Your Realtor is a service provider. This person works on your behalf to sell or buy your home, navigate the complicated legal paperwork, negotiate the closing price, and help you transition into a new living space.
As with any service provider, you get what you pay for. All real estate commissions are entirely negotiable. It’s recommended that you pay your Realtor a full or typical commission. After all, you want this person to be sufficiently motivated to show and sell your home.
So what is a fair Realtor’s commission in Calgary? Below is a full explanation of what to pay your Realtor and how these fees are structured.
What Is the Going Rate for a Realtor?
Realtor fees in Calgary are based on the percentage of the property’s final sales price. As the sale price increases, so do the fees.
In Calgary, one type of commission structure is 7% on the first $100,000 plus 3% on the balance of sale price. This fee structure is often called a “7/3 split.”
As the home seller, you typically pay the commission for both your listing agent and the buyer’s agent. This means that the commissions on a 7/3 split (for example) are shared between those two Realtors.
Say your home sells for $500,000. In a 7/3 split, your real estate agents will earn a 7% commission on the first $100,000, or $7,000. They will also earn a 3% commission on the $400,000 balance, which is an incremental $12,000. This commission is typically split evenly between the listing and buying Realtors.
If your home doesn’t sell, you won’t need to pay these commissions.
Realtor Fee Structure
Your Calgary Realtor should be able to fully explain their fees and how they will achieve results for you. This must be an honest and transparent conversation. It should be discussed when meeting with a potential Realtor.
Fee structures can be arranged in different ways and can have various implications on the sales process and the final commissions paid to all parties. Let’s examine a couple of different ways that fee structures are created in real estate sales, both from the buyer’s and the seller’s side.
Buyer’s Realtor Commission
As mentioned, the seller will typically pay the commissions for both the listing and buying Realtor. But because no amount is required by law, the seller can decide how much to compensate the buyer’s Realtor.
Offering an even split is the ideal way to incentivize the buyer’s Realtor. Within the Multiple Listing Service (MLS) System, the buyer’s Realtor can see how much commission is offered on the transaction. If faced with a reduced commission, some Realtors may be less inclined to show the house, which can reduce your chances of selling your home.
However, when a home seller offers a reduced commission to the buyer’s Realtor, the Realtor is still ethically and contractually bound to help their client purchase the home. In Calgary, Realtors and clients often enter into a Buyer Representation Agreement.
Home buyers should talk with their Realtor to avoid any confusion around fee structures.
Seller’s Realtor Commission
Because home sellers usually pay the fees for both sides, be sure to clarify the fees with your listing Realtor. The amount agreed upon will be stipulated in the listing agreement. It should also detail the fee offered to the buyer’s Realtor.
Most often, the fee is paid from the proceeds of the sale. This prevents you from having to write a cheque to the Realtor as you negotiate the deal.
Questions to Ask When Choosing a Realtor
Information is at a premium in real estate. When surveyed, 32% of Canadians said they didn’t feel prepared or knowledgeable about the real estate process of selling or buying a home.
Here are a handful of questions you can ask to help you find the best rate with a reputable real estate agent:
- Do you offer a free consultation?
- What is your average commission fee?
- How many homes do you typically buy or sell each year?
- Do you work alone or as part of a real estate team?
- How much of your business comes from referrals?
- How quickly do you close a deal, on average?
- How would you determine what price to list my home at?