Canada Realtor Fees: Who Pays?

If you’re not familiar with buying or selling a home, the realtor’s commission fees can seem very confusing. What are the typical commission rates, and who pays them?

Usually, the simple answer is the seller pays the commission fees. The not-simple answer is that it can depend, and the fee itself can vary from province to province and even from agent to agent.

As mentioned, it’s usually the seller who pays all realtor commission fees. The sellers will sign a listing agreement with an agent that outlines the total commission fee and what percent of that total fee will be taken by the co-operating brokerage, i.e. what percent will go to the buying agent.

The commission rate varies from province to province and agent to agent. Typically, agents will charge a percentage of the sale price of the home, usually anywhere from 3.5 % to 5%.  

In Ontario, the standard commission is 5%, with 2.5% going to each brokerage. Some provinces will do a tiered commission structure–for example, in Alberta agents will charge 7% on the first $100,000 and then 3% on the rest.

With that being said, there is no law fixing commission rates, so agents will often adjust their rates to remain competitive.

Commission rates are negotiable, and many agents will discount their rate in competitive markets. You may also see agents who charge a lower commission rate, or no commission rate, to friends or family.

When the seller’s agent reduces their commission rate, the co-operating brokerage rate often stays the same. For example, the selling side may take a commission rate of 1% instead of 2.5%, but the co-operating brokerage will still receive 2.5%, making the total commission rate 3.5% instead of 5%. It may not seem like a lot, but this can add up to thousands of dollars.

Some agents may not be willing to cut their commission rates, but will offer various services instead. Photography and staging are examples of costs that an agent may cover for you.

What happens when an agent represents both the sellers and the buyers? This is called multiple representation. Agents who represent both parties in a real estate transaction receive the whole commission instead of just part of it. You may have heard this referred to as “double-ending” a deal.

Both buyers and sellers must give consent before entering a multiple representation situation. Your agent should provide you with a consent to multiple representation form that outlines what multiple representation is as well as what the brokerage can and cannot disclose to the other party. 

Multiple representation is allowed in most provinces, but is restricted or banned in some areas such as BC. 

Typically, a buyer will not directly pay their agent. Before you begin house hunting, your agent should provide you with something called a Buyer Representation Agreement. This agreement will outline the agent’s commission–usually it will say that the agent will be paid a percentage of a home’s sale price by the selling brokerage.

However, the agent may include that they are to be paid even if the seller isn’t offering a commission. In this case, the buyer would be responsible for paying the commission fee. These types of instances are rare and usually only occur when dealing with private sales or off-market properties.

In some cities, flat fees are gaining popularity, especially as online brokerages become more prevalent in the real estate space. With a brokerage offering a flat fee, you’ll be paying less than with a fee percentage, but will often be receiving fewer services in return.

These types of arrangements can be great if you have some real estate experience and don’t mind managing things yourself, but a full-service agent can assist with marketing, negotiation, and pricing–things that can often make or break a deal.

When it comes to pre-construction homes, it’s typically the builder who pays the agent’s fee. The commission is usually around 3% to 4% of the purchase price. Builders will often do this to attract agents to sell their properties.

Some agents who specialize in pre-construction properties will also offer buyers cashback incentives out of their commission. Be sure to ask your agent if this is an option if you’re buying a pre-construction home.

Sellers will have to pay either GST or HST on real estate commissions. Keep in mind this tax is only for the commission, if you’re selling your primary residence then the capital gains on your home are not taxed.

Buyers will not have to worry about paying any tax for agent commissions, unless they have an agreement where they are directly paying their agent.

When it comes to Realtor fees, there should be no surprises. Your agent should outline any fees you have to pay in the listing agreement or buyer representation agreement. If you have any questions, always clarify with your agent!