Tag Archive for: Commercial real estate

For most people real estate purchase or sales are anything but a regular event, so some unclarity exists around the real estate agents’ compensation (often referred to as commission, brokers fee, brokerage fee etc.). The lack of transparency in many markets does not help either. 

So, let us shed some light on the topic.

Apart from the standard real estate brokers fee for a sale there are some other types a real estate agent might charge. Don’t worry, you rarely pay more than one of them. 

Most are incentive fees or success fees respectively, meaning they become payable upon completion of a transaction. 

The fees that should be on your radar should be the following: 

  • Sell-side fee
  • Buyside fee
  • Referral fee
  • Sourcing fee
  • Advisory fee (fixed or by the hour)
  • Kicker (also: incentive) fee

1. Sell-side fee

This fee, also called sales fee or sales commission, is what the seller of a house pays to the real estate agent when a sale is concluded. 

How much are real estate agent fees in Portugal?

The most common real estate brokers’ fee for the sale of apartments and houses in Portugal is 5% (plus VAT). 

However, some agencies specialised in the upper segment or luxury respectively, charge up to 6% (plus VAT). These are usually the ones with a particularly strong brand, such as Sotheby’s and Christies Porta da Frente. 

The sell-side fee can be freely negotiated, so you can also come across other percentages (down to 3%, but with very difficult assets 1-2% above 6%) or even fixed amounts. The latter makes sense for very small sales volumes, because a percentage might not reflect the effort the agent expects to make. 

When you consider negotiating bear in mind the following: 

  • You want the agent to be incentivized and while they might be compensated sufficiently for the time or effort they make, there is a chance that in their daily work they prioritize an instruction that pays better.
  • It is often the small agents with less resources, such as network and brand, who compromise the most on their sales commission. As a seller you should carefully consider if you want to enter this potential compromise. 
  • As you will see further below, the sales commission will often be shared with other brokers to find a buyer and close a deal. The less the lead agent is paid by the client the less they can share with other brokers, so there is less incentive to work towards a sale.

As mentioned, in Portugal this is paid by the seller. This differs from some other countries, however, it reflects that the sales agent is instructed by and acts in the interest of the seller. 

2. Buyside fee

The second most common fee is the buyside fee, which is often referred to as the buyer’s fee. 

This fee can vary a lot and can be anything between a fixed amount of a few thousand Euros or 50% of the respective sell-side fee (especially when agents’ share) up to a full percentage equal to the sales commission which would typically apply (rather rare). 

Unlike the name suggest, this could be paid for by either the sellers’ side (through a fee share with the sales agent) or the buyer themselves as a fee that is unrelated to the sale-side fee. 

In principle, it pays the agent or consultant who represents or supports the buyer of a property. There are two different situations in which a buyside fee would occur: 

  • Firstly, the buyer instructs a broker or consultant to find a property for him. In this case the buyers advisor often asks the sellers agent for a share of the sales commission in return for introducing a buyer. 
  • Secondly, the buyer instructs a broker or consultant to provide more comprehensive advice, such as preparing a valuation, an asset business plan, coordinate other experts etc. Since being compensated by the sell-side and acting for the buy-side constitute opposing interests, the compensation in this case should only come from the buyer. 

Often, the buyside fee is a success-based fee, which means it only becomes payable when a pursued transaction is successfully concluded. However, since often much work is done in preparation parts of the fees may be agreed to be payable nevertheless or a abortion fee may occur. 

Keep in mind that the amount or percentage of any buyside fee varies greatly. However, so do the services that you can expect in return. When working with a buyside advisor always clarify their experience, qualifications and which exact services they are going to provide to you. 

3. Referral Fee 

The referral fee, often called finders fee or tip fee, is just that. It someone’s compensation for bringing a buyer or, less frequent, a property or co-investor, into a transaction. 

This can apply to other brokers or tip givers, meaning that whoever establishes contact between two parties who conclude a transaction with each other could negotiate a referral fee. 

Depending on the constellation this fee is a fraction of the sales commission or, less frequent, the buyside fee. 

In practice you find amounts of anything between 10% and 50% of the reference fee. It will depend on what the referring party brings to the transaction, how challenging that is and how well they negotiated. 

This fee will ideally have been agreed and fixed in writing before the potential buyer or asset is established. 

4. Sourcing fee

A sourcing fee is a compensation paid in exchange for identifying a property in the market for a buyer. This can be on-market (real estate portals, speaking to brokers) or off-market (approaching private individuals, speaking to people in the desired neighbourhood etc). 

This can also, less often, refer to equity or debt souring, meaning bringing an equity investor or a creditor (the party that lends the money to someone else) to an investment. 

A sourcing fee is usually paid buy the buyer, but other constellations, especially like the above-mentioned buyside-fees, occur. 

If the process is rather simple or standardised (e.g. a debt broker requests conditions from several banks) this will usually not be more than a per mille of the reference amount. When the process is difficult and highly individual (e.g. finding an apartment with unusual characteristics off-market) this fee could be as high as a sales commission. 

5. Advisory fee (fixed or by the hour)

A good real estate expert will have plenty of knowledge, skills and contacts around his actual core tasks. Often additional services are provided to facilitate the transaction from which the expert is paid. However, when the work they perform is to far outside the agreed scope or there is no base instruction (e.g. sales instruction) the advisor may charge by the hour or day. 

These advisory fees are paid by the instructing party. 

Rates can vary between fixed amounts starting at 50-100 Euros for help opening a bank account to daily rates above 1,000 Euros as often seen in business consulting. 

Since the subject scope is usually fixed it advisable to compare alternative options, compare and, for simpler services, consider lower priced servicers.

6. Kicker fee

Most of the above success fees, so they become payable upon successful completion of a transaction. However, sometimes parts of the total fee will only be paid out when predefined conditions are met, e.g. a minimum sales price. Alternatively, this can be a fee on top of the base fee. 

A kicker fee can often be found in larger commercial transactions, but is rather uncommon in the residential market. However, it can be a pragmatic incentive to negotiate into the contract with your real estate advisor. 

In practice, these kicker fees can range from 0% to 70% of the base fee and are often a percentage of the amount achieved above the anticipated sales price.


There are various ways to compensate your real estate professional. As an investor, keep in mind that: 

  • There are at least six types of fees, each of which make sense in different situations.
  • Fees can be negotiated, but you will have to carefully consider where this is advisable.
  • In real estate, and especially in transactions, there is a lot of money at stake and compromising on quality to save fees may come at a much higher price later. 

Lots of confusion arises, especially amongst first-time real estate buyers, when it comes to dealing with brokers and valuers. 

However, it not that complicated. Here is what you need to know:

The terms

Depending on your language area there are various different terms describing one and the same role. 

A valuer may also be called appraiser or (chartered) surveyor. The latter implies a professional qualification which, depending on laws as well as professional standards of the respective market, individual or the valuation company may or may not be common. 

It is also common to refer to them as real estate valuer, real estate appraiser or real estate (chartered) surveyor. In some countries real estate may be called property and in some both uses are common. 

An agent might be called a broker (in the USA also often Realtor). Since agents obviously also exist in areas outside of real estate they may also be referred to as real estate agent or real estate broker. Saying property instead of real estate is also common in different geographies. 

There are residential agents (usually dealing with single houses, apartments or multi-family buildings and commercial agents (office, retail, logistics, hotels etc.).

An agent who solely focuses on finding real estate according to the search profile of the client might sometimes refer to themselves as house hunters or asset sourcers. 

Nice to know

In Portugal a real estate valuer is called avaliador imobiliário or avaliador de bens imobiliários and an agent agente imobiliário

In Germany real estate valuers are called Gutachter (usually regulated), Schaetzer, Bewerter or Immobilienbewerter and agents Makler or Immobilienmakler. 

In France a real estate valuer is called évaluateur or évaluateur immobilier and an agent is referred to as agent immobilier.

Legal and regulatory

To the displeasure of many market participants legal and regulatory frameworks for real estate professionals differ a lot between countries. 

For valuers either respective public authorities or at least banks have established rules and regulations which cover formal qualifications for valuers as well as key concepts and binding guidelines for the preparation of valuation calculations and the respective reporting. Naturally the tightest knit regulations are found around valuations of private residential for bank loans and fund valuation in order to limit risks to consumers and the financial system. 

In Portugal the main body regulating bank and fund valuations is CMVM and it not uncommon to apply IVSC (international) or TEGoVA (European) standards. The largest international organisation governing real estate professions and particularly valuers is the Royal Institution of Chartered Surveyors (RICS). RICS is the world’s major institution to set, assess and promote professional and ethical standards in the field of real estate.

For agents the legal framework is usually rather thin. This can be explained by their role which is usually focused on marketing, communications and coordinating different experts alongside the transaction process. In Portugal agents obtain their licence via application to IMPIC, IP (the Institute of Public Procurement, Real Estate and Construction). You will be able to tell if an agent is properly licenced by requesting their licence number (AMI number).

Nice to know

Often, private individuals place a lot of trust in the sales agent when being on the buyers side. However, it is good practice to keep in mind that an agent who is instructed and paid by the seller will act in their best interest. 

Therefore, it is often a good idea to instruct your own specialist who acts in your interest and limits your risk exposure. 

The tasks

The main goal of a valuation is to determine an objective value of an asset. This is often: 

  • To determine a mortgage value
  • For a potential seller to understand what they would sell for
  • For an investors balance sheet
  • For a buyer to assist in the bidding and understand risks and returns

In order to remain objective and indepent it is most common that valuers charge a fixed fee payable upon delivery of the valuation report rather than a commission that is dependent on a transaction. 

The main goals of an agent are:

  • To sell when they act for the seller
  • To facilitate the purchase when they act for the buyer
  • To browse the market and identify a building when they are instructed with asset sourcing
  • To lease a unit when acting for the owner
  • To find a unit, negotiate or re-negotiate lease terms when acting for the tenant

Depending on the respective goal an agent will pursue the highest or lowest possible price for their client. 

Nice to know

Whereas a good valuation is based on past transaction evidence (lease and sale terms of comparable properties) it might not reflect recent or temporary market movements. However, an agent would be able to translate those into their work immediately.

Depending on the circumstances, this will often mean that the value stated in a valuation is below the asking price of a property.

The reporting

Typically, a valuer concludes their work with production of a valuation report. Ideally, this report covers all important aspects that led to the result, such as location, the building itself, tenancy, costs, rental income etc. 

Depending on the use type and purpose of the valuation the applied methods and verifications may be:

  • Comparison method
  • Cost approach
  • Income approach and multiplier
  • Discounted cash flow and yield profile

An agent’s work may include a short version of a valuation or estimate, but usually is more focused on a marketing plan and their practical tasks around the transaction. 

Nice to know

Whereas valuers and agents will usually have knowledge around legal, technical and environmental issues, it is good to keep in mind that those areas a better covered by respective specialists, for instance lawyers or construction engineers. 

Both, valuers as well as agents will usually be able to refer to the respective specialists where appropriate.

How valuers and agents work together

Ideally, they don’t. This might sound like a contradiction in a process that becomes smoother, safer and faster with an increase of service integration. 

However, since the valuer works to produce independent and objective advise whereas the agent is determined to move the needle towards the (usually monetary) interest if their client, these two work best without interfering with each other. 

Moreover, in many countries laws as well as regulations exclude mixing valuations and transaction advise to avoid potential conflict of interest. Whereas some workarounds can be found and sometimes make sense in the area of commercial advisory, it is not recommended in more consumer-related markets like private residential. 

Nice to know

Valuers fees are usually a much smaller fraction of a property’s value than agents fees. Rather than the transaction price a valuer would usually quote based on time, effort and provided liability.

A valuers’ fee is typically a fixed amount whereas agents typically charge a success-based percentage of the sales price or rent they achieve for their client.