A commission rebate means a real estate agent gives money back to a home buyer. The cash back realtor refunds a portion of the commission that is paid by the seller to the buyer agent.
Real estate commission to buyer agents is most commonly paid by the seller. In most cases, the seller pays the buyer’s agent at approximately 2.5% of the home purchase price in the Great Toronto Area in the current market.
There are some exceptions, i.e. the seller pays less than 2.5% commission or even doesn’t offer any commission to the home buyer agent. Under those situations, the buyers are obliged to pay the deficiency.
Yes, cashback from a real estate agent is legal in Ontario. According to the Real Estate and Business Brokers Act (REBBA 2002), a real estate agent can give money to home buyers. But a buyer agent rebate to an unregistered third party for referral is illegal.
To avoid any confusion and misunderstanding, it is an appropriate practice to keep a buyer agent commission rebate agreement. Cashback real estate may include rebate terms and details in a BRA (Buyer Representation Agreement) or in a separate agreement.
The cashback is commonly documented in the addendum (Schedule A) of the Buyer Representation Agreement. It also maybe be drafted in a separate document, which is acceptable as long as the key information is covered clearly and comprehensively. Those terms include the amount or percentage of cashback, who the beneficiaries are, how it is collected when it is delivered, whether there are any conditions.
No. The seller pays the realtor fees to the listing brokerage which includes the amount to the cooperating brokerage i.e. buyer brokerage agreed upon in the agreement.
When you sell your home and the house is not your primary residence, the buyer agent rebate may have tax implications on capital gains.
More specifically, when calculating the capital gains tax, the cash back from real estate agents would be deducted from the adjusted cost base (ACB), which eventually increases your gains for tax purposes. For accuracy, it is recommended that you consult with a qualified professional on this issue.
No. The land transfer tax is based on the home purchase price. Any commission rebate related to tax issues should be discussed and confirmed with accredited professionals such as real estate accountants, tax specialists.
The cashback usually won't happen at the closing since it takes time for the buyer brokerage to get paid by the seller via a listing brokerage. It is typically applicable a few weeks after the successful closing of the transaction, and all funds have been distributed and commissions are received from the listing brokerage and/or lawyer.
Different rebate realtors offer different commission rebates. It is not uncommon to see rebates above 1% of the home purchase price in Toronto. There are no standard rules to select the right realtor.
Though there are rules to regulate every real estate agent, there are still grey areas relying on individual conscience. How to judging the realtor's moral standard becomes a challenge to human nature when a personal stake is heavily involved?
The house purchase or sale is a large stake to most families, and the associate $ amount in GTA can easily surpass the revenue of most small enterprises.
Therefore, it makes more sense, that you, as a seller or buyer, actually hire a partner or professional manager to run the project for you instead of hiring a mediocre customer representative to provide the service such as showing and making an offer.
The whole process of either home buying or home selling is a system, complex and intertwining. Thus it requires your partner to possess the business acumen, and the similar capacity to run a business, besides the realty knowledge.
Your partner also needs to have the capability to provide a thorough analysis and reasonable predictability, he needs to help you manage the uncertainties, the changes, and the risks, and he needs to provide advice on your current and future planning and help you set up priority among many considerations.
To maximize your investment, he needs to formulate strategies and tactics before the negotiation and create and catch the opportunity once it arises.
Obviously, you need to consider the integrity and cost of hiring your potential partner as well. The effective balancing among the 3 components ( your partner’s capability, integrity, and cost) is the key to making a successful deal beneficial to both parties.
An easy call at 647-914-7337 to set up an appointment with me at my brokerage office in Markham. Let’s exchange your opinion, views, and my philosophy on how to run the project as your trusted partner and how I can maximize your interest and relieve your worries.
Cash back realtors offer commission rebates out of their own commission to a home buyer. The real estate commission rebate is legal and may be taxable. Commission rebate realty doesn’t necessarily mean a discounted service. How to balance the factors to choose the right cashback agent needs to be considered carefully.