About Real Estate Commissions?

Realtor’s commission in Ontario, Canada is an important aspect of the real estate process. In this detailed explanation, we will cover various aspects of the commission, including its amount, who pays it, negotiation possibilities, the coverage provided, how it is divided between agents, its implications for buyers, whether it applies if you don’t buy a home, its relation to closing costs, the scenario when a home doesn’t sell, the concept of dual agency, its legality, and the responsibility towards your selling agent if the contract expires without a successful sale.


The real estate commission in Ontario is not fixed by law and can vary depending on several factors, such as the region, the specific real estate market conditions, and the services offered by the real estate agent or brokerage. Generally, the commission is based on a percentage of the final sale price of the property. In Ontario, the commission rate is typically around 5% of the sale price, but it can be negotiable.


The commission is typically paid by the seller from the proceeds of the sale, although in some cases, it may be split between the buyer and seller or negotiated differently depending on the local market practices and agreements. When a property is sold, the seller agrees to pay a commission to their real estate agent or brokerage as compensation for their services. The seller’s agent, in turn, will usually offer a portion of the commission to the buyer’s agent as an incentive for bringing a qualified buyer to the table.


While the commission is often seen as a standard cost, it is negotiable to some extent. Both buyers and sellers have the ability to negotiate the commission fees with their respective agents or brokerages. Sellers can discuss the commission rate with their listing agent before signing a listing agreement. Similarly, buyers can negotiate the commission arrangement with their agent before engaging in a buyer agency agreement. However, it’s important to consider the value and quality of the services provided by the agent, as a lower commission may not always result in the best outcome.


A lower commission is not necessarily the best option because it could potentially impact the level of service you receive. Real estate agents work on a commission basis, and the fee they earn is a reflection of their expertise, time, and effort invested in helping you buy or sell a property. A lower commission might mean that the agent has less incentive to dedicate significant resources to marketing your property or investing the necessary time to find the best available options for buyers. It’s important to find a balance between the commission rate and the quality of service provided.


The real estate commission covers a wide range of services provided by the agent or brokerage. For sellers, these services often include marketing the property, conducting open houses, advertising, coordinating showings, negotiating offers, and providing guidance throughout the transaction process. For buyers, the commission covers services such as searching for suitable properties, arranging showings, providing market information, preparing and presenting offers, and guiding them through the purchasing process.


The commission is typically divided between the seller’s agent and the buyer’s agent. The exact split can vary depending on the agreements between the agents and brokerages involved. A common arrangement is for the total commission to be divided equally, with each agent receiving 2.5% of the sale price. However, the specific division can be negotiated based on the circumstances of the transaction.


For buyers, the commission is indirectly factored into the purchase price of the home. Although the buyer doesn’t directly pay the commission, it is typically built into the listing price set by the seller. Therefore, buyers indirectly contribute to the commission through the price they pay for the property.


If a buyer decides not to purchase a home after engaging the services of a real estate agent, they are generally not obligated to pay a commission. The commission is only payable when a successful transaction takes place, resulting in the transfer of property ownership.


While closing costs which encompass a range of expenses such as appraisal fees, title insurance, lender fees, and property taxes, can vary depending on factors such as location, property type, and specific contractual agreements, it is important to note that the real estate commission is not typically included in these costs.

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