Real Estate Commission in Toronto

How much would be the standard real estate commission in Toronto? Apart from what a real estate agent can do for you, it’s important to know about the real estate agent fee in advance.

That’s the questions many home sellers have when they decide to sell their Toronto house or condo.

Other questions that might come to your mind are usually, how can I sell my house or condo? Or how much cost is involved in selling my property? Or how much is the average real estate agent commission in Toronto?

We’re going to answer all those questions in this article. Just have in mind, one size does not fit all. Real estate commissions may vary depending on the type of property, location, services provided by the REALTORⒸ, etc. Down below we’ll go through the Range of commission you can expect in Toronto, and then we’ll see how to choose the best real estate commission!

Let’s start from the basics. As a seller you can have the option to sell your Toronto property yourself, or ask a Toronto real estate agent to help you selling your Toronto property. Sellers, mostly, choose to use a REALTORⒸ when it comes to sell one of their biggest assets. However that involves agent fees or commission, which we’re gonna talk about it in this article.

If you are wondering what does a real estate agent do for home sellers you can view this article:

What does a real estate agent do for sellers and buyers?

A top Toronto real estate agent sells tens of properties in year, whereas usually people in their entire life, sell an average of 4 properties (unless you are a real estate investor).

Other than that, in a nutshell, a real estate professional can help you with:

1. Evaluating your home’s price and doing the CMA
2. Setting the Pricing Strategy
3. Setting the Marketing strategy
4. Preparing the home for sale
5. Stage the property in order to sell higher and faster
6. Setting the strategy and managing the offer presentation
7. Following up to make sure you are gonna have a smooth transition and buyer closes the purchase successfully.

Typical Real Estate Commission in Toronto

In Toronto, or in Ontario in general each real estate transaction has 2 sides:

1. First one is the Listing side, It’s called the Listing agent.
2. Second side is the co-operating side, It’s called Co-Op agent, also known as Buyer’s Brokerage or buyer’s agent.

The typical commission for each side varies depending on Geographic locations, the amount of service provided and so forth, and is not always the same, literally not one size fits all. In order for you to have an idea, in Toronto, the real estate commission is usually fluctuates around 2.5% for the co-op agent and 2.5% for the listing side and marketing more or less (that changes based on many variations).

The next question that you might want to ask is, how much service do you get for the amount of commission. Like everything else, the commissions are negotiable, but it depends on the property type, location, the marketing strategy, and the services that the Listing agent provides to you.

As mentioned before, there are 2 real estate sides involved in the sale ( Unless it’s a multiple representation which will be explained below this article). A commission or fee for service is paid from the proceedings of the sale. That means you have zero cost upfront in that regard and the sales representative and real estate broker takes on the marketing costs and they get paid from the proceedings of the sale after you get an accepted offer.

That however depends on your listing agreement with the listing brokerage, and the payment is outlined in the listing agreement with your agent. In some cases you might decide to agree that you would cover some of the costs upfront for any reasons (such as staging etc).

In the multiple representation ( when the listing agent represents both the seller and the buyer ), there is a way for you to pay less commission as well. I’ll explain it down below this  article.

Each real estate brokerage has a sales representative or broker working on their behalf. The average real estate commission, is typically split between brokerages, and then between the Brokerage and the respective REALTORsⒸ. Then the real estate agent has to pay all the marketing expenses, as well as other business costs and taxes.

The below image is for information purposes only and the percentages may vary depending on the market, services, and or brokerages and their policies.

Are there any Low Commission Real Estate Agents in Toronto?

Before going into the details I am going to say, you can choose to work with any REALTOR with any amount of commission you both agree on. At the end of the day, you get what you paid for!

Things to know about low commission real estate agents in Toronto

Imagine, you hire a low commission real estate agent in Toronto, who offers you for example 1% commission ( that’s for the listing side only though!), but that REALTORⒸ doesn’t offer you extensive marketing strategies and maximum exposure, what will happen? You merely have a listing on MLS system, but you don’t have the proper exposure. One thing to rememebr is that when you see an advertisement of 1% commission that does not mean 1% in total commission. Read the footprints on that and thank me later!

Less exposure means less showings, and less chances of getting the Top Dollar for your condo or your house. Whereas, a full service Toronto Real Estate Agent, might offer you a bit higher commission, but also offers you services such as Staging, Printed ad or Digital Marketing and ads, targeted Marketing, Open Houses, and so on so forth. Staging is among the items that helps your house or condo sells quicker for Top Dollar.

The commission and marketing strategies are not One Size Fits All. It depends in your Micro Market, your potential buyers, your asset class that whether it is a townhouse, or a house or a condo apartment in downtown Toronto, and also the services that your Toronto REALTOR is gonna provide you when listing your property.

Is the Low Real Estate Commission Fee, Really low?

It doesn’t matter how much commission the Listing real estate agent charges you, usually a portion of it which could be around 2.5% would go to the co-operating agent. So even the low commission ads which advertise 1% commission, don’t tell that to you at first place. And you might think that’s a great deal, but at the end of the day you’ll realize that those advertised commissions are just one side of the story to grab seller’s attention and at the end you might find yourself with 1%+2.5%, which in Total would be 3.5% commission!

So if you see low commission ads from some real estate agents, please real all the fine prints etc. Because those ads have a main purpose, and that’s to get you reach out to them. Then they’ll explain the rest of the story to you!

So with all that being said, we highly recommend that when selling your biggest investment, it’d be great if you consult with trusted Top Toronto real estate agents, who don’t need to use cheap commissions to lure the sellers to work with them at the first place, and their resume and professionalism talk for itself.

Ask yourself, do you want the top dollar and get the most money in your pocket? Or just go for low commission? Sometimes you might save 1% but those agents might not do any good for you other than photography and listing your home on MLSⒸ. What if the less exposure results in your home sells 5% less than what it should sell? You might save 1% in commission, but in reality you might have left more money on the table!

Is there a catch with low real estate commission?

As we reviewed above, you get what you paid for. The business model in low fee brokerages is based on “Saving Commission” not based on ” Getting the maximum price for your home”! But what if you sell your home 5-10% cheaper but you save 2-3% commission?

In that case you need to ask yourself, does it important for me to get more money for my sale or pay less commission?

Our most recent experience that I’d like to share the story with you is about a Townhouse complex in the city of Toronto (North York)!A similar townhouse, which had been listed with a low commission brokerage, sold around $30K LESS than a similar townhouse in the SAME complex within just a few weeks apart. In that case the seller saved $14,000 in commission, but sold his property around $30K less than his neighbor! So he was Negative -$16,000!

The seller of the first townhouse (listed with the discount brokerage) which got sold around $30K cheaper (we were representing the buyer in that transaction and got a very good deal for our buyer though!) later told us that he’s not happy with the low commission brokerage’s service and just accepted our offer to get over with this. The seller had to coordinate the showings, and was doing the negotiations on behalf of himself etc.

Imagine a seller, who possibly have done 2 other real estate transactions in his entire life, has to do the negotiations on his behalf and do the job himself! How many mistakes can he do that leads to leaving money on the table when it comes to the selling a property!

So it all depends on the seller and might vary on a case by case basis, it might work for sellers who are professional real estate investors though. But if cheaper means less service and can result in losing money at the end, what’s the point of saving $14K if a seller might at the end sell $30K less than his neighbour!

What is multiple representation? How can it reduce the commission?

You might be wondering, what is multiple representation? Can the listing agent represents both the buyer and the seller in a transaction? Short answer is yes.

In the multiple representation, first of all, both parties have to acknowledge and agree that one agent represents both their interests.

However in some instances the listing agent, which has a fiduciary duty, towards the Seller, might act within customer service definitions and provide customer service to the buyer. Other than that case, both parties have to agree for the listing agent to represent both of them.

Personally I recommend not to use the Listing REALTORⒸ if you are a buyer. Because the listing agent has fiduciary duties towards the seller.

How to reduce the commission? What is collateral agreement?

If you are a seller, there can be Collateral agreement between you and the listing real estate agent. Collateral agreement means that if the listing agent sells the property himself/herself, you’ll pay less commission.

That’s a great idea! Right?

Well, Yes, and No.

It depends on your marketing strategy. Yes, it’s a great idea to reduce the commission if you are planning to sell your home in an areas that you simply list your property to sell and you wait for the right buyer to buy it. Any way, other than Multiple offer marketing strategy.

If you are planning to create a bidding war, based on previous experiences, you might not want to have a collateral agreement in place. One of the most important reasons is that if the listing agent has collateral agreement in place, it might deter other agents or their clients, because they know that they already are in the weaker position. And in a bidding war, as a seller, the last thing you want is to deter people and have less bidders!

Conclusion

When selling your Toronto home, the goal is to get the highest price for your home. So the Net proceed is the most important thing. A winning marketing strategy is what gets the top dollar for your house or condo! If you can sell your property 5% more with proper marketing strategy, then the real estate agent commission fees could well be worth it!