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Selling your home involves significant effort, time, and work, much of which involves knowing regulations. Real estate agents facilitate the sales process, ensuring that the sale is conducted in a legal manner while also striving towards the highest selling price. Choosing the right professional is equal parts measuring commission rates for real estate agents and determining their skill level. Seller goals differ, ranging from quick transactions to high profits. Finding an agent whose commission best fits into your financial landscape can help you reach your goals.
Real estate agent commissions are the agents’ percentage-based earnings from the proceeds of a home sale. Real estate agents are trained and credentialed to sell your home, handling everything from advertisements to showings to negotiations. Instead of the seller dealing with prospective buyers, the agent does so on the seller’s behalf, communicating messages back and forth in an efficient manner.
The practical aspects of conveyancing (the transactional process of changing ownership of real property) are highly nuanced. For the agent, it takes time, energy, and effort, with services reimbursed upon the sale of the house. Taken in the form of a percentage of the sale amount, the commission is only paid when the home sale is complete.
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Generally, commission rates in Canada vary between 3% and 7% of the home sale price. The commission is typically divided between the buyer and the seller’s agent. However, rates can fall beyond the range depending on the city and the real estate agent you work with.
The amount you pay depends greatly on the value of your property. For example, a $300,000 would result in a real estate commission between $9,000 – $21,000, while a $600,000 house would result in $18,000 – $42,000. Check out how much commission you’ll pay based on the average house prices in Canada.
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Real estate is a competitive arena, so the pricing models of agents vary in approach and amount. It often depends on whether the real estate agent works with a larger company or is independent. Since the needs of home sellers vary so significantly, it is important to identify the most compatible pricing model with your requirements.
In general, real estate agents use a set percentage as payment for their services. This means that the seller pays the agent an established percentage of the home sale value. The percentage rate remains the same regardless of the amount for which the home is sold. Conceptually, this incentivizes the real estate agent to get the highest sale price since it would lead to a higher payment.
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This type of payment is when the real estate agent charges a set price for their services, with no consideration resulting from the sale value. More common on the extreme ends of the pricing spectrum, you can find this type of payment for homes selling at very low prices and those at the top end of the market range. The fixed fee keeps the cost reasonable, relative to the work that needs to go into the project of selling the property.
A common approach on the sale of upper-middle-class properties, this is used as a marketing tactic to incentivize sellers – and for good reason. It is when the seller receives a higher percentage for the first tier of sale value, and a smaller percentage on the remainder of the sale proceeds. For instance, an agreement can see the agent getting three percent on proceeds up to one million dollars, and two percent on the remainder. Split percentage agreements always favour the seller, with regulations in place to ensure that the percentage remains fixed or decreases as the home sale value rises.
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Depending on the state of the real estate market in your area, agents may choose to charge a blend of a fee for service and a percentage. Especially if it’s a buyer’s market, where it is harder to sell the house, taking more time on the market, the agent can charge a flat rate in addition to a percentage on the sale. It can account for the listing fees and extra marketing effort.
When negotiating a combination agreement, be sure to read the fine print carefully. Real estate agents are bound by professional ethics regulations, but they also know all the loopholes in those rules as a result. Don’t be afraid to ask questions and negotiate whenever possible. Be sure you understand the agreement; what all the terms mean and how they will practically apply to your situation.
Real estate commission is the portion paid to both the buyer and seller of the property, though not always in equal measure. In most cases, the commission gets paid by the seller of the property, though in some situations the payment is not your onus. Be sure to consult directly with your real estate agent to learn how commission applies, prior to any agreement being signed and before there are any offers on the home.
The agreement stipulates that if the home remains unsold, there are no payments to either agent. This applies to brokerages and independent parties, meaning you are not obligated if the home is not sold. When agreeing to terms, check the duration of time the property can be listed to see when your contractual obligations as the seller end.
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Taxes are payable on real estate commissions, though the specifics vary between provinces. For instance, in Quebec, the sales tax applying to the real estate commission combines the provincial and federal taxes at a rate of 9.975%, in addition to the 5% GST cost. In Ontario, the HST cost is applied to the real estate commissions, ringing in at a rate of 13%. Some jurisdictions combine federal and territorial, while others do not.
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When a real estate agent represents both the seller and the buyer, this is referred to as double-ending. A colloquial term in the industry, it can also be called dual agency transactions. Depending on the situation, choosing a single entity to represent all those involved can save time and potentially avoid miscommunications. This is especially true for simple transactions which may otherwise have been completed at arms-length. Conversely, using it can lead to risks like collusion, or simply the agent going beyond the bounds of their agreement. Choosing how to handle this situation involves weighing the advantages against the
Selling a home is a major transaction with far-reaching financial implications. In order to find the most affordable rate (without foregoing the quality of your realtor), research is key. There are two main ways to get a lower real estate commission:
Find A Broker
Make a list of the brokerages in the area and look into their time on the market, rating with the Better Business Bureau and Chamber of Commerce. Equipped with an understanding of the brokerage’s reputation, you can choose an agent from there. Look at their commission rates and get an understanding of the industry standard. This option is ideal for those dealing with more complex sales or those of higher value. The oversight and established corporate identity promote safe practice and lend security to the seller. Because the broker is affiliated with an agency, they can often charge lower fees and may be open to negotiation.
Selling By Owner
Another way that you can sell your home is to complete the transaction itself. If you have the time and ability to do all the necessary negotiations, paperwork, and administration, then this can save you a great deal. There are boiler-plate sale templates available online which you can adjust. As with any agreement, independent legal counsel is advised, but this can be waived on a real estate agreement. However, to ensure that the process is completed correctly, conveyancing lawyers usually handle the actual transmission of the property. Selling by owner isn’t free, and it comes with real risk.
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Real estate professionals are trained to help home buyers and sellers achieve their goals. While it is possible to sell property independently, unless it is a low-value asset, it is best practice to enlist the services of a realtor. Choosing the right professional means doing diligence on the local market and average commission in the area. Use that information to narrow down the different brokers and find one to fit your needs. Real property transactions are major financial maneuvers. Taking the time to research everything from the market to commission rates can help you take prudent steps that foster financial success.
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