Real estate commissions are one of the most significant costs you’ll encounter when selling a home in Canada. These fees can total tens of thousands of dollars and are often misunderstood by both buyers and sellers. Whether you’re hiring an agent to guide your sale or considering selling your home yourself, understanding real estate commissions will help you possibly save thousands of dollars. Because these commissions are such a significant line item in any transaction, it’s essential to know how they work, who pays them, and what options you have to negotiate or avoid them.

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Key Takeaways

• Real estate agent commissions in Canada typically range from 3% to 5% of the sale price, paid by the seller and split between agents.
• Commission structures can be percentage-based, flat-fee, or tiered, and are always negotiable.
• Sellers can consider For Sale by Owner to reduce costs, but it requires handling marketing, negotiations, and legal details themselves.

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What Is a Real Estate Commission?

A real estate commission is the fee paid to your real estate agent for helping you sell or buy a property. This fee is typically calculated as a percentage of the final sale price, though in some situations, a flat fee may be agreed upon instead. 

Percentage-based commissions are standard because they tie the agent’s compensation to the outcome of your sale, aligning their incentives with yours to achieve the highest possible price. However, this also means the total amount you pay can be substantial, especially in provinces or cities with high average home prices.

In Canada, there’s no universal rate for real estate commissions; their structures and percentages vary depending on your province, the real estate brokerage you hire, and the level of service provided. 

Who Pays Real Estate Commissions?

In almost all Canadian real estate transactions, the seller pays the commission to both the listing agent and the buyer’s agent. This means that even though the buyer has an agent advocating for them, they don’t usually pay that agent directly. Instead, the selling agent’s real estate commissions are split with the listing agent.

For example, if a seller lists their property for $700,000 and negotiates a 5% total commission, $35,000 is paid to the real estate professionals involved when the sale closes. The buyer indirectly covers this cost because the sale price includes the commission. While buyers don’t typically see this fee itemized in their trust ledger, it still affects the total amount they pay for the property.

How Are Real Estate Commissions Structured?

Real estate commissions can be set up in various ways. Understanding the pros and cons of each model helps you choose the arrangement that works best for your goals and budget.

Common Commission Structures

When selling a home, you’ll encounter a few different ways agents charge for their services. Understanding how each model works will help you choose the option that best fits your budget and priorities. Here are the most common commission structures you’ll see in Canada:

• Percentage of Sale Price: The most widely used method, typically ranging from 3% to 5%, is split between the buyer’s and seller’s agents. This approach ensures the selling agent is motivated to help you sell for the highest possible price.
• Flat Fee: A set dollar amount agreed upon in advance. Flat-fee arrangements are more predictable but can mean the agent has less incentive to negotiate the highest sale price.
• Tiered Rates: Some provinces and brokerages use a structure where the commission is higher for the first portion of the price (for example, 7% on the first $100,000) and then drops for the remainder. This can balance incentives while controlling costs on higher-value properties.

Pros and Cons of Common Commission Structures

Choosing the right commission model can have a significant impact on both your costs and the service you receive. Each approach comes with its benefits and drawbacks, so it’s worth taking the time to compare them carefully. Ask your agent to walk you through an example using your estimated sale price so you’ll know exactly what to expect. 

• Tiered Rates: Can feel more equitable, especially for higher-priced properties, but sometimes confusing to calculate.
• Percentage-Based: Motivates agents, but can result in very high fees as property prices rise.
• Flat Fee: Predictable and transparent, but you may get less hands-on service or marketing support.
  

Real Estate Commission Rates by Region

Real estate commission rates aren’t the same everywhere. They vary by province, local market trends, and the practices of individual brokerages. Here’s a general overview of typical rates in different parts of Canada to give you a sense of what’s common and where there may be room to negotiate. Commission is always negotiable, especially if your property is expected to sell quickly or if you’re also buying another property with the same agent. Here are some averages as reference points: 

• Ontario and British Columbia: Commonly 5%, usually split 2.5% each to the seller’s and buyer’s agents.
• Alberta: Often 7% on the first $100,000 and 3% on the balance.
• Quebec: Generally around 4–5%.
• Saskatchewan: Typically follows a declining scale (for example, 6% on the first $100,000, then 4% on the next $100,000, and 2% thereafter).

Commission Splits with Brokerages

It’s easy to assume that your real estate broker pockets the full commission, but that’s rarely the case. Most realtors work under a real estate brokerage, which provides training, administrative support, and brand recognition in exchange for a portion of each sale. The way commissions are split between agent and brokerage can vary widely, and it often influences how your agent runs their business and prioritizes clients. 

These arrangements matter because they can impact the level of service you receive. Agents who pay significant brokerage fees may be more selective about the clients and properties they work with. If you’re considering discount brokerages, make sure you understand precisely which marketing and negotiation services are included.

Here are some of the most common split models you’ll see:

• Traditional Split: A fixed percentage (such as 50/50) is allocated to the brokerage, and the remaining half to the agent.
• Graduated Split: The agent starts with a lower share and earns higher percentages as they reach tiered sales targets.
• 100% Commission Brokerages: The agent keeps the full commission but pays a monthly fee or per-transaction fee to the brokerage.

What Is Dual Agency?

Dual agency is when the same agent represents both the buyer and the seller. This setup can be convenient but often creates a conflict of interest, as the agent cannot fully advocate for both sides.

For example, if your agent is representing both you and the buyer, they cannot share confidential negotiating strategies or price expectations with either party. In some provinces, such as British Columbia, dual agency is heavily restricted or banned in most circumstances. In others, like Ontario, it is legal but requires full disclosure and your written consent.

From a purely commission standpoint, it’s in the best interest of both the selling and listing agents that the buyer purchases at the highest price, as it increases their shared commission split. However, if the home sale price becomes unaffordable for the buyer, they may walk away from the negotiation. 

For Sale by Owner (FSBO): The Sell-it-Yourself Route

Choosing to sell your home without an agent is called FSBO. This option is becoming more visible thanks to online listing platforms commonly known as proptechs, but it still represents a small portion of Canadian sales.

FSBO may be a good fit if:

• You are an extrovert with a natural talent for selling.
• You have experience selling property.
• You’re comfortable handling paperwork and negotiations.
• You can dedicate time to showings and inquiries.

However, many sellers underestimate the work involved. You’ll also need to decide whether to offer a commission to buyer’s agents; most FSBO sellers still offer around 2–2.5% to ensure agents are motivated to show their listings. If you’re considering this route, it’s advisable to consult with a real estate lawyer in advance to understand the closing process and your legal obligations.

Quick Tips for Negotiating Commissions

Negotiating commissions can feel awkward, but it’s an expected part of the process. Most agents will appreciate that you’re taking time to negotiate what’s in your best interest.

Before you sign an agreement, consider these steps:

• Compare multiple agents: Interview at least three to five agents and ask detailed questions about their commission structures and services to determine which one best suits your needs. Also, ask about their sales experience, including how long they have been a realtor and the number of sales they have completed over the last quarter or year.
• Ask what’s included: Beyond having your property listed on the Multiple Listing Service (MLS), higher commissions often cover professional photography, staging, targeted online ads, and other marketing investments.
• Inquire about rebates: Some agents offer cash-back incentives to buyers or reduced commissions for repeat clients.
• Confirm in writing: Whatever you agree on, ensure the details are precise in your listing or buyer representation agreement.

Frequently Asked Questions (FAQ) About Real Estate Commissions in Canada

Final Thoughts

Real estate commissions are one of the most significant costs you’ll face when selling your home, and understanding exactly how they work can help you keep more of your equity. From the structure of commission splits to the services included, there are many ways to tailor your approach and potentially save thousands. Whether you negotiate a lower rate or secure extra marketing support, understanding and negotiating your commission structure gives you more control over the process.

Now that you’ve put your home on the market, it’s the perfect time to plan your next move. Whether you’re upsizing, downsizing, or buying your dream property, nesto mortgage experts can help you finance your next home with confidence. Connect with us today to explore options that align with your budget and mortgage strategy.

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Why Choose nesto

At nesto, our commission-free mortgage experts, certified in multiple provinces, provide exceptional advice and service that exceeds industry standards. Our mortgage experts are non-commissioned, salaried employees who provide impartial guidance on mortgage options tailored to your needs and are evaluated based on client satisfaction and advice quality. nesto aims to transform the mortgage industry by providing honest advice and competitive rates using a 100% fully digital, transparent, seamless process.

nesto is on a mission to offer a positive, empowering and transparent property financing experience – simplified from start to finish.

Contact our licensed and knowledgeable mortgage experts to find your best mortgage rate in Canada.

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