Real Estate Commission Rates and the Truth
This page will explain residential real estate commission rates in our trading area of the GTA. It will explain the difference between the listing brokerage commission, the selling brokerage commission and the total commission. I will also explain about whether commission rates are negotiable, cut rate commissions and a few examples of how commission rates could affect your sale price.
Real estate commissions in the GTA are generally set as a percentage of the sale price of the property. There is no fixed commission rate or set rate and it is not legal to fix the rate, but it appears that the total commission rates charged are typically in the range of 3.0% to 3.5% and up to about 5% or higher – this is the most common amount. Typically this total commission is divided 50/50 between the listing and selling broker but you must take into account the fact that the selling broker typically receives 2 to 2.5% and the balance is paid to the listing brokerage (more on this below). Of course these amounts vary widely and there are many exceptions to “the norm”. As with any commission based businesses, the level of service you receive can or may vary depending upon the commission rate, so you must do your research before choosing your listing brokerage.
|You will see some Agents advertise “maximum 2.5%” or “all this for 2.5%” or “2.5% commission paid” or sometimes you will see signs that show “1% commission”. I’ve even seen some agents advertising “0% commission”, “0.1% commission” etc. Can you really believe these claims? Often these claims are only “a half truth” as they are only referring to one half of the commission, specifically, the listing side of the commission. There is also the selling side of the commission to consider and pay in a real estate transaction of this type. The reality is this. You must read the fine print of the advertisement very carefully and consider the services you will receive in lieu of a lower commission rate. These ads can be somewhat misleading, so please do your due diligence before signing any listing agreement.
The facts are this: There are two sides to the real estate commission, the portion that the listing agent charges you (the listing agent is the one who puts the sign on your property and represents your interests) and the portion paid to the selling agent (the selling agent is the one who brings the offer on your home and represents the buyer).
In our trading area, you will often see on most MLS listings that 2.0% to 2.5% is ‘normally’ paid to the selling agent. This amount is not fixed and can vary from 0% and up. Sometimes the amount paid to the selling agent is greater than 2.5% and this is often seen as an incentive for that selling agent to show and sell that particular property and receive a slightly higher commission than they would otherwise receive by selling a property that offers 2.5% or lower. There is also the listing agent commission of 2.5% (which can vary greatly) that can be paid to the listing brokerage, which would make your total commission payable, as the seller, of 5%. This is the bottom line truth regarding commission rates in some of our residential real estate transactions in our trading area.
I say “normally” or “some transactions”, because these figures can and do vary widely. There is flexibility in the 2.5% figure and I am referring to my immediate trading area and my experiences – other areas of the GTA may be different. The commission rate is never carved in stone and is always negotiable.
Some companies offer discounts and try to be a Full Service Discount Real Estate Broker at the same time – how can that be? Read the Ads very carefully and ask for all the details in writing before you sign anything. Some companies can and do offer a discounted commission rate and are full service, but others are not, so you must do your research before choosing your listing brokerage. Are Commissions Negotiable? Click here to find out. Back to my guarantees when selling
There are some companies in the Mississauga and GTA trading area that do offer full service at a discounted commission rate and they are full service real estate companies that offer you an alternative choice of brokerage in our marketplace, but there are others that do not, so be careful and do your research when choosing your brokerage.
My personal philosophy in real estate and for any transaction in general is this:
“The long-term pain of receiving poor service and selling your home for a lower price than it should have originally sold for, will last much longer than the short-term gain of a small savings in the commission rate.” Think about it.
Mark’s Guarantee is this – 2.5% commission paid to selling broker on all transactions and MLS listings
PLUS, you get
All My Marketing, Experience and Internet Exposure for 2.5%, read my marketing package
Are Commissions Negotiable?
In most geographic areas there is a percentage of the sale price that is charged for full MLS services. Usually, in our trading area, it is about three or four or five to six percent of the final sale price. In some areas it can be as high as seven percent. However, just like anything else in real estate, the commission amount is always negotiable and it can be lower than 5%.
When completing the listing agreement, we can discuss and come to an agreement on the amount of the total real estate commission depending upon the services that you require. It is also important to note that different commission rates, fees and listing and marketing services may be offered by other RE/MAX Franchisees and Sales Associates in Canada.
Cut-Rate Listing Commissions
With the advent of the web, some agents are offering “cut-rate” commissions. Sometimes, lower commission rates equate to a different level of service by your listing agent, but this is not always the case. There are some companies in the Mississauga trading area that do offer full service real estate at discounted commission rates.
There are a few discount Brokers that offer different levels of service for a lower fee or there are companies that charge a ‘typically normal’ commission and perform the functions of a Full Service Discount Real Estate Broker.
There are also companies that offer full service for a discounted price, so there is plenty of choice out there for you. You must research brokerages and feel comfortable with the brokerage, the agent representing the brokerage and the fees charged.
If you want an agent who will actively promote your property to other agents, spend time and money on marketing and extensively promoting your property, who has made a long term commitment on the internet and marketing your property locally, then you you will receive that from me.
Another common practice when you see an advertisement for a reduced commission is that the compensation is lowered only when you agree to buy your next home through the same agent or broker (maybe you want or have already purchased a new home) or you must buy one of their own listings (less choice for you) or the listing broker must list and also sell your home to a buyer themselves (not too frequent) or you must take out a new mortgage with the lender that the agent refers you to (this usually means: higher interest rate to compensate for cash back) or else no discounts apply. Be careful and read all the fine print.
Sometimes, the reduced commission is not really being offered on the sale of your existing home but on the purchase of your next one. Check the marketing claim carefully, the advertisements are often unclear or vague regarding these items.
You may also see ads that proclaim ‘maximum 2.5% commission‘, and again, reading the fine print of the ad is advisable, you will see that this is usually only one half of the total commission that is being charged, so in reality there is no discount on the commission at all! Again, be careful and read the fine print and look for those nasty asterisk marks **
|Another ‘real life’ example
I’ve had some clients decide to list their home with another agent because that agent offered them 1% less than what I was charging. What I have found is yes, commission is important, but your bottom line can be more important by a factor of 10!
For example, if your listing agent does not aggressively market and promote your property to the agents and public, support your price and position and negotiate solely on your behalf to receive the best possible price and terms it could easily impact your eventual sale price by $10,000 or $20,000 This is the truth and these numbers impact you far more than the total commission.
Generally, (as you probably know) the Real Estate marketplace in Mississauga is very competitive regarding commission rates.
What I have found during my 20+ years in the business is that my persistence in fighting for the best possible price and terms for my vendor far exceeds a half of a percent reduction on the commission rate.
This is a real life example of a listing in Erin Mills.
Recently a seller who was choosing between myself and another agent, chose the other agent because the agent gave them a 4.5% total commission rate. The vendor had to reduce his asking price from $279,900 to $264,900 mostly because the marketing by the other agent and support of the vendors price was not there. The behind the scenes negotiations were not taken care of with much skill or with any consideration for the vendor’s position. Thus, the vendor listed their home with another agent, rather than me, to receive a “perceived” savings of about $2000. Meanwhile the vendor’s were forced to reduce the price of their property and have just lost $15,000! It is the behind the scenes conversations that is one of the ‘secrets’ in maximizing your price, read more about it here.
With all of this said, there are often situations where I will reduce the commission once we are dealing with an offer. When we have an offer on the table and we are very close in price, then certainly I can make a business decision and reduce my commission if the purchaser or you can’t move anymore on price and if a reduction in my commission will help to make the sale.
As well, we will list on the MLS at 5% but if I list and sell your home myself (which is quite possible given my expert marketing and promotion) I guarantee will reduce the total commission. Does this sound fair to you?
Bottom line is this. we list at 5% and I can be flexible if you get into a situation where you are squeezed or if the situation warrants it. As discussed above, I will make a “business decision” and help you sell if we are very close in price.
This information is copyrighted by Mark Argentino and is for the sole and exclusive use by only Mark and his clients. Other real estate agents are warned that they may not use any of the information contained on this page or any other pages on this website. Thank you for your understanding!
When you see an advertisement or an offer for a lower commission, you should carefully analyze what you are giving up by accepting such an offer. All the details will probably not be readily apparent in the advertisement and you will have to investigate further and dig deeper to get the truth.
Remember this truth in life “you can’t get something for nothing” and lower commission rates may indicate a lower level of service, but certainly this is not always the case – they may just want your business at any cost. I’ve found that it’s most important that the brokerage and the agent representing that brokerage is most critical when it comes to selling your home, so do your research. Some marketing services may not be offered for the largest sale of anything you will ever own in your lifetime. So you must ask yourself the question, is it really worth it? Just be sure to do your research.
Be sure to ask plenty of questions before you sign anything. You may seek clarification or confirmation of any representations other agents make to you by contacting me at any time, email me now if you have a question about commissions.
If you have a complaint about an advertisement, flyer or billboard you have recently seen that you feel is false and misleading, then you can easily do something about it. RECO (Real Estate Council of Ontario) handles complaints and any complaints from the public are taken extremely seriously and are acted upon to a final result. You may go to the RECO website to see how easy it is to register a complaint.
In this real estate web site you will find information on 2.5% commission rates in Mississauga, Ontario by A. Mark Argentino. You will also find details about Real Estate listings and homes for sale, virtual tours, homes for sale, secrets to ask agent Realtor, Mississauga, Oakville, Toronto, buying, selling and more in Mississauga.
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