How Real Estate Commission Works
Commission Structure
| Component | Typical Rate | On $600K Sale | On $1M Sale |
|---|---|---|---|
| Listing agent commission | 2–2.5% | $12,000–$15,000 | $20,000–$25,000 |
| Buyer agent commission | 2–2.5% | $12,000–$15,000 | $20,000–$25,000 |
| Total commission | 4–5% | $24,000–$30,000 | $40,000–$50,000 |
| HST/GST on commission | 5–13% | $1,200–$3,900 | $2,000–$6,500 |
| Total with tax | — | $25,200–$33,900 | $42,000–$56,500 |
Who Pays What
| Party | Traditional Model | New Model (2024+) |
|---|---|---|
| Seller | Pays both listing and buyer agent fees | Pays listing agent, may or may not offer buyer agent compensation |
| Buyer | Pays nothing directly | May need to pay buyer agent if seller doesn’t cover it |
| Listing agent | Receives 2–2.5% from seller | Receives negotiated fee from seller |
| Buyer agent | Receives 2–2.5% from seller (via listing agent) | Receives fee as agreed in buyer representation agreement |
Commission Rates by Province
| Province | Typical Total Commission | Listing Agent | Buyer Agent | Notes |
|---|---|---|---|---|
| Ontario | 4–5% | 2–2.5% | 2–2.5% | HST applies (13%) |
| British Columbia | 3–4% (tiered) | 1.5–2% (tiered) | 2–3% | GST only (5%), tiered rates common |
| Alberta | 3.5–5% | 1.5–2.5% | 2–2.5% | GST only (5%) |
| Quebec | 4–5% | 2–2.5% | 2–2.5% | GST + QST (14.975%) |
| Manitoba | 4–5% | 2–2.5% | 2–2.5% | GST only (5%) |
| Saskatchewan | 4–6% | 2–3% | 2–3% | GST only (5%) |
| Nova Scotia | 4–5% | 2–2.5% | 2–2.5% | HST applies (15%) |
| New Brunswick | 4–5% | 2–2.5% | 2–2.5% | HST applies (15%) |
BC Tiered Commission Example
| Sale Price Portion | Listing Rate | Buyer Agent Rate |
|---|---|---|
| First $100,000 | 7% | 3.25% |
| $100,001–$200,000 | 2.5% | 1.16% |
| Balance above $200,000 | 1–1.5% | 0.5–1% |
| On $800K sale | ~$16,500 (2.06%) | ~$8,400 (1.05%) |
How to Negotiate Commission
| Strategy | Potential Savings | When It Works |
|---|---|---|
| Ask for a lower rate directly | 0.25–1% reduction | Always worth trying |
| Offer to list and buy with same agent | 0.5–1% off listing | When buying and selling |
| Sell in a hot market (homes selling fast) | Agent may accept less | Low days on market |
| Higher-priced property ($1M+) | Agents accept lower % (higher $ amount) | Luxury market |
| Provide your own buyer (eliminate buyer agent fee) | Save 2–2.5% | If you find the buyer yourself |
| Tiered/bonus structure | Align incentives | Offer higher % for above-ask sale |
| Flat fee arrangement | Save $5,000–$15,000+ | Simple, market-ready properties |
Full-Service vs Discount Brokerage Comparison
| Feature | Full-Service Agent (4–5%) | Discount Brokerage (1–3%) | For Sale By Owner ($0–$1,000) |
|---|---|---|---|
| Commission on $600K | $24,000–$30,000 | $6,000–$18,000 | $0–$1,000 |
| MLS listing | ✅ | ✅ | ❌ (or paid MLS posting) |
| Professional photos/staging | ✅ | Some | ❌ (DIY) |
| Open houses | ✅ | Limited/none | DIY |
| Negotiation support | ✅ Full | Limited | ❌ |
| Paperwork/legal coordination | ✅ Full | ✅ Basic | DIY (need lawyer) |
| Marketing plan | ✅ | Basic | ❌ |
| Showing coordination | ✅ | DIY or limited | DIY |
| Best for | Complex sales, buyer’s market | Hot market, straightforward sales | Experienced sellers, known buyers |
Notable Canadian Discount Brokerages
| Brokerage | How It Works | Listing Fee | Buyer Agent Fee |
|---|---|---|---|
| Unreserved (formerly Purple Bricks) | Flat fee + à la carte | Flat fee (~$3,000–$6,000) | Separate if applicable |
| 1% Realty | Low commission | 1% listing fee | Standard buyer agent fee |
| Homelicity | Flat fee with packages | $4,000–$8,000 | Standard |
| FairSquare | Flat fee, tech-driven | $5,000–$7,500 | Included or separate |
| PropertyGuys.com | FSBO + MLS posting | $600–$3,000 | Standard buyer agent fee still applies |
| Justo | Cash back to buyer | Standard | Cash back up to 1% |
Commission on Different Sale Prices
| Sale Price | Full Commission (5%) | Listing Only (2.5%) | Discount (1% + buyer 2.5%) | FSBO ($0 + buyer 2.5%) |
|---|---|---|---|---|
| $400,000 | $20,000 | $10,000 | $14,000 | $10,000 |
| $600,000 | $30,000 | $15,000 | $21,000 | $15,000 |
| $800,000 | $40,000 | $20,000 | $28,000 | $20,000 |
| $1,000,000 | $50,000 | $25,000 | $35,000 | $25,000 |
| $1,500,000 | $75,000 | $37,500 | $52,500 | $37,500 |
Tax Implications of Commission
| Province | Tax on Commission | On $25,000 Commission | Net After-Tax |
|---|---|---|---|
| Ontario | 13% HST | $3,250 | $28,250 total cost |
| British Columbia | 5% GST | $1,250 | $26,250 total cost |
| Alberta | 5% GST | $1,250 | $26,250 total cost |
| Quebec | 14.975% (GST+QST) | $3,744 | $28,744 total cost |
| Nova Scotia | 15% HST | $3,750 | $28,750 total cost |
Note: Commission paid by sellers is not tax-deductible on a principal residence. For investment properties, commission reduces your capital gain and is effectively deductible.
Questions to Ask Before Hiring an Agent
| Question | Why It Matters |
|---|---|
| What is your commission rate? | Ensure transparency |
| Is the rate negotiable? | Everything is negotiable |
| What does your fee include? | Compare services |
| What is your marketing plan? | Photos, staging, open houses, online advertising |
| How many homes have you sold in this area? | Local expertise matters |
| What is your average days on market? | Speed indicator |
| Can I see a sample listing? | Quality of presentation |
| What happens if I want to cancel the listing agreement? | Understand your commitment |
| Will I work with you directly or a team member? | Know who handles your file |