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Who Pays The Commission?

Most Canadians use a real estate agent when buying or selling a home, and pay real estate agent commissions for the services. Why?

Do you pay a dentist or a lawyer for their professional services? A home is probably the largest asset/investment that you will have in your lifetime, doesn't it make sense to get professional assistance. A realtor can help purchasers find the right home for the right price and guide them through the entire home buying process. For a seller, the real estate agent brings exposure and access to a network of buying clients that can translate into a faster sale.

Commissions paid to real estate agents in Canada typically range between 3% to 7% of the final purchase price, depending on region and the agent used.

So, for example, commissions on a home that sells for $400,000 — about the average price in Canada — would total $12,000 to $28,000. This amount would be split between the buyer’s and seller’s agents.

So who actually pays the commission?

Generally, buyers don’t pay realtors directly. Instead, their agent's compensation comes in the form of a commission on the property’s final sale price. Commissions for both the buyer’s and seller’s agents are taken off the top of the proceeds of the sale. Therefore, the seller technically pays the commission.

That being said, the seller and their agent always have that cost in the back of their mind when they are negotiating the sale price of their home with the buyer.

In the end, both the buyer's and seller's agents should always be trying to get the best deal possible for their clients, knowing all of the numbers, like commissions, and closing costs, that meet their client's budget and goals.

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