Although most likely you’ll have a listing agent representing you and a buyer agent who brings in the successful offer, the payment of the total commissions falls to the seller.
Don’t think that the buyer is getting away with a big win however. The seller pays minimal closing costs while the buyer will have to pay, among other expenses, both Province of Ontario land transfer tax and, if buying in the City of Toronto, they’ll also have to pay city land transfer taxes.
On a $500,000 purchase those taxes alone could range between $6,000 and $12,000 depending on whether they’re first-time buyers or not.
Realtor commissions of course are completely negotiable. Historically total real estate sale commissions have ranged between 4% and 6% with a recent average of about 5%. Typically, the commission is split 50-50 between the listing agent working for the seller and the buyer agent working for the purchaser.
In cases where the total commission is 5%, as an incentive for the buyer agent to show your home, it has been common for the listing agent to offer 2.0% or 2.5% to the cooperating or buyer agent.
When an offer comes in, the buyer agent will include a form entitled ‘Confirmation Of Cooperation’ which lays out how the buyer agent will be compensated upon a successful completion of the agreement.
The buyer will offer a deposit with their offer… usually approximately 5% of the purchase price… and that deposit will go into your listing brokerage’s Trust Account for safe keeping until the closing day.
No Realtor will get paid until the sale has closed. Once all the closing documents have been signed and title has been transferred to the buyer AND before your lawyer gives you a bank draft for the proceeds of the sale, he or she will cut a cheque to the listing brokerage for any balance outstanding on the commission (plus HST) due on the sale.
The listing brokerage then deposits the lawyer’s funds and pays the buyer agent’s portion out of that money.
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