Whether you’re looking to buy or sell a home, understanding all of the real estate fees in Toronto can help you make the best decisions down the line. 

Real estate fees are usually calculated as a percentage of the price of the property being sold. However, these percentages can vary depending on the brokers you use as well as the deals you negotiate with these real estate professionals. The more you learn about these fees and how they work, the easier it will be to complete the sales process and move into your dream Toronto home.  

In this article, we’ll explain the different real estate fees and commissions that you need to cover. We’ll also share the importance of these fees and go over a few negotiation techniques you can apply when negotiating commission rates with your real estate agent.

What Are Real Estate Commissions

Before going any further, it’s important to understand that real estate commissions are not the only fees that sellers and buyers may need to pay. Depending on the circumstances, some buyers have to pay harmonized sales tax or HST (if it’s a brand new home) while every buyer has to cover transfer taxes (LTT) after buying a property. 

This article contains specific information about Toronto’s real estate commission fees, but make sure to consider any additional costs that may potentially come your way.

Real estate commissions are paid to agents on both sides to facilitate the selling of a home. There is no law surrounding the division of the commission, but this fee is typically split between both agents. That said, the split is not always equal, so the exact amount that each agent gets will depend on the negotiations that took place prior to the closing of the sale. 

Commissions for real estate sales can either be:

• Fixed percentage: by far the most common format, agents receive a fixed percentage of the selling price
• Split percentage: similar to fixed, with the difference that the commission is higher if the price of the house goes up
• Flat fee: rather than a percentage, agents receive a flat payment for the sale, regardless of the price of the property
• Variable service fee: agents charge a flat or hourly fee for every action (hosting open houses, managing listing, etc.)

What Does a Real Estate Fee Include?

Hybrid formats: A combination of a flat fee plus additional payments that vary from case to case

Although sellers are in charge of distributing commissions after the sale is completed, these real estate fees are included as part of the price of the house. This means that both buyers and sellers have a right to know what their real estate agent commission in Toronto includes.

The activities covered by the real estate fees in Toronto vary depending from one firm to the next. In some cases, the commission can cover things like property staging, equipment rental, general advertising, professional photography, and listing management services. Typically, the commission fees don’t cover minor property repairs, cleaning costs, or professional home inspections. 

You should talk to your agent and find out exactly what will be included. If not, you may end up being charged for additional services that were not included in your real estate brokerage fees.

What Are the Normal Real Estate Commissions in Toronto?

According to our observations, the average fixed percentage realtor commission in Toronto is close to 5%. This number is typically divided into 2.5% for each agent, but this isn’t always the case. 

Since Toronto is currently a sellers’ market, homes tend to sell very quickly compared to other regions of Canada. Because of this, commissions for real estate agents can also be divided into 2% for the seller and 3% for the buyer as this split encourages more house views and visits.

Homeowners can also work with real estate agents that offer a combined 3.5% commission rate, but the approach to selling the home tends to be more basic. In these cases, the 3.5% is split as 1% for the seller’s agent, while the buyer gets 2.5%. These brokers only tend to promote homes through basic listings and other passive means. But, these are still effective because of the nature of the market.

While sellers get the chance to negotiate commission rates with their agents, buyers don’t usually have this option available. That said, homebuyers can also opt to work with agents that provide rebate cashback on the commissions earned. For instance, some brokers will charge 2.5% on commissions and give back 1% to their clients as cash rebates after the sale has been closed.

Defining Harmonized Sales Tax (HST) on Real Estate Fees

We briefly mentioned HST earlier and how new homeowners need to pay for this tax on top of the final price of the house. HST can’t be charged more than once on every good, which means that resale homes are exempt from this tax. However, HST does apply to some of the services you need to hire to buy or sell a home, including real estate agents.

Canada’s HST stands at 13% as of writing. This means that buyers need to pay for the 13% tax on the real estate commissions, regardless of whether it’s a new or resale property.

Why Are Realtor Fees Important in Toronto?

It’s true that all homeowners can purchase and sell the property without working with a realtor to eliminate commissions. But, real estate professionals help ensure a hassle-free transaction by handling all the behind-the-scenes tasks needed to sell a home. 

To be placed on the market, a home needs to be cleaned, staged, photographed, mapped and inspected. Not only this, but you also have to advertise the property and cover all legal fees. Simply finding all of these providers can take a significant amount of time, let alone negotiating fair prices for the different services.

Realtors have easy access to all these providers as well as agreements that help them keep prices low for their clients. By agreeing to a commission, you ensure that a reliable real estate agent like Justo will take the lead and guide you through the entire process while making it as easy as possible for you.

How to Negotiate on Real Estate Fees in Toronto

Like all interactions, you should address your real estate commission negotiations with the utmost respect. If you’d like to explore this idea, your best bet is to bring it up with your realtor during your initial meeting.

Many realtors are willing to meet in the middle because they want to secure the listing. That said, you should ask questions to ensure that a lower rate won’t impact how your listing is treated or the amount of value you’re receiving from that specific realtor.

Conclusion

We hope that the guide above has helped you understand the real estate commission fees you have to pay in Toronto. If you take the time to understand the different fees, what they include, and how to negotiate with your realtor, you’ll be able to get the best possible deal. Contact us today to know more!