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Sales Agents & Commission

Many For Sale By Owner websites tell you that Real Estate commission is 6% of the sale price. They even offer you a savings calculator so you can do the math yourself and see the thousands of dollars you'd save if you used their program.

However, what they don't tell you about commission are the facts.

For one, 6% is not a standard commission. There is no fixed rate for commission charged by a real estate company. These charges may vary from 0-10% with all kinds of cost divisions and conditions blended in, such as 6% of the first $100,000 and 3% of the remainder, or 1.5% on the list side and 3% on the remainder, etc. Regardless of what the options are, all commission is negotiable.

Did you know that there are actually two sides of the commission? The listing agent, which is the Sales Representative that comes and works with you to find a buyer, is on one side of the commission. On the other hand is the Sales Representative who brings the Offer to Purchase from a buyer.

Often, the listing Sales Agent determines the commission paid to the selling side of the deal. More often than not, this amount is half the dollar value that the listing agent receives, but this is not mandatory. However, if the selling commission is considerably lower than what comparable rates are offered by other listings on the Real Estate web sites, many Sales Agents will make little or no effort to bring their buyers to buy a property.

The reason is obvious: less money to be made on closing day!

When dealing with a Real Estate Company:

The seller will sign a listing agreement, which states the agreed amount of commission both parties have agreed to. For this fee, the seller should firmly establish the level of service they will be receiving and the fees that they will be required to pay. Many cut-rate agreements also have cut-rate services and additional charges for items such as advertising.

Interview more than one Sales Agent, and compare personality, reputation, professionalism, fees and services before deciding. Keep in mind that commission is negotiable in all areas of Canada. Make the best deal possible.

When selling your home by owner:

When selling your home by owner, commission may still be an issue if you have agreed to let Sales Agents bring buyers to your home. In this case, there is no Listing Agreement because you are, in this case, the listing agent. If you have agreed to make arrangements with one or more Sales Agents, be sure to have this agreement in writing. The best suggestion would be a commission letter. Any Sales Agent can supply you with this form.

Do not get tricked into signing a listing form. Even for a 24-hour time frame. A listed property constitutes a full commission.

The commission letter will clearly state any agreement you have made with the Sales Agent, including what amount you have agreed to pay for their participation in the sale.

Realistically, if the full commission is designed to cover the listing agent and the selling agent, then half of the commission would be fair. This Sales Agent is only bringing the buyer, whereas you are marketing and selling the home yourself.

Just like any other real estate deal, commission is negotiable. Put whatever amount you have agreed to pay in writing so there is no confusion or unexpected charges at the time of closing.

Any and all funds the Sales Agent expects on the closing of the sale are to be paid out by your lawyer. Never pay fees directly from your chequebook, because in fact, the commission cheque goes to the listing company, not to the Sales Agent. The real estate company will, in return, deal with the funds accordingly once they have received payment from your lawyer.