Real Estate Commissions in Canada

MONEY & FINANCE

If you’re thinking of selling your home, you should know that there are commissions associated with selling your home. The costs of selling your home can add up to thousands of dollars, and real estate commission often accounts for a large portion of the costs of selling a house. You probably know that real estate agents charge for their services, but do you know how much, how you can get a cheaper rate, and what alternatives there are for you?

Full Commission Real Estate Agents

Full commission realty is the traditional model for selling a house through a real estate agent. The agent, usually from a local company, assumes the responsibility for selling your home and provides the skills, knowledge and contacts for doing so. For being able to sleep with minimal worry during the selling period you will pay this real estate agent a standard commission rate – around 5% (in Canada) and 6% (in the US) commission (based on the selling price of your home), of which 50% usually goes to the buyer’s agent.

These are just averages, however. In Canada, commission rates differ from province to province and even from city to city. For example, real estate commissions in Ontario are a flat 5% in total but real estate commissions in Vancouver are more complex at 7% for the first 100K of the home’s price and 2.5% for the rest. 

The same variation from region to region can also be seen in the United States. For instance, combined real estate commissions in New York City are approximately 5-6% of the home’s selling price while the typical real estate commissions in Florida are around 6% but can vary between 5-7%, depending on the specific agent you work with.

Up until now, using a full commission real estate agent has been the option in which you are able to expend the least time and energy in selling your home. Your real estate agent typically takes care of all of the work involved in selling your home, including advertising, photography, listing your home online on MLS?, opening up time slots for open houses, and negotiating the final price of your home with the buying party. All you need to do is hand over the keys to your real estate agent and they will handle the rest.

Flexible Commission Real Estate Agents

A new real estate commission model has arisen to deliver the advantages of a commission-based model but at a lower cost – flexible commission. The concept behind flexible commission realty is that selling houses is just like selling any other item: the commission should be flexible depending on factors surrounding the agent and the sale. For example, the experience of the agent; the breadth of their contact network; their knowledge of the geographic area; their skills in marketing; their past successes; their client reviews and so on. In addition, the time of year and the demand for homes in the surrounding area can also affect the negotiation of the commission rate.

You can find real estate agents with flexible commission rates at wowa.ca

Now platforms such as WOWA give an option to real estate sellers to hire agents at a different commission rate. Along with real estate agents offering flexible commissions, on Wowa you can find agents advertising a lower commission rate than other agents to attract new clients (as in any other business). But do not be confused by the ‘flexible” term; these agents are usually full-service real estate agents who will do all the work for you.

Low-Commission and 1% Agents

Over the past decade, real estate prices have increased significantly, especially in large metropolitan areas. As real estate commissions are calculated based on the percentage of selling price of your home, some agents find that they can still earn the same amount in commission while charging the seller a lower percentage commission.

For instance, a 1.5% commission on a $800K home gives the agent a $12,000 commission, which is the same as the agent charging only a 1% commission on a $1.2M home.

Commission Rate3%1.5%1%
Selling Price400K800K1.2M
Commission Amount$12,000$12,000$12,000

As a result, some real estate agents in large metropolitan areas like Toronto or Vancouver have developed low commission business models, with some charging as low as 1%.

On WOWA, you can find a real estate agent near you who charges one percent commission.

The Range of Commissions

If you’re thinking of selling your home, you’ll probably start to notice “For Sale” signs on properties wherever you go. Some will have the name of a real estate agent on them, others may have a company name and yet others may have “For Sale by Owner” handwritten on them. All of these options of people to sell your home come with an associated commission or fee, from $0 if you do it yourself up to the industry standard percentage commission for full commission real estate agents.

For Sale by Owner

This is the option for selling your home in which you do everything – from deciding how to price your home to marketing and advertising to arranging open houses to the legal and financial investigations and contracts to weeding out unqualified buyers to whatever is needed. Not only is all this a significant investment of your time and energy but it is also very stressful as you are selling something in which you are probably very emotionally invested.

If you are a hands-on person and you think you would be happy to do the tasks of a real estate agent, then the “for sale by owner” option can help you save thousands of dollars on real estate commissions. 

The most important and often overlooked part of choosing to sell your home by yourself is listing your home online. While there are an abundance of websites that you can list your home on, even including websites such as Kijiji, you should ideally try to list your home on a website where there are a lot of buyers and real estate agents looking to purchase a home to ensure that you are getting the highest number and most relevant traffic coming to your listing.

In particular, REALTOR.ca? (also known as MLS?)  is the main website that real estate agents look for homes for their clients on, and this would be the best place to list your home on. There are a number of website services that help you list your home on MLS? for a flat fee as they are partnered with brokerages and have access to post listings on MLS?. Some of the website services include For Sale by Owner Inc, The Realty Commission, and PropertySold.  

There are also other websites such as Prelist and Free2List which will list your property on their website, but do not necessarily provide a listing to MLS?.

If selling by yourself sounds just too much, you can hire an expert in these matters – a real estate agent – to do some or all of the work for you.

Fixed-Rate Platforms

The fee that a fixed-rate platform company charges you for selling your home is less than you would pay a full commission real estate agent. It is an agreed-up-front amount and not a commission. For example, Purplebricks charges $799 CAN to sell a home in Ontario and $699 in Manitoba, Canada, and £999 throughout most of the UK (except for London).

However, fixed-rate real estate companies vary in the services that they provide for the fee, and it is not always clear from their website what is included. You will probably receive a free home evaluation but may have to organize the showings for your home yourself. Extra services are often available from the fixed-rate platforms for a price.

While you do work with a local real estate agent affiliated with the platform under this option, you will still have to do some of the work and carry some of the stress yourself.

So what is the best option for me?

In summary, there are many options available for homeowners looking to sell their home. To choose the best option for you, first consider how much work you are able to put into selling your home and how much you are willing to spend on the costs of selling your home. Once you know the type of service level you are looking for, it will be easier to narrow down your alternatives. 

For example, if you are a shift worker and your shift schedule does not allow you to open up suitable time slots during the day for open house, then you might be looking for a full service real estate agent. Depending on how much you are willing to spend, you might be looking for a real estate agent with full commission, flexible commission, low commission, or one percent commission.

If you are the type of person who prefers to do most of the work yourself, then you might be looking into a For Sale by Owner or Fixed-Rate Platform option. 

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