Real Estate Agents Protest Brokerage Fee Cuts... Gadu-ri Movement Emerges Amid Landlord Power Abuse

Intense Competition and Financial Supervisory Restrictions
Landlord Power Abuse... Brokers Frustrated
Concerns Over 'Gaduri' Side Effects

[Asia Economy Reporter Tae-min Ryu] “I have never charged the highest brokerage fee rate before. In this era where certified real estate agents are overflowing, the homeowner is the boss, so it’s difficult to even receive half of the maximum rate.” (Representative of A Certified Real Estate Office in Sangil-dong, Gangdong-gu, Seoul)

When asked about the brokerage fee reform on the 19th, officials at brokerage offices in the Sangil-dong area of Gangdong-gu, Seoul, showed troubled expressions. The representative of A Certified Real Estate Office, who has been operating the office for 10 years, expressed frustration, saying, “It’s not our fault that house prices have risen, so I don’t understand why the brokerage fees that agents receive are being cut.” He added, “Nowadays, there are so many certified real estate agents, and most jointly broker the same listings, so competition is fierce, and real estate transaction volumes are rapidly decreasing, making things difficult. On top of that, real estate platforms promoting ‘half-price fees’ are emerging, so I’m even more worried about the future.”

A representative from nearby B Certified Real Estate Office said, “People might think that just one successful brokerage at the legally set maximum fee rate can earn tens of millions of won, but in reality, such transactions are extremely rare, and competition among agents is so intense that it’s difficult to receive even half of the fee.” He continued, “These days, many homeowners refuse to pay any commission at all when listing properties, and if we refuse, they threaten to find another agent, so there’s nothing we can do.” In fact, the certified real estate office visited that day had almost no customers or purchase inquiries.

Statistics also show a declining trend in apartment transactions in Seoul. According to the Seoul Real Estate Information Plaza, the number of reported apartment transactions in Seoul as of the previous day was 419, a sharp 82.5% drop compared to the previous month (2,403 transactions). Considering that the reporting deadline for real estate sales transactions is 30 days after the contract date, the number of transactions may increase somewhat, but compared to last month, the decrease is significant. This year, the average number of apartment transactions in Seoul was in the 4,000 range, but last month it dropped to about half that level.

If this trend continues, there are concerns that various side effects may occur among agents, such as the resurgence of “Gaduri.” Song Seung-hyun, CEO of Urban and Economy, said, “As the commission agents earn from one contract sharply decreases, there is a high possibility they will be tempted to increase the number of contracts to make up for the lost income by engaging in ‘real estate Gaduri.’” He added, “Besides this, the quality of services provided to consumers may decline, and new brokerage offices entering the market may face ostracism and discrimination, causing various problems.”

“Real estate Gaduri” refers to the act of listing properties at prices lower than the homeowner’s asking price. When house prices rise too rapidly, sales do not proceed smoothly, so many agents choose Gaduri to increase their brokerage fee income.

On the other hand, most consumers gave positive evaluations, saying their brokerage fee burden has decreased. Kim (41), a resident of Eunpyeong-gu, Seoul, said, “The brokerage fee was too high for just showing a house, so it was burdensome. While some agents are sincere, there are so many unfriendly agents that I have often felt the fee was not worth it.” Lee (32), a resident of Gwacheon-si, said, “I didn’t understand why fees were higher just because they showed more expensive houses when it doesn’t cost more effort or expenses,” adding, “I hope the reform continues to narrow the difference in commission rates according to transaction amounts.”