property. Additionally, the contract outlines the terms and conditions for the provision of services, as well as the payment terms.

The brokerage contract between the agent and the buyer should include the names of the involved parties, the details of the property that the client is interested in, and the client's budget and requirements. Furthermore, the document outlines the conditions for providing real estate services, contract termination provisions, and specifies the amount of the rera agent commission.

Who Pays for Agency Services?

In both cases, the document must contain a clause on financial obligations between the agent and the client. The broker can only receive payment from the party that authorised them to mediate the transaction. But who pays agent commission in Dubai? If both parties signed a service agreement with this agent, each of them must pay a fee (even if the parties eventually agreed verbally that only one of them would cover the cost).

If multiple specialists were involved in negotiations that resulted in a real estate purchase deal, each of them is entitled to compensation. In such cases, the amount should be divided among them as specified in the contract. However, if a party entered into contracts with multiple agents but only one agent successfully concludes the deal, that agent will receive the full commission amount.

In accordance with UAE law, a broker is only eligible to receive remuneration once a sales contract has been signed and registered with the Dubai Land Department (DLD). Until the document is officially processed, the agent does not have the right to receive compensation for their services.

Furthermore, if the agent acts in favour of a third party, thereby breaching their obligations to the represented person, they may forfeit their right to remuneration or reimbursement of expenses. Instances have been reported where a seller listed a property for sale at a certain price (e.g., $150,000), but an unscrupulous broker intentionally advertised a lower price (e.g., $145,000) to attract more inquiries. When potential buyers expressed interest in the property, the broker would claim that the price had increased or that the property had already been sold, and then propose alternative options from another client at a lower price. In this manner, they were acting in the best interest of a third party, thereby violating their duties as the seller's representative.

Additionally, the agent is not entitled to remuneration if the parties have not reached an agreement on the transaction. The contract is considered finalised only when all the conditions have been mutually agreed upon by the parties involved.

How Much Are Agency Services in Dubai?

Being a highly sought-after profession in Dubai, real estate agents play a crucial role in the city's vibrant and expansive real estate market. How much do real estate agents make in Dubai? Typically, the agent commission in Dubai amounts to 2% of the property's sale value, unless otherwise specified in the contract. Furthermore, a value-added tax (VAT) of 5% is levied on the sale of any real estate or the annual rent for commercial properties.

When searching for housing or renting out a property, engaging the services of a broker can be a viable option. In such cases, the agency fee typically amounts to 5% of the annual rent for residential properties, and VAT is not applicable in this context. It is important to note that tenants are responsible for covering the commission. On the other hand, homeowners (landlords) may pay the agent a fee ranging from 0% to 8%, depending on the extent of real estate management services required. These services can include tasks such as advertising placement, client search, organising property viewings, and property maintenance in the owner's absence, among others.

When it comes to commercial real estate, the commission fee typically falls within the range of 5% to 10% of the annual rent. Just like with residential properties, tenants are responsible for covering this commission fee when leasing commercial spaces. On the other hand, the owners of commercial properties may pay a commission ranging from 0% to 8%, depending on the specific scope of services provided by brokers for managing their property.

Deals Without a Real Estate Agent

The UAE legislation grants individuals the freedom to choose whether or not to engage the services of brokers in real estate transactions. It is entirely at the discretion of the client. Should you decide to proceed without intermediaries, you have the option to independently carry out the deal and pay no commission to real estate agent in Dubai. In such cases, the seller and buyer can enter into a Memorandum of Understanding to outline the terms and conditions. Subsequently, the buyer is required to provide a deposit amounting to approximately 10% of the property's total value. If the property is under construction or a resale property, the seller must obtain a No Objection Certificate (NOC) from the developer. The NOC serves as confirmation from the developer that there are no outstanding claims against the seller, and that the seller has met all financial obligations. Finally, the necessary documents are then submitted to the Land Department for registration.

In a Nutshell

In the UAE, particularly in Dubai, rental agent commission are considered reasonable when compared to other countries. For instance, realtor remuneration typically ranges from 0.5% to 3.5% in the UK, 3% to 5% in Spain and Italy, and 3% to 8% in Cyprus. However, it is common for both sellers and buyers to desire lower fees. It is important to note that venturing into a real estate transaction without professional assistance in a foreign country is only advisable if you possess a thorough understanding of the process, are well-versed in the local market dynamics, and have a comprehensive understanding of the applicable laws. Otherwise, it is generally preferable to seek assistance from experienced real estate agent in Dubai.

Cover photo: Central Park At City Walk (Housearch)