'Every penny counts': Home-buyers are ditching realtors to save on fees

Industry

Published: 24 Jan. 2024, 15:06

'Every penny counts': Home-buyers are ditching realtors to save on fees

Apartment buildings seen from Mount Namsan in Jung District, central Seoul, on Monday [YONHAP]

Koreans seeking to buy or sell an apartment are now increasingly bypassing traditional real estate agents, turning instead to an online secondhand marketplace.

A 35-year-old office worker surnamed Park recently moved into a two-bedroom apartment in Mapo District, western Seoul, with a 200-million-won ($149,309) lump-sum deposit contract, or jeonse in Korean.

If Park were to find housing through a real estate agent, the commission would've cost up to 600,000 won. Park could save that money by contacting the landlord directly through an online secondhand marketplace, Danggeun Market.

“Every penny counts since jeonse price spiked as of late, so I used Danggeun Market,” Park said, adding that “It was convenient, because I could directly ask questions to the landlord instead of going through a real estate agent.”

Park’s case has become increasingly common in Korea, as more and more people are opting for direct housing transactions.

If you search for “direct real estate transaction” on the Danggeun Market app, you will find at least dozens of options available, whether for jeonse, rent or sale.

In expensive neighborhoods such as Gangnam, Seocho and Songpa Districts in southern Seoul, there were even offers for a 5.8 billion won apartment and 4.5 billion won penthouse, with messages like “direct transaction can save you 43.9 million won.”
Such direct real estate transactions have been gaining traction not only through secondhand marketplaces but other apps dedicated to real estate transactions as well as online communities.

Direct transactions accounted for 10.7 percent, or 39,991, of the 373,285 apartment sales last year, according to the Ministry of Land, Infrastructure and Transport’s latest data. In 2022, the figure was 15.6 percent, with 40,289 cases out of 258,599 contracts signed.

“Direct transactions are preferred when people wish to save commission fees or give the housing to family or friends,” said Yeo Gyeong-hee, a senior researcher at property data compiler Real Estate R114.

“The percentage of direct transactions fell last year compared to the previous year due to the increased burden of gift tax, which was imposed in January last year. But just like any other commodities, real estate properties are increasingly being traded through online platforms.”

The recent slowdown in housing sales also urged sellers to opt for direct transactions to save time, Yeo said.

Such a trend, as a result, is taking a toll on real estate agencies.

Last year, 15,817 real estate agencies went out of business or temporarily shut down, a record high since 2019, according to the Korea Association of Realtors.

“In cases of fraud or defects in the properties, the contracting parties need to bear full responsibility by themselves with direct transactions,” said the association’s spokesperson.

“So in many cases, people often pay a certain amount of commission to real estate agents when it comes to signing the contract.”

The biggest upside to direct transactions is their lack of commission fees. Under current law, the sale of a 1 billion won apartment could incur a commission fee of up to 5.5 million won.

However, there are possible risks that come with direct transactions. The process can be highly complex, with a long list of documents and legal details that need to be considered, including registration certification and whether the property has been seized provisionally.

BY KIM KI-HWAN [shin.hanee@joongang.co.kr]