Real Estate Commission Q and A

Question: I am selling my home and I wonder the amount of commission I will need to pay? 

Generally, real estate commission rates seem to vary between 4% to 6% of the sale price. However, there is no standard commission rate. In Ontario, it is not legal for brokerages to work together to set or fix a rate.   Commissions can vary depending on the services offered by the agent and the agent’s experience and expertise.  Real estate commission is based on a home selling. If a home is listed for sale but doesn’t sell, no commission is paid.

Question:  When do I pay the commission and who do I pay it to?  

When your home sells, on the day of closing, your lawyer will subtract the amount of commission owed and will issue payment on your behalf to the Listing Brokerage. The Listing Brokerage then pays the individual listing salesperson and the Co-operating buyer’s brokerage their portion of the commission.


Question: Is the Real Estate Commission I pay taxable?

Real estate is a professional service, meaning HST is charged on the real estate commission. The HST that you pay is collected by the brokerages and then forwarded to the government. Brokerages and agents do not keep the HST,   they collect and submit.

Question: My Neighbour sold their home in less than a month. It seems like the real estate agent made too much money because it sold so fast.

Remember you are paying a professional to sell your home. Whether it takes 8 days, 8 weeks or 8 months. If your realtor does a great job and sells your home quickly at the price you want, you are happy.  Should the agent be penalized for doing the job you hired them to do? As an example say you need dental surgery, and your dentist provides a written quote for the procedure. Everything goes smoothly and you are finished and out of the dentist’s chair much quicker than anticipated. Should the dentist be paid less because the procedure went quickly? Conversely, if the procedure takes longer to complete, should the dentist be paid more?  The same skills, preparation and experience are required to do the procedure whether it takes less time or more time.

Question: Are there other costs on top of the commission that I need to pay to sell my home?

When hiring a full-service brokerage, your salesperson usually covers all marketing expenses. These expenses include professional photography, marketing, brochures, advertising, etc. Your agent will discuss the many things a homeowner can do on their own to enhance the saleability of the home. Many full-service firms cover an initial staging consultation to provide advice and tips on helping the marketability of your home.  Some realtors offer “free staging” but it is always good to remember that it is in your best interest to hire a skilled professional stager rather than a jack of all trades realtor who also does staging. With staging, whether you pay for it upfront or it is rolled into the commission, nothing is ever free. Your agent will be able to help you find a stager that will work well with your property and your budget. (Note: If you are using a flat fee or low fee brokerage the Seller will often be required to pay for all marketing/selling expenses)

Remember – Real Estate commission is a pay for performance profession.


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