how much is realtor commission in vancouver
Let’s First Talk About Realtor Commission Structure
The realtor commission in Vancouver has proven to be a confusing topic to many home sellers. You might be asking yourself how much is Realtor commission when selling your Vancouver home.
After our discussion, our goal is to better inform home sellers how much is Realtor commission in Vancouver and provide insight about who’s getting paid.
There are a few things we need to break-down first, which will help explain Realtor commissions. In the following sections we will talk about realtor commission structure and distribution. After we will provide information about actual fees and Realtor commission calculations.
Who gets paid
In the typical real estate transaction in Greater Vancouver area, there are two real estate agents involved. There’s a ‘sellers’ agent representing the homeowner, and a ‘buyers’ agent assisting the homebuyer.
How is the commission distributed
The commission fee is typically split 50/50 between the listing realtor and the buyer’s realtor.
However, the actual split for realtor commission in Vancouver tends to be more like 54%/46%, advantaging the agent representing the home seller. The selling agent receives slightly more commission to reflect the marketing expenses incurred when listing and selling your home.
Seller’s Agent Fee
Although a seller’s agent commission can be a hefty initial cost, the seller only receives the commission upon a successful sale and takes on the full risk of expenses if the home is not sold.
The seller agent is responsible for the entirety of home marketing which includes tasks such as coordinating repairs, cleaning, decluttering and often home staging. Creating all of the digital media is also completed for use in all marketing materials. Other responsibilities during the initial stages of selling would be market research and accurately pricing your home.
The job of a seller realtor can often last many months. Scheduling open houses and showing buyers can last for an extended period of time before an offer is received. One of the most important tasks a seller realtor provides is expert negotiations on behalf of the homeowner.
Buyer’s Agent Fee
More than just a payout, this portion of the commission incentivizes buyer agents to bring potential buyers to the listing. It shouldn’t be underestimated, most experienced buyer realtors are experts at matching homebuyers with properties for sale.
Other general tasks of a buyer’s agent is market research, contract writing and negotiations.
The True Commission Realtors Charge
As Vancouver realtors, we have a commission rate we charge clients. Our rate is 7% on the first $100,000 + 2.5% on the balance of the sale price.
We are also very transparent and calculate the potential commission, including taxes, ahead of signing any contract so the home seller knows their costs.
There is no set real estate commission
It must be noted Canada Competition Act prohibits realtors from fixing and cooperating to set a fixed rate of commission when selling real estate in BC.
Each realtor is free to negotiate their own rate and the brokerage does not dictate what the commission should be, although they may have guidelines.
Can You Negotiate real Estate Commission?
Yes, rates for a realtor commission in Vancouver are usually negotiable. However, it is crucial to remember that although you negotiate with your realtor (the listing agent) the gross commission is split.
If you end up receiving a reduction in commission, understand who will actually be paid less money, should a sale go through. Is it the seller’s agent, buyer’s agent, or both? Reducing the buyer agent commission can mean your home receives less attention on the market.
There is something else to consider if the seller’s agent is reducing their commission. Does this mean less money will be spent on your home marketing? Will there be a reduction in services? Remember the listing agent often spends a considerable amount of money developing media and marketing your home. These funds are spent regardless of your home selling or not.
Are there any other hidden fees with realtor commission?
The commission rate is exclusive of GST. It is important to note in B.C., teh commission rate is subject to a 5% GST tax. Please keep in mind, just like any other small business in BC, Realtors are required to have a GST number and remit GST to CRA. Basically, the tax portion does not go into the realtor’s pocket.
In most instances, realtor commissions are ‘all encompassing’. This means there should not be other extra expenses above and beyond the commission fees. All of the media, marketing and expenses to sell your home is included in the commission charged.
Who Actually Pays The Realtor Commission
The home seller, or owner of the property being sold pays realtor commissions. Real estate commissions are born from the proceeds of the sale, basically deducted from the sale funds. So the owner receives the funds from the sale, minus the realtor commissions.
The seller controls commission distribution & amount
To expand on the above, ‘who actually pays the realtor commissions’, we need to state the home seller is the one who negotiations the commission rate and the split between the buyer’s agent and seller’s agent.
This is an important topic as most sellers only focus on the total commission paid. It’s important to read the small print and also understand how the commission is being distributed. How much is being offered to the buyer’s agent. These small details can affect the success of a sale. We talked briefly about this in the section about negotiating realtor commissions.
If the seller controls commission, why not hire a realtor from a discount brokerage?
There have always been discount brokerages such as, 1% Realty, or the many mere posting brokerages. In the case of 1% Realty, the idea is to pay a reasonable commission to the buyer’s agent, or in other words offer an attractive incentive for buyer realtors to bring their clients. The seller’s agent would receive a reduced commission.
So what’s the potential issue with discount brokerages? Let’s think about how the commission is used by the seller’s agent. It’s used for marketing, such as photography, videography, print media, web design, online marketing campaigns and all kinds of marketing related expenses. If there’s no budget for marketing, there’s simply no marketing! Plus, if you’re dealing with an agent who needs to sell a lots of real estate to make a living, they may not have time to invest in each of their properties for sale.
It’s for the seller to decide if limited marketing or time the agent is willing to invest, will affect their potential sale, or final sale price. How much will the seller save on commission? If the seller receives 50k less on the sale of their home but saves 5k on commissions, would that be a good financial decision?
Better Understanding Of Realtor Commission
Commissions are one of the most significant expenses when selling your home in Vancouver, or the Greater Vancouver area. We hope this article about realtor commission provides some insight about how real estate fees are structured and actual commission rates.
Our goal is to provide home seller and buyers with information about real estate fees because it’s not well understood, plus most people feel uncomfortable about bringing up the topic. It’s always important to fully understand what you’re paying for, especially when it’s a large financial transaction. Feel free to contact us if you have questions!