Short answer? Buyers don't typically pay for an agent’s services. The seller pays the real estate commission, which is split between the buyer’s agent and the seller’s agent.
Here's the long answer…
The seller pays the commission. In the Toronto and GTA market, the typical real estate commission is 5% of the selling price, half of which goes to each agent. (There are other models including fixed fees or a combination of fixed and percentage, but the percentage-type commission is the most common.)
However, there's no hard and fast rule that it has to be 5%. Individual brokerages and agents may set lower percentages or open themselves up to negotiation. What an agent charges may also depend on what services they provide and on their level of experience/expertise.
But here's one key thing to remember (especially when you're tallying up what 2.5% of $1.5 million adds up to): real estate agents work on a 100% commission basis. In other words, they only get paid when a sale happens, whether they represent the buyer or the seller.
An agent’s commission is their only income. They don't get salaries or hourly rates. And everything they do comes out of that commission. Things like paying for beautiful listing photos and virtual tours. Going to 10, 15 or even 20 showings with a single buyer. Knowing exactly what's going on in the market day-to-day so they can determine the right price for a seller's property – or help a buyer get good value from a purchase. Coming up with marketing plans. Coaching first-timers through the process. Connecting clients with reliable lawyers, mortgage brokers and other professionals. And a whole lot more.
Read more: Finding the right agent
How does the real estate commission get paid out?
As the seller, you don't pay your agent directly. Once the property closes and the buyer takes possession, the seller usually provides payment to their real estate lawyer, who then pays the listing brokerage. The brokerage then pays both agents.
Do I have to pay HST on a real estate commission?
Yes. Because agents provide professional services (just like an accountant or lawyer), they also have to charge HST.
Looking to buy or sell a condo or house in Toronto or the GTA right now?
You'll need some expertise on your side – and someone with great negotiation skills. To get good info, solid value and an experience that’s as stress-free as possible, talk to a Property.ca Inc. agent today.