Commission fees are a routine part of the real estate buying and selling process, since both agents and brokers are regularly involved in each deal. There’s a lot of legwork and due diligence on the part of the real estate agent to help buyers and sellers through each transaction, and commission rates are designed to reward them for a job well done. In turn, buyers and sellers are able to achieve their real estate goals more quickly, while avoiding far less hassle and wasted time.
That being said, is there a standard commission rate for real estate transactions in the province of Ontario? The answer is slightly more complex than you might think, which is why we invite you to follow along as we break down all the intricacies. You’ll then possess a much better understanding of the process, and how commission rates work.
COMMISSION RATES IN A NUTSHELL
Boiled down to its core principle, a commission rate is a percentage of a sold property that is paid directly to real estate listings agents, who in turn may share a cut with their parent brokerage. Not only do brokerages guarantee that real estate agents are operating within legal and ethical industry guidelines, but they also help facilitate a strong reputation among other property owners and buyers.
Ontario brokerages establish their own commission fees, which take care of MLS listings, signage, advertising and marketing materials, and payment for services rendered. Depending on the brokerage in question, commission fees may be somewhat negotiable, based on the types of services being offered. Real estate agents tend to provide the maximum amount of services to clients who agree to higher commission rates, which means clients need to decide how best to approach the topic. Property sellers are responsible for paying commission fees to the real estate team via a real estate attorney who creates a trust ledger showcasing a breakdown of services, costs and final earnings.
KEY TIPS TO UNDERSTAND COMMISSION RATES
To maximize your understanding of real estate commission rates as they pertain to the province of Ontario, we’ve prepared the following list of key tips and points to provide further information.
1) Commission Structure
The total commission rate of a real estate sale equates to roughly 5% of the sale price, but it’s important to note that this figure can, and sometimes does vary. In fact, it’s quite common for the listing agent and buyer’s agent to split the commission, with each receiving a percentage. Regardless, 5% is a baseline figure through which many brokerages in Ontario operate under, and a good starting point for possible negotiations with the seller.
2) Listing Agreement
Sellers will have to sign a listing agreement with their chosen real estate agent, which in turn outlines the terms of the arrangement, including the agreed-upon commission percentage. This is to establish all the criteria of a real estate sale beforehand, so that both parties understand and avoid any confusion or miscommunication.
3) Cooperating Brokerage Commission
The listing agent will offer a certain percentage of the total commission to the buyer’s agent, which is also referred to as the cooperating brokerage. This percentage helps serve as an incentive for other agents to bring potential buyers to the property, further speeding up the sale.
4) Buyer’s Agreement
Buyers may sign an agreement with their agent which outlines the terms of their respective relationship, including any commission fees the former may be responsible for. However, it’s sometimes common for the buyer’s agent to be compensated directly from the seller’s proceeds, depending on the type of deal.
5) Payment at Closing
Commission fees are typically paid at the closing date of the sale, and funds are usually deducted from the seller’s proceeds before they receive their final payment. However, this is not etched in stone, and the commission payment due dates may vary, depending on the deal. Many real estate agents and brokerages help offset this uncertainty by opting for commission advances, which guarantee their money before the seller has made a payment.
6) HST Charges
Always note that commission fees are subject to HST (Harmonized Sales Tax), which means it’s important to clarify whether the quoted commission includes HST, or if it will be added on top. Agents and brokerages should be especially mindful of this, to avoid any possible confusion or issues down the road.
CONCLUSION
As you can see, it isn’t too difficult to understand real estate commission rates, though there are times when certain complexities may arise. This, however, should serve as an adequate baseline through which real estate agents can better understand the nature of the commission process. For those new to the industry, it’s invaluable information that will help them grow and acquire more business as time goes by.
Rocket Advance understands the nature of real estate commissions all too well, and that’s why our commission advance system is so popular. Our application process requires no credit check, and is based on commissions you already have locked in through your respective deals. Apply for as many as you like, depending on how many deals you have going, and receive your money as quickly as the same day as we receive your application. From there, you can receive your funds immediately, without having to wait, which will help you strengthen your real estate career and pursue more business opportunities with clients who trust you. Contact us today for more information!
