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How Do REALTORS Get Paid In Canada?

There are many ways realtors in Canada can be paid. There are many options for realtors commissions.

Quite often the rate of commission a realtor will charge a selling client will depend on the extent of the client’s needs. For example, some agents will charge a lower level of commission for a lower level of service, whereas an agent offering a full service will charge a higher rate of commission. The commission on a sale of a home is dispersed by the seller’s lawyer to both the selling agent and the buying agent where applicable.

If a realtor works as part of a team, the commission disbursement will be different again. The realtor will have to provide some of their commission to the team leader.

Realtors should hire a professional accountant to keep track of their commissions and expenses for income tax purposes. This will ensure that paperwork is always organized and kept up to date.

Reputation and Size of The Real Estate Agency

size difference

When a seller chooses to list with a reputable real estate agency this can greatly affect the traffic that the “for sale” sign attracts. Not only is the seller paying for the realtor’s service, but they are also paying for the use of their reputation. A larger agency will have many agents working for them and the likelihood of obtaining many more buyer leads is much greater than a small agency.

Selling Agent and Buying Agent Commissions

When there are two agents involved in the sale/purchase of a home, both realtors get paid a commission, however, the amount of commission may vary between the selling agent and the buying agent. Some buyers may have a misconception that they are responsible for paying their buying agent some sort of commission, but it is the sole responsibility of the seller to pay all commissions to whatever agents are involved in the sale of the property.

How Much Do Agents Make Off The Sale Of A House?

Typically in Ontario, Canada the standard rate of commission that a seller pays on the sale of their home is 5%, but can range between 3% and 7%. However, the commission split between the selling agent and the buying agent can vary depending on the arrangements the selling agent has made with their client. If the selling agent wants to bring a lot of attention and traffic of potential buyers to the property they may offer the buying agent a higher commission instead of a 50/50 split on the commission. Other factors including selling agents expenses such as marketing, staging, professional photography, and other fees involved in selling a home will affect exactly how much the listing agent will make on a sale.

How Much Do Realtors Make Off Rentals?

rent a house

Many realtors are hired by clients owning properties who are looking to rent them out. The amount a realtor is paid for this service can vary depending on the agreement with the client. Typically, in Canada, an agent is paid a 1-month lease payment per 1-year lease, or 5% of the total gross lease amount if longer than 1 year. If there are two agents involved, the landlords and the tenants, then both agents would split this amount. Many realtors don’t feel this is enough payment for all the work involved, however, it may also lead to future sales down the road when the landlord is ready to sell, or the tenant is ready to buy.

How Much Do Realtors Make Off a House Purchase?

It is important for potential buyers to hire a realtor when looking to buy a property. A realtor is very knowledgable in the business and can lead them through every step of the process. Buyers do not directly pay a commission to their buying agent, however, the commission on the home is built into the selling price, so indirectly they are somewhat paying towards the commission.  The buying agent may receive a larger rate of commission than the selling agent if the selling agent is using this as a strategy to attract more traffic with buying agents. The selling agent will discuss this plan with his selling clients and it must be agreed upon in the contract between the seller and their selling agent. In Canada for a home that sells for approximately $500,000, the commission amount would be between $15,000 and $35,000. However, in certain locations where home values are much higher such as in Toronto or Vancouver, a home that would sell for over $1 million would pay commissions of $30,000 to $70,000.

How Much Do Realtors Make Off a New Construction?

New Home Construction

Many buyers wonder if they have to deal with the builder’s real estate agents when purchasing a new construction home. The simple answer is yes. The builder’s agent works to represent the builder’s best interests, while your agent works to represent your best interests. It is always in a buyer’s best interest to have their own representation when purchasing a new build, a resale, a condo, commercial, and even rural properties. However, with some new builds, the builder may not want their agents to deal with other agents, just the buyer.

In this case, the buyer’s agent can provide some negotiating strategies and advice behind the scenes. Keeping this in mind, if this is the circumstance, and you are utilizing the advice services of your agent, you will have to pay your agent for their time and services. This may be an out of pocket expense for you. However, some builders will provide a buying agent part of the selling agents commission.

Also sometimes a builder will pay a realtor a certain rate of commission for simply bringing the buyer to the builder but not actually fully representing them throughout the buying process. If a buyer is adamant about using their own real estate representative and the builder won’t allow it, the buyer may have to look at other new builds where the builder will allow them to use their own agent.

Resources

https://medium.com/@ab.digital.brp/real-estate-commission-how-do-realtors-get-paid-in-canada-48336754f868
https://www.fivewalls.com/what-are-the-real-estate-commissions-ontario-canada
https://urbantoronto.ca/forum/threads/how-much-do-realtors-typically-make-when-leasing-out-a-condo.9783/
https://www.reca.ca/consumers/tools-resources/ask-charles-consumer-questions/not-working-with-builders-real-estate-professional/