Commissions are the lifeblood of the real estate industry, and both brokers and agents work hard to earn them on each and every property that is sold and purchased. Typically, commission rates in the Toronto area tend to hold stable, with minor fluctuations in the percentage amount that are dependent on a number of different factors.
These can include location, market conditions, the state of the overall economy, and individual agreements between real estate agents and their clientele. Other factors may include regulatory changes, competition, and shifting market dynamics. To understand real estate commissions as they pertain to 2024, we’ve put together this article with all the knowledge you’ll need. Let’s dive right in.
WHAT IS THE AVERAGE REAL ESTATE COMMISSION RATE?
Typically, real estate commission rates tend to waver somewhere between 5% and 6%, and location plays a rather large role in determining where exactly the needle stops. In 2024, commission rates tend to hover just under 6% of the value of the sold property. This is largely a baseline, and does not necessarily take into account the fluctuating criteria previously mentioned.
HOW MUCH DO AGENTS GET TO KEEP?
Contrary to what many customers think, real estate agents don’t get to keep the entirety of a commission fee. When a property is sold, the seller pays out the commission to the listing agent, who in turn siphons off a portion to cover the costs associated with marketing and advertising the property. These can include necessary things like professional photography and video, showings, and other forms of marketing.
Next, the commission is typically split in half with the buyer’s agent as a means to compensate both. After all, there can be no commission without a sale, and it takes two to make it happen. Once the split is finalized, both listing and buyer agents must pay a portion to the respective broker. The exact amount paid out to the broker is not etched in stone, however, and depends on several factors, including the original agreement.
HOW FLEXIBLE ARE COMMISSION RATES?
There is a small amount of play when it comes to real estate commission rates, but this depends heavily on the willingness of real estate agents to go along with such a proposal. Negotiation of commission rates means agents may lose the ability to try and push for a higher sale price of a property. Similarly, lower commission rates mean less profit, especially after marketing and ancillary costs have been taken into account.
One of the reasons clients choose not to negotiate on commission rates is due to the smaller number of agents willing to represent them. It’s far easier to agree on a baseline standard, as sellers wish to sell their properties as fast as possible, while buyers may want to sign on the dotted line before a competing client beats them to it. In the end, it’s better to keep commission rates as they are, so clients can benefit from the widest possible pool of talented agents willing to work with them.
IF A PROPERTY DOES NOT SELL
The inevitable question on the minds of new real estate agents is whether they will receive their commission in the event that the property in question does not sell. The short answer is “no,” but there are certain exemptions. Typically, real estate agents enjoy an exclusive right to sell a property, meaning no other agent can swoop in and take the opportunity. In exchange, the real estate agent must agree to sell a property before an agreed-upon date, lest the commission fee be waived.
However, certain contractual clauses may give the seller more opportunity to collect a commission fee, such as if a buyer purchases the property after the deadline has passed. These are known as brokerage protection clauses, or a “safety clause.”
CONCLUSION
Whatever the situation, you as a real estate agent are determined to earn your commission, which is the driving force beyond all your hard work. However, there may be times when you require that commission fee sooner than the scheduled date. If you have closed on a deal, you can receive your commission faster by contacting us.
Rocket Advance will deliver your commission payment to you so that you can put it towards anything you would like. It’s a great solution for agents who are just starting out, and need to receive their commissions fast in order to build new clientele and work towards the closing of new deals. Contact us today for more information!
