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How Much Is Realtor Commission In Canada?

by David Bico on 22 Dec 2022

When you negotiate a home purchase through a real estate agent, that agent typically receives a commission fee for helping you sell your house. The fee is typically split between the buyer's agent and the seller's agent.

According to the Canadian Real Estate Association, the average real estate commission ranges between 3-7% in Canada, but there are no hard guidelines for what the going rate is. The entire fee is usually paid by the home seller, but this may not always be the case depending on the terms of the sale.

Keep reading to find information on how much realtor commission pays, as well as details on realtor commissions and other real estate agent fees in Canada.

How Much Does the Average Real Estate Commission Pay?

Most real estate brokers only get money when a real estate deal closes, as opposed to being paid hourly or weekly real estate agent fees. This is because real estate work can be demanding, and an hourly wage is unsuitable for that kind of work.

Real estate commissions are often shared by home buyers' and sellers' agents. Therefore, if a home sells for $500,000 with a 5% commission, the buyer's agent and seller's agent may split the $25,000 and earn each $12,500 if the sale goes through.

The commission split varies from agent to agent, with an inexperienced listing agent occasionally earning a lower commission percentage than agents who have more experience and have been selling properties for longer.

Who Pays The Real Estate Agent?

Usually, the home seller will pay it based on the final sale price of the home. The buyer's agent fee may not always be covered by sellers. Look for the clause in your agent's contract that deals with the real estate commission.

That section should describe how the contract handles real estate commissions. According to this clause, the home buyers shall be liable for the buyer's agent fee if the seller fails to cover it. Negotiable commissions are available as a flat charge or as a percentage of the purchase price.

If a seller is listing their home without an agent, they will obviously avoid paying a realtor fee. However, a buyer's agent may still attempt to negotiate a commission fee from the seller in this case.

What do Realtor Fees Cover?

Agents offer their clients a wide range of services, such as assisting with home pricing, marketing the property (on multiple listing service, social media, and other platforms), haggling with prospective purchasers, and guiding the sale of the property through closing.

Real estate agents can help you get top money for your home, deal with emergent scenarios, and reduce some of the stress associated with selling a home. Not all real estate agents are exceptional, but the ones who are will generally be worth the extra expense.

What Does Dual Agency Mean in a Real Estate Transaction?

Sometimes, a single real estate agent will negotiate both sides of a real estate transaction. This is called "dual agency" or "double-ending", and allows real estate agents to potentially rake in lots of money from dual commissions.

However, many agents avoid engaging in a dual agency because it forces them to represent both the seller and the buyer, and other jurisdictions don't even let it. There is a conflict of interest, in my opinion. After all, clients employ me to advocate on their behalf.

In Canada, the legality and regulation of dual agency are left up to provincial law. Many provinces in Canada allow dual agency under a variety of names, but most of them regulate it to some degree. Understanding how dual agency works in your province is essential to avoiding bad and potentially illegal real estate transactions.

Pros and Cons of Dual Agency

Although the dual agency is typically highly regulated and may seem like a raw deal, there are a number of potential advantages as well as disadvantages when allowing one realtor to negotiate both sides of a deal:

Pros

Many double-ending real estate brokerages will reduce the total commission cost, potentially saving money for both the buyer and the seller. Additionally, since just one brokerage would need to be dealt with by both sides, the process would be simpler and more straightforward. Additionally, the buyer can potentially learn more about the property's past because the agent will already be familiar with it.

Cons

Since the buyer and seller have different objectives, having separate agents means that negotiations need to satisfy both parties as best they can. When one agent represents the entire deal, it means that the negotiation is mostly playing to the advantage of that realtor, and not necessarily for the buyer or seller.

Because an agent's compensation is reliant on the selling price, if the agent is shady and tempted to support the seller, he or she might make up a larger offer in order to convince the buyer to raise their offer.

Another possibility is that the buyer might not receive any guidance at all as the agent is meant to be impartial.

Will Real Estate Agents Negotiate Real Estate Commission Fees?

If you're a homeowner looking to sell your house, you can ask your agent to take a smaller commission, but he is not required to comply.

Consider this: Since an agent's commission typically covers marketing expenses, a lesser commission may result in less exposure for your home.

Nevertheless, it doesn't harm to request a reduced commission. The majority of agents won't be offended, and in the worst scenario, they'll decline. In exchange for a flat fee or a lower commission, the listing agent may assist you in setting an asking price, facilitating communication between you and the buyer, writing the contract, and advancing the process to closing. However, you may not receive the full extent of their services with a lower fee.

What Is a Flat-Fee Commission?

A flat-fee real estate agent commission is when a real estate agent agrees to a set amount for their real estate fees rather than a percentage of the eventual closing price. This might play to your advantage if you need to save some money on the deal, but many agents will vastly prefer a percentage-based commission.

Make sure you know what services are offered if you're dealing with an agent on a flat-fee commission. You can end yourself performing the majority of the footwork, like preparing the house, hiring a photographer, scheduling appointments, and haggling with purchasers. Because flat-fee services often solely include listing your home, you could find yourself unsure of how to handle certain aspects of the real estate transaction.

Pros and Cons of Flat-Fee Commissions

Although most realtors will prefer to work for a percentage rate, there are a few advantages and disadvantages for both you and the agent if you decide to move forward with a flat-fee commission:

Pros

The obvious advantage for you is that you can potentially save money by paying your real estate agent a fee that is less than the percentage rate would have been. The real estate agent, on the other hand, might end up actually getting paid more depending on what the closing price on the home ends up being.

Flat commission fees might also be more agreeable for the seller, as they will have to fork over money to pay the real estate agent commission anyway, at least in part. A flat fee can also lead to smoother negotiations depending on the exact terms of the sale.

Cons

Although flat fee agent commission can potentially save you money, you may also end up paying more than you would have on a percentage-based commission. Furthermore, with a flat fee, agents have no incentive to maximize the selling price of the home, and so might negotiate less fervently.

Usually, a real estate professional will only accept flat fees if the person they represent agrees to do more of the work themselves. In other words, an agent's full services may not be available if they are only working for a flat fee versus a percentage-based commission.

Are Real Estate Commissions Tax Deductible?

The HST is typically applicable to real estate commissions, though this can vary from province to province. To learn more about what to anticipate from the sale of your property, it is advisable to talk to your real estate agent.

In Ontario, you are eligible to claim a certain amount of tax deductions from your moving costs if you relocate significantly closer to your place of employment or study. These expenses include the real estate commission, legal and advertising costs, and a penalty for paying off your mortgage early.

Since tax laws may vary from province to province, it's important to understand the local tax laws before you attempt to deduct anything from the taxes you pay.

Final Thoughts

Agent commission can make up a significant proportion of the cost of a home sale. However, in many cases, home sellers will pay the entire fee for the buyer's agent as well as the seller's agent. That being said, this is not always the case.

Understanding realtor fees can be a huge boon to selecting the right real estate agent. There is no sense in overpaying an agent who may not have given you the best deal. It's also typically a good idea to avoid double-ended deals.



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