Commission in Real Estate: A Complete Q&A

Q&A of commission in real estate

What is a commission in real estate

Commission in real estate is the fees paid to the realtors for their services rendered during the real estate transaction. 

The services include but are not limited to:

  • For home buying: finding a prospective house or condo, booking an appointment, showing the properties, drafting an offer, negotiating, etc,
  • For home selling: verifying the documents to list in MLS, arranging appointments for viewing, negotiation, counteroffer, etc

How does a realtor get paid?

  • Real estate agent fees are charged by a percentage of the home sale price or a fixed amount or the combination of percentage and fixed amount. 
  • It is not allowed to be calculated by the difference between the actual selling price and listing price. 

How much do realtors charge? How much is real estate commission in Ontario?

Depending on different realtors, the average real estate commission, in Ontario, ranges from 3.5% ~5% of the home selling price, of which, 2.5% of the home price is payable to the buyer's agent, the rest 1% ~2.5%is for the seller's agent who represents home sellers. By using a calculator, you can easily come out with the exact amount of the realtor fee.

How does a realtor get paid? How does commission work in real estate?

  • The commission to seller agent is paid by sellers via their lawyers after closing. 
  • The buyer agent commission is in fact out of the seller's pocket but via the seller agent or lawyer. The commission structure is documented in the Form 200 Listing agreement. Then based on Form 320, the listing brokerage distributes the commission to the buyer agent brokerage accordingly.

Who pays the realtor fees? Does the buyer pay realtor fees?

Commission in real estate is normally paid by the seller. However, the real estate buyers may have to pay the real estate agent fees under some special conditions. The commission clause and holdover period in Form300 buyer agency agreement outline those situations. 

Is HST applicable to the real estate commission in Ontario?

Yes, real estate commissions are subject to HST in Ontario.

Is real estate commission tax-deductible in Canada?

When you are calculating capital gains, the real estate commission can be added to the cost for tax purposes in Canada. For accuracy please consult with the real estate consultant or tax specialist.

Is real estate commission in Ontario included in the closing cost?

In most cases, the buyer doesn’t pay a real estate commission in Ontario. When selling a house, the commission could be part of the selling cost.

How much do real estate agents charge to find a rental in Ontario?

The rental commission runs differently than that of home buying and selling. In most cases, the commission in residential rental is one month of the rent, paid by the landlord, and evenly split between the 2 agents who work with the tenant and landlord respectively.

Are realtor fees negotiable?

Absolutely, any claim from realtors that the commission is fixed by regulation is against RECO law and this violation will face a serious fine and punishment. It is totally at your liberty to weigh all the factors and negotiate a fee you feel comfortable with.

Does a lower commission in real estate mean a discounted service?

  • Not necessarily. Depending on the buyers and sellers’ circumstances, the seller may choose a flat fee service or negotiate a lower commission than the average, and the buyers may negotiate for a higher commission rate. 
  • No matter what kind of commission or commission rate realtors offer, they are all regulated by Reco law and have to conduct themselves professionally.

Does no fee realty work?

Some internet companies may offer a free listing for sale by owner. However, its market exposure is far less than MLS listing, which is one of the key concerns when selling a home privately in Ontario. There are more considerations are discussed in this separate article.

The possibly lowest commission in real estate?

  • The real estate commission structure has been established for a while. The home price significantly increased over the recent years. 
  • For many buyers and sellers, real estate commission is considered high. There are increasingly more realtors offering cash back to the home buyer and offering a lower commission rate or lower fee to the home sellers. 
  • Realsav offers the best cashback package to home buyers and the valued package to sellers, with absolutely no service discount.