Buying a home can be a complex process involving many fees and expenses. One of the most common questions that homebuyers in Canada have been whether they are responsible for paying realtor fees.
In general, the property seller pays any real estate commission in Canada. This commission is typically split between the seller’s and buyer’s agents. The commission paid can vary depending on the value of the property and the specific sale proceeds between the seller and their agent.
Homebuyers must understand the fees and expenses involved in the home buying process, including realtor fees, so they can make informed decisions and avoid surprises.
How Real Estate Agents Get Paid
In Canada, most homebuyers employ a real estate agent to help them find their next home. A realtor can help purchasers find the right home for the right price and guide homebuyers through the process. However, buyers never pay realtors directly. Instead, real estate agents are compensated by a commission on the property’s final sale price.
Commissions for both the buyer’s and the seller’s real estate agents are taken off the proceeds of the sale. The commission is pre-determined by the seller, the seller’s agent, and their brokerage. This means that the buyer can not negotiate real estate commissions. However, the seller can sometimes negotiate real estate commissions with their own agent.
Once the purchase is closed, the buyer’s statement of adjustments will not show a commission and therefore is not paid by the buyer. The gross commission is always included in the seller’s statement of adjustments and deducted from the sale price proceeds.
How Real Estate Commissions Work
Commissions for real estate agents in Canada typically range between 3 and 7 percent of the final purchase price, depending on the region and the agent. The buyer’s expectation should be that representation by a real estate agent is paid for by the seller, meaning that you do not need to pay any real estate commission.
When a house is listed for sale, the listing agent and the seller agree to a gross commission split between the seller’s agent and the buyer’s agent. The agreement is outlined in the listing contract, signed by the seller, the seller’s agent, and the seller’s brokerage, if applicable. The buyer has no signing authority or disclosure on the listing contract or gross commission.
Upon completion of the sale, the commissions are deducted from the seller’s statement of adjustments (profit), and the notary or lawyer sends the funds to the real estate agents directly or through their brokerage.
The Value of Hiring a Real Estate Agent
While the seller pays realtors by the sales profits, the buyer still pays that extra money, and potentially interest, since it is built into the price of the home. It can be tempting to try to buy a home without a real estate agent since you might be able to win a sale with less money. But with so many variables at play in a real estate sale, hiring a real estate agent can reduce the stress and provide valuable advice on how to proceed with your sale.
A real estate agent handles all negotiations in the best interest of their clients. They will be able to identify potential problems and know what you are legally entitled to. An experienced real estate agent will help you avoid overpaying for a home and handle negotiations on your behalf, potentially saving you thousands of dollars. Finally, a real estate agent can access sales information online and use comparable properties as reference points for the home you are considering. By working with a real estate agent, you can save time, avoid costly mistakes, and increase your chances of achieving your goals in the real estate market.
Real estate agents have extensive knowledge of their local market and can help you navigate the buying or selling process, but there is also a financial value to their services. By being aware of the costs involved and working with a trusted professional, homebuyers can ensure they get a fair deal and make the most of their home-buying experience. The knowledgeable real estate agents at RE/MAX can help homebuyers navigate the complexities of the home-buying process and understand their rights and responsibilities when it comes to paying realtor fees.