Why and How Much Commission Do I Pay When I Sell My House?

Nobody likes to talk about the subject of money but I think its important to address the subject of commission, why you have to pay it, how much you pay and how its split so that its one less thing for you to be concerned about when you are ready to sell.    

So lets take a look at the why first.   

This is simple, real estate professionals charge a fee for their services.  We, unfortunately, cannot work for free.  You pay for our expertise, knowledge and experience in this area.  We know what we are talking about.  We help you get your home ready for listing, we list your home at an agreed price, market your home to get more buyer exposure, deal with all negotitations, paper work and make sure that the closing process runs on time and smoothly.  

So what do agents usually charge and why?   

Realtors in Ontario typically charge anywhere from 1-6% to list a home for sale; the amount depends on the agent’s experience and results, business model, location, included services (ie professional photography, videography, floor plans, online marketing etc) and the amount offered to the agent who brings the Buyer (will explain more about this below).  

You may not be aware but when you hire a real estate agent to sell your home, the commission you pay is usually split four ways:

the agent who works for you, the Seller (ie the Listing Agent)
the Listing Agent’s brokerage
the agent who brings the Buyer (ie the Buyer’s Agent)
the Buyer’s Agent’s brokerage

How is this split?

For example, if you are charged 4% commission on the sale of your home, 2.5% of that will go to the Buyer side and is split between the Buyer's Agent and their Brokerage and 1.5% is paid out on the listing side so that would be split between the listing agent and their brokerage.  Furthermore, if your agent works as part of a team, the percentage of what is paid to the Seller's agent is then further shared between the Agent and a small percentage is paid back to the team.

I hope this clarifies the issue a little more for anyone who wasn't sure how real estate commissions work. 

- Justin