Whether you’re checking real estate listings in Toronto to buy or sell your property, it’s very likely that you’re also looking for ways to cut down your costs. Both buyers and sellers are always more than happy to avoid expenses if it can be helped.
One of the expenses that buyers and sellers deem to be among the most costly is the agent’s commission. This refers to the cut the realtors take out of the total sale price. Sellers see it as an extra cost that they could have just pocketed while buyers look at it as an additional cost on top of the price of the property. This is why the most pressing question when it comes to pricing a property is ‘how much commission should agents get?’
How Real Estate Agents Earn Money
To answer this question, it’s crucial to look at the details. The most important one, in this case, is the fact that real estate agents earn only through commission. They don’t have a set salary even if they work for a firm. Their earnings are also dependent on the success of a sale, so they work hard to help you successfully buy or sell a property.
Like most homeowners who intend to sell, however, real estate agents also need to spend money to make money. They often have to market their services to get clients and then actually make a sale before they can cash in on their efforts. As not all sales push through, there are also instances where they get nothing from their efforts.
While all of these seem like a major gamble on the part of the professionals, the amount they make from a single sale can also be well worth the effort. This makes the profession an attractive one.
How Much Commission Do Real Estate Agents Make?
While they don’t get a salary, agents are allowed to set commission rates completely on their own accord. The Competition Act of Canada allows them to do so to encourage free and open competition. There is no standard when it comes to these rates so realtors cannot claim that there’s any justification to push their commission rates to buyers and sellers.
However, because of this, it’s also a bit challenging for the public to have a good estimate of how much their agent will get after the sale. The MLS may include how much the buying agent can get but one will have to ask the selling agent how much they’re getting to know such a crucial piece of information.
If you need a ballpark figure to help you decide how to proceed with your sale or purchase, experts say that you can often expect a lot of agents to charge about a 5% rate. It might not look like a huge amount at first glance, but it’s a staggering number considering that the current average house price in Toronto is $805,320 according to the Canadian Real Estate Association. They can make tens of thousands of dollars from a single sale.
Buyers and Sellers Should Learn to Negotiate
The large amount that agents and brokers make tend to make a lot of buyers and sellers think that they can make as much savings by not hiring professional services. While this is true and the very reason why some properties are offered through the For Sale By Owner (FSBO) scheme, it can make the home buying process way trickier for you.
As mistakes made when shopping for real estate can also be devastatingly costly, you should definitely look into other ways to save some money during the process. One of the best examples of this is learning how to negotiate.
Both buyers and sellers can negotiate the commission rate of their agent to save some cash. Even just a 1% cut can let you save thousands of dollars so it’s worth a try. As these rates aren’t set in stone, some persuasion could help you convince your agent to take a commission cut especially if it can quickly seal a sale.
