Dreaming of a house in Italy? Fantastic! Just don’t forget the hidden gems—like sales tax, notary fees, and the agent’s commission—because the price tag is just the beginning of the adventure!
Selling your home? Surprise! You’ll be footing the bill for the agent too—yes, both sides pay.
Wait, hold on—are you telling me the agent gets paid twice?
Oh yes, welcome to Italy, where the real estate commission system is designed to be fair and transparent, ensuring a smooth and secure transaction for all parties involved!
Sure, the internet is a jungle of wild real estate tales, enough to make your head spin. As a real estate agent with over 15 years in the profession, I decided to shed some light on everything concerning commissions for real estate agencies.
In a heartbeat
- In Italy, the buyer and seller pay the real estate agent's commission, typically ranging from 2% to 5% (+22% VAT, if applicable) of the property's sale price.
- Commissions tend to be higher in large cities like Milan, Rome, and Florence, especially for luxury or complex international transactions.
- The commission is due when the sale is finalized, usually after the preliminary contract is accepted, unless suspensive conditions (e.g., mortgage approval) apply.
- No commission is owed, if the deal isn't concluded due to the agent’s involvement.
- Good news! If your agent isn’t licensed, they can’t ask for a cent—though you might want to rethink that choice altogether!
What is a real estate agent's commission in Italy?
In Italy, the real estate agency's commission is calculated based on the sale price, with the specific percentage agreed upon between the parties on a case-by-case basis. The average commission is 3%, although it ranges from 2% to 5% (exceptions may occur, with rates either higher or lower than this average).
For example:
- Listing price: 3,500,000 euros
- Final sale price: 3,000,000 euros
- Agreed commission: 3% + VAT = 3,000,000 * 3% = 90,000 euros + 22% VAT = 109,800 euros.
In case of renting, the commission may correspond to a single month's rent, or 15% of the annual rent (to be calculated on the first year only).
The commission for a purchase at auction is 3% plus VAT calculated on the property's adjudication price. Often a fixed initial fee for collecting the documentation is added on top.
Spoiler: experience has taught me that the work of realtor is even more useful when it comes to winning property at auction, because in that case the aspects to be considered and the documentation to be analysed is rather complex.
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What happens in the absence of an agreement?
In the absence of an agreement with the real estate agent, you can refer to the customs and practices published by the Chambers of Commerce (here as an example Milan [1]), or in extreme cases commissions are decided by the judge according to equity.
Is the commission subject to VAT (Value Added Tax)?
Yes, the commission is subject to VAT 22%, even if you are a foreign citizen, not resident in Italy. But there is an exception... remember that Italy is the country of one billion nuances! If the real estate agent is on a flat-rate scheme (“regime forfettario”), the VAT will not be applied!
Why do commissions vary?
Real estate agency fees vary according to market laws. In large cities such as Milan, Rome and Florence, commissions tend to be higher.
The same effect occurs with international transactions or luxury properties, such as villas or historic buildings, because they involve more complex marketing and negotiation processes.
Conversely, commissions for standard flats are lower than average in less densely populated areas (typically Sicily or Apulia).
When and how is the commission paid?
Italian law (Art. 1755 Civil Code [2]) states that: “The realtor is entitled to a commission from each of the parties, if the deal is concluded as a result of his intervention. The amount of the commission and the proportion in which it shall be borne by each of the parties, in the absence of an agreement, professional rates or custom, shall be determined by the judge according to equity”.
Hence, the real estate agent's commission is due once the deal is finalized, which happens when the agent communicates the seller’s acceptance of the preliminary contract. If there's a condition precedent, like mortgage approval, the commission is only owed if the condition is met; otherwise, no payment is required.
Can You Negotiate the Commission?
Yes, the commission is negotiable. However, in my experience, I've found that focusing on providing my clients with an ever-better service often yields more value than negotiating the commission.
Legal considerations and rights
Situations Where Commission Is Not Due
Commission is not due when:
- The deal has not been finalised due to agent's intervention.
- The sale is finalised after the time limit set in the agency mandate and between persons not introduced by the agent.
- The buyer is kept in the dark about fundamental information on the property, such as the existence of a mortgage or the lack of registration with the Land Registry.
- The real estate agent is not qualified and therefore not registered in the REA.
- The contract signed by the parties cannot be considered a preliminary sale and does not, therefore, create obligations for the parties.
- The preliminary sale is subject to a condition precedent, which still needs to be fulfilled.
Who is legally required to pay the commission?
In Italy, the real estate agent's commission is paid by both sellers and buyers.
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Commission in case of non-sale
Generally, if a realtor fails to sell a property, no commission is due (unless otherwise agreed).
I emphasise the words “in general”, because some agents add addendums in the sales commission that provide for reimbursement of expenses incurred in the event of a failed sale.
Examples of “in vogue” expenses to be reimbursed: the photo report, video filming of the property with a drone, cost of publishing property advertisements on portals.
What happens if I no longer want to sell my house?
Let me explain.
What happens if you instruct an agency to sell your house in the next 12 months and, after 3 months, you change your mind and no longer want to sell (early withdrawal)?
Again, I advise you to read the sales order you signed. Without specific clauses, you, the seller, do not owe the agent anything.
In most cases, the seller who withdraws early must still pay a financial reimbursement proportional to the work done and, in any case, less than the commission in the event of a sale.
Can You Deduct Real Estate Commission Costs?
The real estate commission cost can be deducted in rare cases, such as capital gains.
Let's say you, as an individual, bought a house in Italy 2 years ago for 1,000,000 euros and today you sell it for 1,400,000 euros.
Yes, but the tax authorities want their share of the 400,000-euro capital gain.
In this specific case, you can deduct the cost of the commission paid from the capital gain.
Elena Manzhos: Mother of two beautiful children, wife, and real estate agent for over 15 years. Frankly, I don't know what is more complicated. More than 20 years ago, I moved to Italy from Eastern Europe, where I taught English. I have always had a deep-seated passion for houses; as a child for the Barbie house, and now as a real estate professional, my love for luxurious properties is unwavering.
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