Real estate commissions are the fees you pay to your real estate agent for their services. It is usually calculated as a percentage of the selling price of the property. In Ontario, the combined real estate agent commission of both the buyer and seller agents is typically between 3.5% and 5% of the home sold price.
The average combined real estate agent commission is 3.5% to 5% of the total selling price, which is then split between the buyer’s and seller’s agents. Higher commissions are possible, but the typical rate is 5%. The buyer’s agent and seller’s agent (the listing agent) will usually split the commission 50/50 or 2.5%/2.5% for the standard combined commission rate of 5%.
Depending on your agent, the commission can be paid as one of the below three different forms:
The seller of the home will usually pay the real estate agent commission. When a home is listed, the seller will decide on the gross commission they are willing to pay and how it will be split between the buyer and seller agents. This commission will then be paid out by lawyers after the transaction has been completed.
Typically, the seller will cover both the commission for both agents. In rare cases, if the seller lists the property by themselves or chooses not to give a buyer agent commission, the buyer may have to pay their agent the difference. However, such cases are rare and real estate agents will generally let you know beforehand if it is the case.
Yes, the seller has the pay HST in Ontario on the real estate agent commission.
Real estate agent commissions are high because the commission is split between many different parties and the real estate agent has to cover any marketing expenses even if the home doesn’t sell. The agent may have to pay upfront for professional photography, mail marketing materials, supplies, and much more. Your agent works very hard behind the scenes to ensure that you are getting the best price for your property and in some cases, a higher commission can mean better marketing for your home.
There is no formal rule or regulation that sets the commission rate. Each agent can choose their own commission type and rate or fee. Although the commission will vary from agent to agent, it will be close to the average commission for the area. Real estate commissions are negotiable. Details about your agent’s commission will be outlined in the contract you sign when hiring an agent.
Yes! Like most other service fees, you can negotiate the commission with your agent. The commission makes up the largest portion of your selling costs, so it always makes sense to check and negotiate the commission of different real estate agents when selling a property. On WOWA, you can check real estate agent commissions.
Typically no, since you are not paying your agent directly and they are paid by the seller. However, some agents are willing to give a portion of their commission back to buyers as a cashback rebate. Find out more about cashback rebate agents
Flat-fee commissions can seem like a great way to save money, especially since they are usually cheaper than equivalent percentage-based commissions. However, the quality and quantity of services offered with flat-fee packages are often much lower. You may have to stage and market the home yourself, and you will still have to pay a buyer’s agent commission.
Yes. Real estate agent commission is paid only when the property is sold, even if the property has been listed for a long time. In addition, some sellers may choose to self-list their properties and not offer a commission to buyer agents. We do not recommend this as doing so could reduce the likelihood of your property being sold.
A double-ended deal is when one agent represents both the seller and the buyer. In this case, the agent will get the full amount of the commission. This can happen if the buyer directly contacts and works with the seller’s agent after finding the listing without consulting an agent of their own. However, this is not recommended due to potential conflicts of interest. Agents are required to tell you in advance if they are double-ending a commission.
The Real Estate Council of Ontario (RECO) does not allow a commission type to vary based on the final selling price of a home. For example, you are not allowed to be charged a rate for a base amount and then an additional rate for the remainder. The rate has to remain the same for the full sale price.
It is also not permitted to have a different rate for the listing price and the final sale price.
Agents are allowed to base their commissions on how much they think the home will sell for. For example, a $400K home will have less commission than a $1M home if charged at the same rate. Agents can choose to charge a lower commission rate for the $1M home or a higher commission rate for a $400K home.
There are many additional closing costs involved in selling a home including lawyer fees, penalties from closing out a mortgage too early, as well as legal fees.