Real Estate Commissions in Ontario, Canada

Home Seller

5%

The seller typically pays 5% commission on the final sale price of a property to the listing and buyer’s agents.      

Home Buyer

0%

Real estate commissions are not typically paid by the buyer because the seller distributes commissions to the agents.

REAL ESTATE COMMISSIONS FOR SELLERS

According to the industry standard in Ontario, the seller typically pays 5% commission on the final sale price of a property to the listing and buyer’s agents. In addition, HST is added on top of the commission and this is a fee that the seller is responsible for. Each agent then has to split this fee with their brokerage offices which varies per agent.


How is the real estate commission determined?

Commission is usually evenly split between the seller’s agent and the buyer’s agent – typically 2.5% to the seller’s agent and 2.5% to the buyer’s agent. Sometimes this can vary depending on what the seller arranges with their agent. Sometimes offering a buyer’s agent commission of 3% is a great way to attract more views to a home. For example, 2% to the seller and 3% to the buyer. Commission is negotiable depending on the property and the market.

What is a 1% agent and how does that compare to a full-service real estate agent?

It is very rare that a seller pays only 1% commission to sell a home. Most of the time, the 1% commission is for the listing agent and a 2.5% commission is owed to the buyer’s agent. This is a typical structure for discount brokerages.


How is the real estate commission paid out?

Lawyers pay out the commission according to the contracts signed by real estate agents and the seller.


Are agents allowed to double-end a real estate commission?

Yes they are but they are required to tell you before you sign any contracts with them.


Can I save money with a flat-fee commission?

This is a matter of perspective and not every listing agent will accept it. It may appear to save the seller money up front but the property may not get as much exposure to the right buyers. You also need to figure out what services are included with a flat-fee service. You may find yourself having to stage the home, take professional photos, handling appointments and negotiating with buyers because flat-fee services typically only include listing your home.


REAL ESTATE COMMISSIONS FOR BUYERS

Depending on your point of view, real estate commissions are not typically paid by the buyer because the seller distributes commissions to the agents. Because commissions are included in the purchase price, one could argue that fees for the buyer’s agent are not technically “free”.


Disclaimer:

Sellers may not always pay the buyer’s agent commission. When you sign a buyer’s agreement with your REALTOR® you may notice a section talking about commission and what would happen if a seller does not pay the buyer’s agent commission. This section will state that if a seller does not pay the buyer’s agent commission the buyer will be responsible to pay the commission. This will be either a flat fee or a percentage of the purchase price and can be negotiated with your buyer’s agent.

An example of when a seller may not pay an agent’s commission is when the seller is listing their home by themselves. However, many agents will negotiate with the seller to collect a commission from them and will only resort to the buyer paying the commission as a last resort.



NEGOTIATING COMMISSION WITH YOUR REALTOR®

Yes, real estate commissions are negotiable!


Keep in mind that some agents will agree to reduce their fees right up front and some will not lower their fees because of the services they offer. This is an important part in selling your home. Do not worry that it will offend your agent. Agents at Fivewalls are happy to explain why they charge a certain commission and the services that they offer.


TIPS ON NEGOTIATING COMMISSION

Just remember that when you are negotiating the ‘perfect commission rate’, you get what you pay for.

  • Reach out to a few real estate agents and ask in details about the services that they offer. Get a deep understanding of what your home really needs to get the highest price.
  • If your home is move-in ready in a high-demand neighborhood, this may be something you can discuss with your agent.
  • Don’t get hung up on commissions – keep in mind that people typically hire their real estate agents for a couple of months. You need someone who is responsive and a great personality to work with.
  • Homes that are more expensive are typically easier to negotiate.
  • Ask how much your agent plans on spending in marketing for your home.
  • Sometimes a lower spend could mean a reduction in fees. Remember that agents are the ones who pay for marketing.
  • Don’t get swayed easily by REALTORS® who will easily lower their commission rate. Remember, you are trying to get them to negotiate the highest price when you sell your home.
  • Homes that take longer to sell will be harder to negotiate.
  • If you plan on using the same agent to buy and sell a home, you may be able to negotiate a lower rate depending on your properties.