Showing posts with label commissions. Show all posts
Showing posts with label commissions. Show all posts

Monday, November 14, 2011

Discounted commission rates and the buyer agent commission

I had an interesting question from a buyer. Below is the question and my answer.

Hi Mark,

Thanks a lot for the very informative email. The house I am considering selling our house, if the buyer's agent gets 2.5% commission isn't the buyer then responsible to pay the HST on behalf of their real estate agent?



Hello MA

Even though the buyer's agent represents the buyer, 99.9% of the time (I'm guessing that maybe 1 in 1000 transactions the buyer may pay the commission to the buyer's agent) the agreement is that the listing agent pays the buyer the buyer's side of the commission and this is why the total commission to the seller is 5% or at least the buyer's agent side comes out of the total commission that the seller pays.

This is the way that it's set up in Ontario and it continues to work well.

In the US and other parts of the world the buyer's agent does get paid through the buyer, but in those cases or areas the lenders and banks need to be 'on board' and assess the property 2.5% (plus HST) higher than the price that the buyer pays in order for the buyer to pay the buyer's agent side of the commission, and it can become complicated.

This is the main reason why the commission split is similar to the way we have always done it even though the buyer's agent represents the buyer, the seller still pays the total commission.

Some Ontario lawyers have a problem with this, but let's not get into that!

All the best!

Tuesday, November 10, 2009

CREA and Competition Commissioner decision

Below is an email that we just received regarding the recent conclusions that the Commissioner of Competition in Canada released. In a nutshell, the commission concluded, among other items, that CREA and local boards must open their boards up to private listings for sale.
To say the above conclusions have created a "flashpoint" would be an understatement.
At any rate, here is our RE/MAX Ontario Atlantic VP and Regional Directors response on the matter below. It's the most clear and succinct information I've seen on this issue to date.

To: RE/MAX Ontario-Atlantic Broker/Owners, Managers & Sales Associates:

I write to you today in response to various media reports that have transpired over the last week with respect to the inquiry by the Commissioner of Competition. Understandably there is some unrest and definitely many questions throughout our network with respect to whether this will affect our current business model and practices.

All that RE/MAX Ontario-Atlantic knows about the issue between CREA and the Competition Bureau is what has been reported in the media and minor clarifications that have been made thereto.

It is our understanding that CREA has not made a decision yet as to how they will proceed as they are still waiting to receive further clarification on what exactly the proposed changes will entail.

We are actively monitoring the situation to determine what any actual change will be. So far this is what we have been able to determine.

CREA has been in communication with the Competition Bureau regarding the inquiry by the Commissioner of Competition into certain practices in the residential real estate brokerage industry in Canada. The Bureau has recently informed CREA of the Commissioner's conclusions.
  1. CREA does not agree with the Commissioner's conclusions. CREA believes that the Bureau's concerns are based on a fundamental misunderstanding of the way in which the rules of the MLS® system operate.
  2. CREA has always indicated its desire to be responsive to concerns expressed by the Competition Bureau and to engage in productive dialogue with the Bureau. Although CREA believes that the Bureau's concerns about the MLS® rules the Bureau is focusing on are unfounded, it is evident that these concerns have become a flashpoint for the Bureau.

  3. The Board of Directors of CREA has determined that it will pursue a consensual resolution with the Bureau, subject to member support. It is my understanding that discussions are ongoing and that it is CREA's intention to inform its members and stake holders of any proposed solution and seek member support before agreeing to any settlement.
Please note a decision has not been made and it is business as usual.


Michael Polzler
Executive Vice President and Regional Director
RE/MAX Ontario-Atlantic Canada Inc.

Monday, August 03, 2009

Mississauga Real Estate Commission Rates and Information Request

Here is a typical question that I receive about commission rates
Dear Mark,

Can you tell me who sets the commission rates for selling residential homes?



Hi D.F.,
There is no set commission, setting commission rates is against the law and the Anti Combines Act and a few other laws in Canada.
There are typical rates and regional variations in rates, but they are never fixed. Commission can be zero to 10% or higher.
I hope this helps.
You can read more about commissions at this page of my site:
Thank you,

Wednesday, April 04, 2007

A closer look at commissions from the Toronto Real Estate Board Perspective

A closer look at commissions from the Toronto Real Estate Board Perspective

A closer look at real estate commissions

The Toronto Area real estate market has shown steady growth for nearly 10 years, resulting in positive outcomes for consumers, the real estate business and the economy as a whole. However, this period of growth has also led to a number of misconceptions about the business.

Perhaps the most common misconception is that in a hot market, properties "sell themselves" and the REALTOR® has less work to do in order to earn commissions. Many consumers are not aware of how the commission structure works, and given the significant amount of money changing hands in a real estate transaction it is natural for them to want to know where their money is going.
Let’s take a brief look at how commissions work.

When a consumer decides to sell their home, they often agree to pay their chosen salesperson (actually the brokerage) a certain percentage of the selling price of their home upon completion of the sale. This rate is generally specified in the Listing Agreement that is signed by the homeowner and the listing salesperson. As in any business transaction, prior to signing an agreement the consumer should firmly establish the level of service they will be receiving and the fees they will be required to pay.

When a home sells, commission is initially paid to the real estate brokerage that employs the listing salesperson. In most cases a portion of this money - often half - is immediately forwarded to the company working on behalf of the buyer for services provided in bringing the transaction to fruition. The remaining funds, meanwhile, may be distributed in a number of ways depending on the business model of the listing brokerage.

Some brokerages retain a portion of the listing salesperson’s commission for operational costs like company management, rent, office staff, employee training, franchise fees and so on. Other companies may forward all of the commission to the salesperson but charge a significant monthly fee.

A good portion of the commission earned goes toward maintaining the business operation and, of course, marketing and selling the home. Keep in mind that most real estate professionals are paid solely on commission, with no base salary. Their livelihood relies on the level of service they provide their customers and clients.

It is also important to understand that as the real estate market grows, so too does competition for commissions. An active real estate market typically brings in a large influx of new registrants that reduce market share for each individual. For example, the total number of sales in 2005 was 24 per cent higher than in 2001, the beginning of the most recent “hot market.” By comparison, the number of Toronto Real Estate Board Members during that time increased by 33 per cent, to over 23,000 active Members. The 7,000 transactions, on average, that take place each month are divided among these Members. (Mark's comment, if you do the math, that means that each agent is selling 1 home every 3 months, not enough to live on - this means that there are many registered agents that are not selling many homes, make sure you work with an agent that is selling at least 2 homes per month and is 'in the business'!)

Article courtesy of TREB

Read more about real estate commissions

Toronto Real Estate Board (TREB) Average Prices and Graph

For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829