Commission
Synonyms: Broker Commission، Brokerage Commission، Agent Fee، Real Estate Commission
Short Definition
Percentage real estate offices take for their services, set by the Real Estate Brokerage Law at 2.5% of the deal value for sales and of the first year’s rent only for leases unless otherwise agreed in writing, and paid by the party that contracted with the broker.
Calculate it: Real Estate Brokerage Commission CalculatorOverview
Legal Basis
Real estate commission is based on the Real Estate Brokerage Law issued by Royal Decree No. (M/130) dated 30/11/1443 AH and its executive regulations, which specify controls for its calculation, documentation, and disclosure. It is also subject to the Value Added Tax Law issued by Royal Decree No. (M/113) of 1438 AH, imposing 15% VAT on brokerage services. REGA requires documenting the brokerage contract in writing before providing the service, and not exceeding indicative rates except by explicit agreement.
Practical Example
Mohammed, owner of a villa in Riyadh, asks Al-Waha Real Estate office to market his villa for sale at SAR 2,800,000. They sign an exclusive brokerage contract, commission 2.5% of sale price due upon transaction completion. Within two months, the office finds a buyer and the deal closes at SAR 2,750,000. Office commission: 2.5% × 2,750,000 = SAR 68,750 + 15% VAT = SAR 79,063 total. The office issues an electronic tax invoice, Mohammed pays the amount, the office transfers SAR 10,312.50 (VAT) to ZATCA, and records 68,750 as revenue. The entire transaction is documented, transparent, and legal. If the broker tried to take commission from the buyer too without disclosure, it would be considered a conflict of interest and expose the license to withdrawal.
Common Mistakes
- ✗Agreeing on commission verbally without written documentation — REGA rejects claiming commission not documented in a brokerage contract.
- ✗Failing to include VAT in commission — causes subsequent disputes; must clarify in advance whether the rate is inclusive or VAT-added.
- ✗Taking commission from both parties without disclosure — a serious violation that may expose the Fal license to withdrawal.
- ✗Delaying electronic tax invoice issuance — a ZATCA violation that may expose the office to fines.
- ✗Assuming commission is due upon merely listing the property — usually due only upon transaction completion, unless explicitly agreed otherwise.
International Differences
Real estate commission rates differ noticeably between countries. In the UAE, 2% of sale value and 5% of first-year rent are customary. In Turkey, the broker’s sale commission is capped at 4% of the price excluding VAT, split equally between seller and buyer unless agreed otherwise, and at one month’s rent for leases. In Egypt, commission is usually 2-3% of sale and 50% of monthly rent. In the UK, Estate Agent Fees range 1-3% for the seller, with a detailed contract system. In the US, the customary rate is 5-6% of sale value split between seller's broker and buyer's broker. The Saudi advantage in commission is the clarity of rules via REGA, relative unification of rates, integration with ZATCA for electronic invoice, and mandatory transparency in brokerage contracts, protecting clients from manipulation.
