Real estate commission중개 수수료 (커미션)

What is it?

Real estate commission is the fee paid to a brokerage (the company an agent works for) when a home is sold or bought. It is similar to what people in Korea call 중개수수료 or 복비. Ontario’s law (TRESA) calls this money "remuneration".

The money is paid to the brokerage, not to the agent personally. The agent is paid their share by the brokerage. That is why the fee is not a verbal deal with the agent: it is written in your contract with the brokerage (the listing agreement or the buyer representation agreement).

Is there a set rate?

No. The commission is negotiated between the seller (or buyer) and the brokerage. RECO (Ontario’s real estate regulator), the government and real estate associations do not set or approve a rate. An agent must not say the rate is "fixed" or an "industry standard". The law forbids it.

The law only controls the shape of the fee. It must be an agreed amount, a percentage of the sale price (or of the rent for a rental), or a mix of both. A sliding scale, where the percentage goes down as the price goes up, is allowed. A fee based on the difference between the listing price and the actual sale price is prohibited.

If the fee box in the agreement is blank or vague ("to be agreed later"), do not sign. The agreement must clearly show how the fee is calculated.

Who pays, and how is it split?

Most deals involve two brokerages: the seller’s (listing) brokerage and the buyer’s brokerage.

The law (O. Reg. 567/05, s. 13.4) makes the listing agreement state two separate amounts: the fee to the listing brokerage and the amount payable to any other (buyer’s) brokerage. Together they are the total commission the seller pays.

Can the buyer end up paying commission?

Yes. The buyer representation agreement states the fee the buyer owes their own brokerage. In many sales the seller agrees, in the listing agreement, to pay an amount to the buyer’s brokerage, so nothing comes out of the buyer’s pocket.

But the seller may offer less than the amount in your BRA, or nothing at all (for example, a seller selling without an agent). RECO’s Information Guide and RECO Bulletin 6.2 warn that the buyer may then owe the shortfall. Your BRA should clearly say who pays a shortfall, and who keeps any excess if the seller offers more. Find those two lines before you sign.

One fix is a remuneration clause in the offer, where the seller agrees to pay a stated amount toward the buyer’s brokerage fee. RECO Bulletin 6.2 explains this approach.

Is HST added?

Yes. Brokerage services are subject to HST (harmonized sales tax), and HST in Ontario is 13%. Agreements usually state the fee "plus HST". For example, on a $40,000 commission the HST is $5,200, so the seller pays $45,200.

Check whether the fee in your agreement includes HST or not. When you estimate what you will net from a sale, include the HST.

When is the commission "earned"?

The law (O. Reg. 567/05, s. 23) lets a brokerage charge a fee when there is a signed written agreement, or when the agent conveyed a written offer that was accepted, showed the property, or introduced the buyer and seller. In practice, when you must pay is set by your agreement, so read its terms.

RECO’s Information Guide says you must pay the agreed fee even if the deal later falls through because of your own default or neglect. Most agreements also have a holdover clause: if you sell or buy within a set period after the agreement expires, you may still owe the fee under certain conditions. There is no minimum or set holdover period, so check the period in your agreement before you sign.

If the seller’s fee terms could affect whether an offer is accepted (for example, the amount offered to the buyer’s brokerage), the listing brokerage must disclose those terms to anyone who makes a written offer.

Example

The rates below are only to show the math. They are not typical or recommended rates. Your actual rate is whatever your agreement says.

Estimate for reference only. On closing, the lawyer deducts this amount from the sale proceeds, sends it to the brokerages and pays the rest to the seller. The mortgage payout and legal fees come off separately.

What to watch out for

• In the agreement, check: how the fee is calculated, whether HST is included, the amount offered to the buyer’s brokerage, how the fee changes if the same brokerage represents both sides (multiple representation), and the holdover period.
• Buyers: check the fee in your BRA and whether you owe a shortfall if the seller pays less. A shortfall changes your offer budget and closing costs.
• Commission is paid to the brokerage. Do not agree to send money to an agent’s personal account.
• A lower fee does not mean the same service. Compare the list of services in the agreement (photos, MLS listing, open houses and so on) together with the fee.
• In a rental deal the fee can also be a percentage of the rent or a set amount. Check the agreement between the landlord and the brokerage.

Pre-construction

When you buy a new home from a builder, the builder often sets its own terms for paying the buyer’s brokerage. The terms differ by project and builders can change them. Before you sign a pre-construction agreement, check the fee clause in your BRA together with the builder’s terms.