Did you know that real estate commissions and fees vary depending on the brokerage and the services they provide? In most situations, the seller pays the real estate commissions to both the buyer’s and the seller’s brokerages. Commissions are written into the listing agreement, so the seller must agree to the commission prior to signing the listing agreement.

Real Estate Commission Blog POst

How does it work?

Commission payments can be structured in three ways: as a percentage of the sales price, as a fixed dollar amount, or a combination of the two. As the seller, you will typically pay the commission agreed upon in your brokerage listing agreement. The commission paid may then be split between your brokerage and the brokerage representing the buyer. Be aware that the real estate commission is subject to HST.

What about buyers?

As a buyer working with a real estate salesperson or broker, you may have signed a Buyer Representation Agreement (BRA), which specifies the amount of commission the brokerage that represents you is entitled to and how it will be paid. If the commission listed in the BRA is greater than what the seller’s brokerage will pay to your brokerage, you may be on the hook for the difference. It’s also important to note that if you buy a home that is “for sale by owner”, you may be responsible for the commission payment owing to your brokerage under the terms of the BRA. Understand your rights and obligations before signing the BRA.

You get what you pay for

As with most things, paying a lower commission rate may mean you are provided fewer services. Before you agree to work with a brokerage, ask for a detailed list of the services they will provide to you. “It’s important to remember that different real estate professionals and brokerages offer different skills and levels of service,” says RECO Registrar Joseph Richer. “Some may prefer to offer discounted commissions and take on a larger volume of sales, while others offer unique or tailored services that provide extra value to their clients.” Have an open conversation with your real estate professional about your expectations and theirs. As a seller, make sure you are comfortable with the commission rate or fees, as well as the services being offered, before you sign the listing agreement.

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