Real Estate

How does buyer and seller realtor commission work?

  • Last Updated:
  • Mar 9th, 2020 2:49 pm
[OP]
Newbie
Apr 1, 2017
64 posts
9 upvotes

How does buyer and seller realtor commission work?

Exactly how does buyer and seller realtor commission work in Ontario?

I read posts online, and some people are saying if I don't use a buyer realtor, I can potentially increase my offer (by 2.5% commission) because seller wont be paying that amount anymore. (And how do I go about this? do I go on houseSigma or similar website and contact seller agent myself for a viewing?) What kind of risk am I taking in if I dont use a buyer realtor?

But I also read online that seller has to pay the 5% commission regardless when they get a seller realtor, so if I use a buyer realtor then 2.5% will just go to the buyer realtor.


My ultimate question is do I use a buyer realtor??

Other info:
1. Found a realtor that offer 20% of their commission.
2. I am a new buyer that doesn't know much, only did some research online and asked some friends of their experience
Any other tips or advice on buying a house for a beginner like me should know will be really much appreciated.
13 replies
Deal Addict
May 16, 2017
1291 posts
1540 upvotes
Seller pays commission, which is split between seller's and buyer's realtors. The commission rate will be in the seller's agreement with the realtor - after that anything is up for negotiation/renegotation as part of the sales agreement IF ALL PARTIES are willing.

That said, the buyer not using an agent puts the buyer at risk of getting shafted by the seller's agent without independent legal review but yes, does leave some space for price negotiation due to selling agent not having to split commission with buyer's agent. You should use part of that negotiating space to get independent legal review of the sales agreement.
Sr. Member
Dec 4, 2004
698 posts
699 upvotes
GTA
The seller pays all commissions from the sale price. The seller will negotiate with his/her listing agent for the listing brokerage commission. This can be anywhere from 0.5% to 2.5%. Then there will be the cooperating brokerage commission, for the buyer's agent. This is can be 2% to 2.5% but will most likely be 2.5%. So total commission will be somewhere between 2.5% to 5%. However, if there is no buyer's agent, the seller will usually pay a lower total commission like 1.5%. The agent must then pay a portion of the commission to the brokerage if he works for one.

There are also brokerages that offer a fixed fee model, like Purple Bricks. However, this usually only applies to the listing agent part, and the cooperating agent will still receive a percentage commission in the range of 2.5%

Also note that just because the seller pays the commission out of the sale price, part of this cost is usually passed on to the buyer through a higher selling price. So if you don't use a buyer's agent you may get a reduced price based on a lower total commission.
Newbie
Jan 19, 2017
40 posts
44 upvotes
As others have stated: you are in a much better position to negotiate without a buyers agent as you are essentially coming to party with the buyers commission in your back pocket and you can use it however you want.

Personally, I also prefer negotiating directly with the seller and/or their realtor. If you have a buyers agent you are essentially just relaying everything through another person which just complicates things unnecessarily. You also have no idea what the two agents are telling each other in order to get a deal done quickly so that they can get their commission and move on.
Deal Addict
Apr 13, 2017
1270 posts
520 upvotes
Get a good realtor. Not all are good.

There are some realtors that don’t do a good job - real estate may be a side gig for them. One of my friend used his colleague as the realtor, who forced my friend to bid 70k above asking. These realtors get annoyed when you keep seeing more houses, but cannot make a purchase for various reasons (budget , location, house conditions etc). A good realtor will try to use his negotiating skills to get a good deal even when it’s sellers market. I bought another rental property in Nov for 20k less than asking - sellers realtor was from a town outside gta and had little knowledge of gta real estate.
Deal Addict
May 15, 2013
1693 posts
434 upvotes
Montreal
1) If you already visited a house and want to buy it, you can get in touch with a buyer's agent and tell him that you already have found a house and that for 1% of comission he can helps you with all the paperwork.

2) You can ask the seller's agent if the contract he has with the owner allow him to also deal as an agent with the buyer. If that the case, he can act as an agent for both parts wih a reduced commission.
Sr. Member
Feb 19, 2019
786 posts
826 upvotes
Stouffville ON
waterbottleemo wrote: Exactly how does buyer and seller realtor commission work in Ontario?

I read posts online, and some people are saying if I don't use a buyer realtor, I can potentially increase my offer (by 2.5% commission) because seller wont be paying that amount anymore. (And how do I go about this? do I go on houseSigma or similar website and contact seller agent myself for a viewing?) What kind of risk am I taking in if I dont use a buyer realtor?

But I also read online that seller has to pay the 5% commission regardless when they get a seller realtor, so if I use a buyer realtor then 2.5% will just go to the buyer realtor.


My ultimate question is do I use a buyer realtor??

Other info:
1. Found a realtor that offer 20% of their commission.
2. I am a new buyer that doesn't know much, only did some research online and asked some friends of their experience
Any other tips or advice on buying a house for a beginner like me should know will be really much appreciated.
I have bolded the most common outcome.
The seller signs the contract with their listing agent for the total commission (doesn’t have to be 5%), the split of commission between the listing and buying agent is established however if you don’t bring your own buyer agent in most cases the listing agent will pocket the full commission (unless it is written otherwise in their contract, rarely happens). In those cases there will be no benefit to you not to have your own agent, and if you don’t know much about real estate you probably won’t feel very comfortable going on your own.
As a first time buyer you should learn as much as possible about the market, government incentives, and most of all contact a mortgage broker and get mortgage pre-approval so you know what is the maximum you can spend.
Other suggestions will depend on the market you are in and what type of property you are trying to buy.
Last edited by senasena on Mar 9th, 2020 8:36 am, edited 1 time in total.
Full Time and Full Service Realtor
Jr. Member
Jun 1, 2019
150 posts
147 upvotes
There are many misconceptions about dealing with Seller's agent directly. You have to realize that the Seller's agent is ethically and contractually bound to get the best deal possible for their Seller, at the expense of the Buyer (you). They are not working for the interest of you, the Buyer, although will follow your instructions in terms of drafting offers. A competent Seller's agent, dealing with a "general-public" Buyer, can easily structure a deal that has many favourable aspects for the Seller, beyond the price. On top of that, there's no reason that a Buyer will get any advantage re: the total commission.

Having an equally-competent Buyer's agent represent a Buyer can help to avoid these pitfalls. On top of that, there are many Buyer's agents that WILL give you half of the Buyer's agent commission, guaranteed. So it's win-win for you, the Buyer.... you have someone competent negotiating and structuring a deal in your favour, AND you can get 1-1.25% back.
Full Service Realtor
Niagara / Hamilton-Burlington
Deal Fanatic
User avatar
Feb 2, 2014
8127 posts
2282 upvotes
Toronto
waterbottleemo wrote:
But I also read online that seller has to pay the 5% commission regardless when they get a seller realtor, so if I use a buyer realtor then 2.5% will just go to the buyer realtor.
This is how the contract is structured (listing agreement) between the seller and the listing brokerage.

Regardless if the buyer has an agent or not, the contract states that the seller owes the full 5% to the listing brokerage.

IMO, you're better off getting your own agent to assist you and ask for some cash back.
Kevin Somnauth, CFA
Principal Broker - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Deal Addict
Mar 27, 2004
4424 posts
2041 upvotes
Toronto
The Sellers have already AGREED to pay the commissions to the Listing brokerage to distribute to the cooperating brokerage.. It is up to the LISTING AGENT to reduce their commission. Its is not up to you to offer 2.5% less. There is absolutely no benefit to buying a property on your own without an agent. The Listing agent will just ask you to sign a customer service agreement and pocket the COOP commission as well.
Full-time Realtor
Sr. Member
May 3, 2013
634 posts
188 upvotes
Toronto
iamthebest wrote: 1) If you already visited a house and want to buy it, you can get in touch with a buyer's agent and tell him that you already have found a house and that for 1% of comission he can helps you with all the paperwork.

2) You can ask the seller's agent if the contract he has with the owner allow him to also deal as an agent with the buyer. If that the case, he can act as an agent for both parts wih a reduced commission.
For 1) some listings state that if the buyer viewed the property already, either thru open house or with the seller agent, the buyer agent will get half the co-op commission, so this suggestion may not fly.

For 2) AFAIK, no listing agent will explicitly sign a contract with the seller stating they cannot act as an agent for the buyer. Whether the agent work with reduced commission is up to the agent.

This has been discussed in previous thread, but here's my point again (and it's not because I'm a Realtor I'm saying this, I truly believed this when I bought my first condo thru a Realtor before I became one): The buyer should simply be concerned with getting the property at a price they are happy with, and not worry about how much commission the agent gets. Chances are, your agent can probably negotiate the price down more by what the buyer is trying to skim. The buyer and buyer agent should act as a team and negotiate with the seller, not create a triangular relationship with "tension".
Newbie
Jan 19, 2017
40 posts
44 upvotes
oasis100 wrote: There is absolutely no benefit to buying a property on your own without an agent. The Listing agent will just ask you to sign a customer service agreement and pocket the COOP commission as well.
This isn't true at all. Realtors, like anyone else in business, have an interest in making money. If two buyers come to a sellers realtor with the same or even similar offers you can bet the realtor will try convince their seller to take the deal with the buyer who does not have a buyers agent. It's literally double the commission for them.

Every time one of these threads comes up realtors (in general, obviously) are so intent on convincing everyone that their only job is to get the best deal for their clients. It's such a transparent facade. Realtors, like any salesperson, are first-and-foremost trying to do the most amount of sales. If they can get a good deal for their clients at the same time then great - but their incentives primarily align with getting a sale done and moving on, especially if they are working for the buyer. In fact, if they are working for the buyer then their incentives are not even aligned with the buyers. If the realtor knows a seller will take $500k and their buyer only thinks a place is worth $475k, do you really think they aren't going to try convince them to come up $25k? Come on, be real... There's a reason why realtors and their regulating bodies (who are really just a body of different realtors) are constantly being investigated and/or fined.

Jr. Member
Jun 1, 2019
150 posts
147 upvotes
@alexyyc

Your comments are only valid if you assume that buyers and sellers [i.e. the general public, for the most part] are stupid & uninformed and let their Realtors push them around. In my experience the opposite is true.... buyers and sellers are very well-informed and know exactly what deal they want, what amount of money they will pay/take for their property, and as a Realtor I couldn't change their opinion, even if I wanted to (which I don't).

Sure, there are some unethical Realtors out there that may try to prey on the rare uninformed buyer/seller, just like there are plenty of unethical [name a profession] out there. People are people. But generally the shady Realtors get weeded out, just like the shady plumbers, the shady car salesmen, etc etc.

It still holds true, however, that as a Buyer as long as you are dealing with a Buyer Realtor that gives you some of their commission for the deal they transact on your behalf (i.e. ~half their commission), you are pretty much guaranteed to be ahead financially than if you approach the Seller's Realtor directly.... plus you have someone working on your side, rather than the Seller's side. Trust me, as a Realtor I deal with this all the time - in both situations. If a Buyer comes to me directly for a property that I have listed for my Seller, I'm still working on behalf of my Seller. Who wins? The Seller, who I am contractually and ethically bound to get the best deal for.
Full Service Realtor
Niagara / Hamilton-Burlington
Deal Addict
Mar 27, 2004
4424 posts
2041 upvotes
Toronto
any prospective buyers trying to buy in todays market, good luck to you if you want to do it own your own.

you will have less information to make a informed decision, guaranteed. I get a lot of clients that rely on bungol for information and time after time they come to realize they do not have all the information.

In a slow market, or in a smaller city in Canada. you can probably go at it alone. in gta. and other hot markets. forget it.

You are making the largest purchase in your life. you have no experience negotiating hence why you have to come on rfd to ask these questions..and you want to go at it alone? recipe for disaster. I'm not saying this because I am a realtor. I am saying this because it's common sense.
Full-time Realtor

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