Real estate commission is often one of the most discussed and misunderstood costs of selling a home. Many homeowners know commission is involved, but fewer understand how it is structured, what it covers, and how it ultimately affects net proceeds. Commission rates are not fixed across Canada, and they can vary based on location, service level, and agreement terms. Understanding how real estate commission works helps sellers evaluate costs realistically and make informed decisions about how they choose to sell. This guide explains how real estate commission is structured in Canada and what sellers should know before listing.
How Real Estate Commission Works
Real estate commission is typically calculated as a percentage of the final sale price and is paid when the transaction closes. The seller agrees to the commission structure in a listing agreement before the home is marketed. Commission is deducted from sale proceeds rather than paid upfront.
Who Receives the Commission
In most transactions, commission is shared between the listing agent and the buyer’s agent. Each agent represents different parties and provides separate services. The total commission reflects compensation for both sides of the transaction.
Commission Structures in Canada
Commission structures vary by province and brokerage. Some agreements use a flat percentage of the sale price, while others apply different rates to portions of the price. Sellers should review how commission is calculated rather than assuming a standard formula applies.
What Commission Typically Covers
Commission generally covers pricing guidance, marketing, listing exposure, showings, negotiation, and transaction coordination. It also compensates agents for time spent managing buyer inquiries, paperwork, and closing logistics. Understanding what is included helps sellers evaluate value rather than cost alone.
Is Commission Negotiable
Commission is not regulated at a fixed rate and may be negotiable in some cases. Negotiation depends on market conditions, service scope, and brokerage policies. Sellers should understand what services are included before negotiating purely on price.
Lower Commission vs Full Service
Some sellers consider lower commission options or limited-service models. While these may reduce upfront cost, they may also limit marketing exposure or negotiation support. Sellers should evaluate how reduced service may affect sale price and certainty.
Flat-Fee and Alternative Models
Alternative commission models include flat-fee listings or limited representation. These options may appeal to experienced sellers but often require more involvement from the homeowner. Understanding responsibilities under each model helps avoid gaps in service.
Commission and Sale Price Relationship
Commission should be evaluated in relation to final sale price and net proceeds. A higher sale price achieved through effective marketing and negotiation may offset higher commission costs. Sellers should focus on overall outcomes rather than commission percentage alone.
Commission in Different Market Conditions
In strong seller’s markets, commission structures may be more flexible due to high demand. In slower markets, comprehensive marketing and negotiation support may provide greater value. Market conditions influence how commission should be evaluated.
Common Commission Misunderstandings
Some sellers believe commission is paid regardless of outcome or that agents are compensated the same regardless of effort. In reality, commission is earned only when a sale closes, and service levels can vary significantly.
Reviewing the Listing Agreement
The listing agreement outlines commission terms, duration, and services provided. Sellers should review this document carefully and ensure they understand obligations before signing.
Private Sales and Commission Avoidance
Selling privately avoids commission but introduces other costs and responsibilities. Sellers should compare total effort, risk, and net outcome rather than focusing solely on commission savings.
Commission and Net Proceeds Planning
Understanding commission early helps sellers estimate net proceeds more accurately. This clarity supports pricing decisions and next-step planning.
The Role of Transparency
Clear discussion about commission expectations helps avoid misunderstandings later. Sellers benefit from understanding both cost and value before listing.
Final Thoughts
Real estate commission is a significant selling cost, but it reflects the services involved in marketing, negotiating, and closing a home sale. Understanding how commission works helps sellers make informed choices and evaluate options based on outcomes rather than assumptions.
Note: Rates and costs vary based on your credit profile, available equity, and location.