How Much Real Estate Commission Should I Pay?

It’s well known that one of the biggest costs of selling a home is the commission that needs to be paid to the real estate agent that closes the deal


If you’re thinking of selling your home, you’re probably wondering, “How much real estate commission should I pay?”

In Canada, realtors typically charge between three and seven percent of a home’s final selling price as commission. Most of the time, that commission is calculated at 5%, with half going to the seller’s agent and half to the buyer’s agent. Of course, there are always exceptions to those figures.

Still, since 5% is the norm, let’s use that as an example. In 2019, the average selling price of a home in the GTA was a little over $800,000. Five percent of $800,000 is $40,000. That’s a significant cost.

Is there a way to pay less? You betcha. Just because 5% is the norm, it doesn’t mean that that’s the amount of real estate commission you have to pay. There are ways to lower that figure — potentially down to 0%.

Variable Commission Rates

In Canada, licensed real estate agents are members of their local real estate boards or associations. Each of those local boards and associations — and there are 90 of them — are members of the Canadian Real Estate Association (CREA).

The CREA upholds Canada’s Competition Act, which is meant to ensure fair market competition. This means that any licensed realtor is free to choose the amount of commission they charge. There is no standard commission rate that is charged by all realtors. As the CREA website states:

Commission rates or fees members charge for services offered to the public, and the division of those fees among cooperating members, are solely the choice of those providing the services.

While a 5% rate is typical, an agent may choose to charge more or less for a variety of reasons. The amount of work and time relative to the final sale price of the house is often a consideration. If, for example, an agent lists a high-value property in a hot market and a booming economy, they may charge a lower commission. They won’t need to expend the same resources as they would in a slow market during a recession, and a lower commission rate will still provide a valuable return, especially for the amount of work and time expended.

Yes, You Can Negotiate Commission Rates

If you’re planning to use a realtor to sell your home, you should shop around for an agent. Canadian Real Estate Magazine suggests looking at things like:

  • Their sales record.
  • Which services they provide. For instance, will your realtor help stage your home and show it or will you do those things yourself?
  • Their knowledge of the community your home is located in. While anyone can gather stats, other knowledge such as future developments and local businesses and activities can help sell your house more quickly and for a higher price.
  • The business model they use. For example, some realtors work in teams and you may end up working with an agent other than the one you interviewed.
  • References, which can help determine if the agent is a good fit for your own personality and expectations.

In addition to these things, you should absolutely ask how much real estate commission you will need to pay.

Some realtors will refuse to haggle. Others may be open to working for a lower rate. As explained above, if there is a good chance your home will sell quickly with a minimum amount of effort from the realtor, they may agree to a lower rate.

Additionally, some realtors may offer reduced services in exchange for a lower rate. For example, if you can handle showings and open houses on your own, your realtor may be open to a reduction in their commission rate.

Always remember that you can choose any realtor that you like. Shop around and find the perfect fit for your needs.

Sell Your Own Home to Lower or Eliminate Commission Fees

The main reason people choose to sell their own homes is to save on commission fees. But, it’s important to keep in mind that commission is typically paid out from the amount that a home sells for, regardless of whether that commission is due to the seller’s agent, the buyer’s agent, or both agents. If the person buying your home uses a real estate agent, that realtor’s commission still needs to be paid out from your home’s selling price.

Ideally, a private seller might hope to find a buyer who doesn’t use an agent, so that no commission needs to be paid out at all. But in the case of a buyer who does use an agent, that commission fee will need to be paid.

When you’re selling your own home to save money, it’s understandable that you want to save as much as possible. It may be tempting to offer the buyer’s agent a lower commission fee than the norm. However, the better your commission offer is, the more buyer’s agents you’ll attract, which should help to sell your home faster and for more money.

If your property is listed on the MLS (and it should be, for maximum marketing exposure), that listing should include the terms and amounts of commission offered to the buyer’s realtor. That is how buyers’ realtors know what commission you are offering, which will impact whether they suggest your property to potential buyers.
To help figure out how much commission you should pay to a buyer’s real estate agent, check the MLS listings for your area. Each of those listings will indicate the amount of commission being offered and will help inform your own decision.

How to Sell Your Own Home to Save on Commission Fees

Selling your own home can be a time-consuming process, but it can result in saving several thousands of dollars. A private home sale usually entails:

Determining Your Home’s Market Value

Your home’s fair market value (FMV) helps to determine a fair and reasonable listing price. The list price holds considerable weight in attracting potential buyers. The FMV may be determined by hiring a licensed home appraiser, doing research on your own, or using an online home value calculator.

Doing a Home Inspection

A thorough and objective inspection of your property can pinpoint things to repair and upgrade before listing. While it’s possible to perform your own home inspection, you can also hire an accredited member of the Canadian Association of Home and Property Inspectors (CAHPI).

Cleaning and Staging Your Home

Once all repairs and upgrades are completed, your home should be decluttered and then cleaned from top to bottom. Staging your home can make buyers feel more welcome and comfortable — ultimately helping to sell your house faster and for a higher price.

Marketing Your Home

The first step in marketing your home is taking terrific photographs. Once you have your photos, list your property everywhere possible, including:

  • Sites specific to home sales, such as Zillow and HomeFinder.
  • Private sale/want ad sites, such as Kijiji or Craigslist.
  • The classified section of your local newspaper.
  • Your social media channels.

Listing Your Home on the MLS

The MLS is the most powerful marketing tool in real estate. However, only licensed real estate agents can list on the MLS. Private sellers can hire realtors who offer “Flat Fee Listings” or “Mere Postings.” For a small flat fee, these realtors will list your home on the MLS.

Showing Your Home

Most buyers will want to see your home in person before submitting an offer. During a showing, it’s best to stay on the property in case the prospective buyers have questions.
Working With a Real Estate Lawyer
Once the offers start coming in, it’s important to work with a skilled real estate lawyer who can guide you through the legal complexities of real estate contracts.

How Much Real Estate Commission Should You Pay?

As you can see, there is no one clear answer about how much commission you should pay when you sell your property. There are many factors that affect the commission rate, including:

1. Are you using a real estate agent or are you selling your home yourself?
2. What are the market trends in your area, in terms of commission rates?
3. If you’re hiring a real estate agent, are they open to negotiating their commission?
4. Is your buyer using a realtor?
5. If you’re selling your home yourself, do market trends suggest offering a competitive commission rate to buyers’ agents?

If you’re lucky to sell your own home to a buyer who is not using a realtor, your commission rate will be 0%. But in any other scenario, how much you should pay depends on the realtor(s) involved and market trends in your area. A little research can help determine typical commission rates in your area and can help you figure out how to shave that commission when selling your home.