One of the most confusing parts about real estate can be the commission. What is your real estate agent earning? Who is paying their commission? How do you even know what you'll owe them?
Let's break it down and help you understand how commission works a bit better from both a buyer and seller's perspective.
What Is Commission?
Commission is another way of saying your agent's wage. This is how you'll be paying them for their services when they help you buy or sell a home. Typically in Ottawa>>, the real estate commission of 5% is split evenly between the listing agent and the buying agent.
Let's say the final sale price on your home was $650,000.
$650,000 * 5%
That amount will then be split evenly between the representing agents. Therefore, the listing agent will receive $16,250, and the buying agent will receive $16,250.
How Do I Calculate Exactly What I Owe My REALTOR®?
Let's say, as a buyer, the final price you end up paying for a home in Ottawa is $680,000. Since 5% of the sale price is being split evenly between the listing agent and the buying agent, you're paying your real estate agent 2.5% in commission.
$680,000 * 2.5%
Depending on the agreement your agent has with their brokerage, they may not be receiving that full amount.
Who Is Paying Your Real Estate Agent's Commission?
As a buyer, you're not technically paying your agent outright what you owe them in commission. It should be included in the final sale price of the home.
As the seller, the 5% commission will be split between the listing agent and the buying agent should be included in the sale price of your home, therefore the fee is subtracted from the proceeds of the sale.
Is Commission Negotiable? How Do I Ask My Agent About Lowering Their Commission?
Negotiating your agent's commission is always up for discussion. It's important to remember that the more you pay, the more services they'll be able to provide for you such as:
- Marketing your home on various platforms - newspapers, magazines, Facebook, listing websites, buses, etc.
- May not have as much time for you if they're trying to sell as many properties as possible at 1% commission
- Having professional photos or a virtual tour of your home may be too expensive
- Staging may also not be an option
The best time to ask about your real estate agent's commission is during the interview process in which you're trying to find the right REALTOR® to work with. When you ask if they're willing to lower their commission, make sure to also ask what that means for servicing your home. An agent will be honest with you when it comes to how their marketing techniques will be affected and why they may not want to lower their commission. The more services they can provide you, the more your home will be seen by potential buyers and look its absolute best.
Do Your Homework
If you're looking to sell your home and require a real estate agent's help, make sure that agent is an expert in your area or neighbourhood so they can price your home accordingly. You can also ask about the commission they will be charging you, which is typically 2.5% of the final sale price of the home. By multiplying 2.5% by the final sale price, that will give you your answer on what you owe them. Remember that the final sale price will also reflect the buying agent's commission of 2.5% as well.
Disclaimer: rates subject to change.
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