Calgary Realtor Fees & Commissions
ALL CALGARY REAL ESTATE AGENT COMMISSIONS ARE NEGOTIABLE!
Home buyer’s do not pay their real estate agents commissions (except in some rare cases (see below)). Instead the home seller agrees to pay a TOTAL commission to a real estate brokerage which is then disbursed to the buyers agent and listing agent per their agreements with their respective clients. Real Estate Agents are not employees of Real Estate Brokerages and as a result they work independently (AKA Designated Agents) and can set their own fees or commission structure with their clients.
You will often hear about a “Standard Commission Rate of 7 and 3”. This means that the seller will agree to pay a total commission of 7% on the first $100K and 3% on the balance of the sale price plus GST.
For example: On a $400K home, the calculation would be 7% on the first $100K ($7,000) and 3% on the remaining balance of the sale price. In this case the remaining balance after the first $100K is accounted for would be $300K and 3% of $300K is $9,000. $7,000 + $9,000 = $16,000 + GST of TOTAL commissions.
The most important thing to say here is that there is NO SUCH THING AS A “Standard Commission”. Commissions for the listing agent and the buyers agent should be seen as two entirely different things and both are entirely negotiable. Any TOTAL commissions agreed to by the seller are then split between the listing agent and the selling agent (buyer’s agent) in line with whatever agreement they have made with their respective seller or buyer client.
Listing agents often come up with very creative commission structures that will depend entirely on the uniqueness of their clients needs as well as consideration of things like loyalty, expectation of future business, referral history etcetera. Some agents will also adjust their commission structure based on the level of service required or the expectations of their listing client. This could mean reduced commissions for reduced level of service or vica versa.
Buyer’s agents also have the ability to negotiate with their buyer clients whatever commissions they will earn. A buyer MUST be represented by a buyer’s agent (AKA “Selling Agent”) certainly BEFORE they write any offer. The Real Estate Council of Alberta (RECA) requires that all agents representing a buyer MUST formalize their relationship via an Exclusive (or non-exclusive) Buyer Representation Agreement (EBRA). In essence, this agreement formalizes the relationship between the buyer and their agent and clearly discloses what the buyers agents commissions both parties have agreed to as well as any “Retainer Fees” an agent may charge should their buyer chose not to move ahead with a purchase after a significant amount of time, driving or work has been completed by their agent. For a complete list of agreements follow this link
FULL DISCLOSURE of the commissions being offered by the listing brokerage (AKA the seller) MUST BE indicated directly in the private remarks of every listing and your Realtor MUST disclose them to you. A few things to know:
A buyer’s agent MUST agree to show ALL properties listed on the MLS System (AKA REALTOR.ca) regardless of the commissions that have been indicated in the private remarks. This means that if the seller is offering ZERO commissions to your buyers agent, your agent is still required to show you the listing and disclose that the seller is not offering to pay their commissions. So what happens in these cases?? You have an agreement with your buyer’s agent via the EBRA that your they will receive 3.5% on the first $100K and 1.5% on the balance of the sale price plus GST… BUT the seller has not agreed to pay this amount in their listing (this happens with virtually all of the various discount brokerages as well as for sale by owner brokerages). You have a few options here: First, you can obviously elect to pass on the property. Second, you can view the property and if you decide to move forward, instruct your agent to add an enforceable term to the contract that indicates “Seller will compensate buyer’s agent 3.5% on the first $100K and 1.5% on the balance of the sale price plus GST”. This then becomes a point of negotiation between you, your agent and the seller.
What do most selling clients offer to buyer’s agents? I would be happy to be proven incorrect here and without spending hours going through all of the 6000+ listings, I can confidently say that ~90% of sellers are offering AT LEAST 3.5% on the 1st $100K and 1.5% on the remaining balance of the sale price plus GST. In a market where conditions are downward trending, some sellers will actually offer significantly more to a buyer’s agent.
For more information on how my commissions, please call me. EVERY client I work with receives a completely transparent disclosure with various options that make sense for both of us.