Cash Back Realtor: a Complete Explanation of Commission Rebate

Cash back agent real estate commission rebate

What is a commission rebate?

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.

Do house buyers pay commission? Who pays commission for buyer's 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. 

Are real estate commission rebates legal? Can real estate agents give cash back? 

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.

Is there a standard rebate form or agreement sample?

The cashback can be documented in the Buyer Representation Agreement. It also may 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, and whether there are any conditions. 

Is there a real estate commission rebate to the seller?

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.

Is the real estate commission rebate taxable? Is it tax deductible?

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 cashback 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.

Does the commission rebate affect the land transfer tax?

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, and tax specialists.

When will I get a buyer agent rebate?

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.

Does cashback in real estate mean a discounted service?

  • Not necessarily. It varies depending on different cashback agents/brokerages. 
  • Most agents will comply with the industry standard, codes, and rules. They value the clients’ referrals and future business. In addition, the fine for any violation is prohibitively high. 
  • The maximum cashback (100% commission rebate with a charge on services required) that offers is based on transaction efficiency. For example, if you have a clear target, your home purchase is very productive and efficient, and you are entitled to that rebate.

Is it worth it to use a cash-back realtor?

It varies with the home buyer’s circumstances and perspectives.

Regardless of whether any commission rebate is involved or not, inherent conflicts of interest between the buyer and the agent always exist since both buyers and agents seek to maximize their own ROI (Return on Investment). For example, the home buyer wants the best cost while the realty agent wants the highest possible commission with the lowest effort.

How to choose a good cash back realtor?

The house purchase or sale is a large stake to most families, and the associated $ 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 would 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.

Call at 647-914-7337 for a chat, drop a line at, or meet with me at my brokerage office in Markham so we can understand your requirements and how my philosophy and methods can be of use.