One question that keeps coming up among sellers is – how much is the real estate commission in British Columbia?

Real estate commission can be confusing at times and not well understood by sellers and buyers. Furthermore, clients feel uncomfortable bringing up the topic and asking their realtor to explain it.

The most significant expense associated with a home sale in BC is real estate commission. For this reason, it is important for sellers to understand how the money is distributed & what type of expenses real estate agents have while selling real estate.  

We hope this article unveils some unknowns about how much commission Realtors charge, commission distribution and the reasoning behind commission rates.

Real estate commission is an important part of the marketing process. Some of the funds collected are used to pay for marketing, media, and compensate the buyer agent. Portions of real estate commission are also collected by the agent’s brokerage office and real estate board.

Ok, let’s get into more details!

WHAT IS THE REAL ESTATE COMMISSION RATE IN GREATER VANCOUVER & BC?

Typical commission structure sellers usually encounter is 7% on the first $100,000 + 2.5% on the balance of the sale price. The commission structure can differ and there is no set standard of fees in Greater Vancouver area & BC.

THERE IS NO REGULATION FOR SET COMMISSIONS

Canada’s Competition Act prohibits realtors to set a fixed, standard commission rate across the board. Every realtor sets their own fees and can charge as much or as little as they see fit.

COMMISSION WE CHARGE OUR CLIENTS

As Vancouver Realtors, we charge a real estate commission of 7% on the first $100,000 + 2.5% on the balance of the sale price. We also offer the cooperation to buyers’ agents to split the fee and offer the buyers realtor as an incentive for them to show our listings and write offers. We believe the cooperation amount we offer to the cooperating realtors is the single most important decision a seller can make in order to position themselves competitively in the marketplace. 

WHO PAYS REAL ESTATE COMMISSION?

One debatable question is who pays real estate commission, the seller or the buyer? In B.C. real estate, commission is usually charged to the seller and payable upon completion of a successful transaction of a sale. However, another way to think about, the real estate commission in B.C. is born out of the sale’s proceeds, which is payable by the buyer. 

Advertised sale prices are the gross amount before commissions are distributed. To better understand where the money goes, we put together important points to know about the real estate commission structure in B.C. The information can assist you not only to understand the topic but to be able to ask the right questions during an interview with a realtor.

real estate commission

6 THINGS TO KNOW ABOUT REALTOR COMMISSIONS IN BC

1) G.S.T. IS PAYABLE ON REAL ESTATE COMMISSIONS

Sellers, at times, feel they miscalculate the expenses and their net position as realtors forget to mention there is GST on the commission amount. It is assumed that all goods and services are B.C are subject to GST but it is important to highlight it when a realtor discusses real estate commission with home sellers. Note that GST does not go into the realtor’s pocket. Realtors, just like any other small business in B.C. require to have a GST number and remit GST to CRA regularly. 

2) SELLER CONTROLS COMMISSION AMOUNT & DISTRIBUTION

Commissions are usually paid by the seller: The seller is the one who negotiates the commission rate with their realtor. One question you ought to ask is, ‘how much is the cooperating commission and is it competitive’? The amount your realtor is willing to share with the buyer’s agent is what we call ‘marketing dollars’ and can have an impact on the sale price. Sellers usually focus on the total amount without reading the small print, which detailing of how the real estate commission gets distributed.

3) DISCOUNTED COMMISSIONS CAN HURT YOUR SALE

Discounted commissions can lead to a lower net sale: When the commission rate is discounted it could result in a lower net sale. A good way to view the commission amount is the sum of money used for marketing, the lower that amount, the lower funds will get spent to market your place. Listing agents in B.C. have a lot of expenses associated with listing homes:

  • Board fees
  • Documents related to land title and strata title properties
  • Signage
  • MLS fees
  • Brokerage listing fees
  • Marketing-related expenses such as print media, videos, photography, web design, hosting and posting on 3rd party websites and services. 

There are many more expenses realtors incur regularly just to hold their license and comply with B.C real estate trading services laws and requirements. These expenses are in the thousands annually.

4) DISCLOSURE REQUIREMENTS

When a seller receives an offer, there is a disclosure requirement by the realtor to break-down the commission payable. The disclosure breaks-down the total fee, amount your realtor is paid, funds your realtor offers to the buyer agent, and any other fees your realtor will be benefiting from (such as 3rd party referral fees, if any) related to this transaction.

5) REAL ESTATE COMMISSION IS NEGOTIABLE

Easily the most common question we hear, ‘is real estate commission negotiable’? The answer is yes, however, it is at the realtors discretion. As a seller, keep in mind if you negotiate real estate fees, make sure it is come out of the realtor who represents you. We have seen situations where real estate commission fees were reduced, just to find out the cut was taken from the cooperating agent offering. This could have negative consequences to your home sale.

6) COMMISSIONS ARE USUALLY ALL ENCOMPASSING

Commission is not the fair or appropriate title for the seller’s expanse, we prefer marketing expenses. Yes, there is a percentage paid to the realtor but the money is used, among other things, to pay for compliance, marketing, time and effort by administrators and trades, and split with the other representative. The commission paid by the seller includes all of the expenses related to marketing and promoting the sale.

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