How Much Does a Realtor Charge to Sell a Home in and around Canada?
Selling your home is a big decision, and there are costs involved such as legal fees, attorney’s fee, insurance, property tax, transfer tax, etc. in getting this executed. Some homeowners prefer to get the sale done by themselves to avoid a major portion of the closing costs, which is the commission. However, in the sale by owner cases, the homeowners should also take up complete ownership and responsibility of all the activities. Starting from deciding the right time to selling your home, determining the sale price to complete all the paperwork involved in the process, they have to handle everything independently.
On the other hand, if you have the real estate agents involved, you should shift a portion of the responsibilities in return for a nominal fee or commission. Sellers don’t always have the time and expertise to execute the sale. Are you worried about the commission rates and how much you will eventually take home from the final sales price?
This article will throw light on the commission rates in different provinces in Canada. You can weigh the costs and benefits of hiring an agent and then reach a consensus on whether you would want to have real estate professionals involved in the sale of your home.
Commission Rates in Canada
Real estate commission no doubt accounts for a major portion of your closing costs. However, you might also get a better deal owing to their expertise and experience in the real estate industry. Studies conducted by the National Association of Realtors showed that homes listed with real estate agents fetched more sale price than those sold by owners themselves.
There is no fixed commission rate charged from the sellers as per the Canadian Real Estate Association (CREA). It depends on many factors such as the region, nature of services availed, and the selling price. The commission rates in Canada vary anywhere between 5 percent to 7 percent of the sale price. You might also find real estate brokerages that work on a flat fee system.
This also varies from province to province. For instance, in Alberta, real estate agents charge about 7 percent on the initial $100,00 of the sale price plus an additional rate of 3 percent on the balance amount of the sale price.
Why Do We Have Different Commission Rates?
The main reason is that there is a lack of proper regulation on the real estate board’s part regarding the rates.
- Nature of Services Availed – The rates also largely depend on the type of services availed from the agent. Traditional brokerage services may be limited to getting the listing done, arranging the buyer-seller meets. In this case, the rates may be lower than the firms who provide end to end services starting from home staging to finishing all the documentation and legal works involved in the sale.
- States and Province Wise Rates: The housing markets in each region is different and has a different brokerage. They also have different approaches to arrive at the total commission. For instance, in most provinces, the seller pays the commission that is eventually distributed to the buyer’s agent. Buyers paying for the commission is a rarity. However, it is followed in some places, which might also cause the rates to differ.
Different Types of Commission Rates
In Canada, you will find that the commission rates broadly fall into the below-mentioned categories.
- Fixed Percentage: This is a fixed rate that is charged on the sale price of the home.
- Split Percentage: In this type, the commission’s percentage reduces with the increase in the sale price. A certain percentage on the initial amount and then a reduced percentage on the remaining amount. This is the typical case in Alberta.
- Flat Fee: this is a fixed amount and is not calculated on the sale price. Seller will have to pay whether the house was sold for $30,000 or for 1 million.
- Service-based Variable fee: Here, the commission rate will vary based on the services availed like listing your home, marketing, pre-sales home inspection, etc.
- Hybrid Fee Rate – flat rate for the basic services and additional rates for the extra services.
- One Percent Commission Agents – Some specific agents only charge 1 percent commission of the sale value. Here you might save some money. However, you may not get the service you are looking for.
Room for Negotiation
Commission rates are indeed high, which makes us want to negotiate a bit with the seller agents. Even a reduction of a one-point percentage can help save a considerable amount. However, we should keep in mind that the commission includes the brokerage fee and costs involved in getting your home listed in the Multiple Listing Service. A percentage from this will also be paid to the buyer’s agent.
All of these factors are to be considered while negotiating. However, it should not deter you from approaching the agent for a reduction in the commission rate. Also, remember that not all the agents will entertain negotiation efforts. There is nothing you are going to lose by initiating a negotiation. On the other hand, it might save you some money that you can use to meet other expenses involved in the sale.
The best way to go about this would be to understand the services’ nature tied to a certain percentage. If you can manage some part of the process on your own, you can definitely ask for a reduction in the percentage.
Going the For-Sale-By-Owner Way?
Like we mentioned earlier, going for home sales on your own might save you all the thousands of dollars in commission. However, you will still have to spend on staging, brokerage for listing agents, attorney expenses, and much more. It would help if you also were prepared to take up the role of real estate agents on arranging for home visits, marketing your home, and taking up all the documentation regarding the sale.
If you are bent on saving the money, you can invest the money saved in buying a home, retirement, renovation, etc. You should also be involved in the process full time and keep and take a break from your routine work.
Is it worth Having an Agent do the Selling?
Going by the pros and cons of having an agent involved, you can definitely list it down on the cost-benefit approach. What are the costs I am willing to pay, and what are the things that will take off from my plate? If you can do a detailed analysis on this, you should know if it is worth having an agent make the sale or do it on your own.
It often comes out that agents work better than us in getting our property sold as they are the field pioneers. They will have the contacts and the experience required to expedite the process and fetch a reasonable sum for your home.
- Look for multiple real estate agents as each one may have a different rate.
- Take into account the type of service offered.
- Look for any hidden costs.
- Negotiate the commission rates.
Having read this article, you will now definitely look at selling your home through agents in s different way. If you have any questions, please do leave us a comment in the section below. Our editorial team does not receive any monetary benefits, and it is independent of the suggestion in this article.