Real estate commission is the fee a brokerage earns for helping you buy or sell a home. In Ontario, it’s fully negotiable, set out in a written agreement, and usually paid from the sale proceeds on closing. HST is charged on top.
Key takeaways
- No law sets commission rates in Ontario; every fee is negotiable.
- Commission is written into your listing or buyer representation agreement.
- HST of 13% applies to the commission amount.
- Compare services, not just the percentage, before you sign.
How does real estate commission work?
When you list your home, you sign a listing agreement with a brokerage. It spells out the commission, how it’s calculated and when it’s earned. Commission is usually a percentage of the sale price, though flat fees are also used.
On closing day, your real estate lawyer pays the commission from the sale proceeds. You don’t write a separate cheque. If the home doesn’t sell, you generally owe nothing, unless your agreement says otherwise.
How the commission is split
In a typical Ontario sale, the listing agreement includes an amount offered to the buyer’s brokerage. The listing brokerage passes that share along when the deal closes. Each brokerage then pays its own agent according to their internal arrangement.
Who pays real estate commission in Ontario?
Traditionally, the seller pays both sides from the sale proceeds. Buyers usually don’t pay out of pocket.
That said, buyers now sign a written buyer representation agreement before their agent submits an offer. That agreement sets out what the buyer’s brokerage expects to earn. If the seller’s offer to the buyer’s brokerage is less, the buyer may owe the difference. Read this clause carefully before you start touring homes.
Bungalow tip: Bungalows often attract a wide pool of buyers, from downsizers to investors. A listing plan that markets to each group can matter more than a small difference in fee. Ask how the agent will reach all of them.
How much is real estate commission on a home sale?
There’s no standard rate in Ontario. Fees vary by brokerage, service level, price point and market conditions. Here’s how the math works so you can compare offers:
| Sale price | Each 1% of commission | HST on that 1% (13%) | Total per 1% |
|---|---|---|---|
| $700,000 | $7,000 | $910 | $7,910 |
| $900,000 | $9,000 | $1,170 | $10,170 |
| $1,200,000 | $12,000 | $1,560 | $13,560 |
Multiply by the total rate you’ve agreed to, and you’ll know your cost. Remember that the sale price matters more than the fee. A strong agent who negotiates a higher price can more than cover the difference.
What does commission pay for?
A full-service listing typically covers far more than putting a sign on the lawn. Ask exactly what’s included:
- Pricing analysis using recent comparable sales
- Professional photography, floor plans and video
- MLS exposure and online marketing
- Staging advice or staging services
- Showing management and open houses
- Offer presentation and negotiation
- Handling conditions, paperwork and coordination with lawyers
Our seller’s guide walks through what a full listing process should look like.
Full-service vs reduced-fee listings
Some brokerages offer lower fees in exchange for fewer services. That can work for some sellers, but it’s worth knowing what you give up.
| Feature | Full-service listing | Reduced-fee or limited service |
|---|---|---|
| Pricing strategy | Detailed market analysis | Often basic or self-directed |
| Marketing | Photos, video, floor plans, targeted ads | MLS listing, sometimes extras for a fee |
| Showings | Managed by the brokerage | Often handled by you |
| Negotiation | Agent presents and negotiates offers | Varies; may be limited |
| Paperwork and conditions | Handled start to finish | More falls on you and your lawyer |
The right choice depends on your time, your comfort with negotiation and how unusual your home is. A bungalow with a legal second unit, a ravine lot or a big renovation story usually benefits from more marketing, not less.
Mistakes sellers make about commission
- Choosing an agent only because they quoted the lowest fee or the highest list price.
- Not reading the holdover clause, which can trigger commission if a buyer from your listing period buys later.
- Forgetting to budget for HST on the commission when estimating net proceeds.
How to negotiate real estate commission
- Interview two or three agents. Compare marketing plans, pricing advice and fees side by side.
- Ask for the breakdown. Know what goes to the buyer’s brokerage and what stays with the listing side.
- Discuss a tiered fee. Some sellers agree to a higher rate above a target price to reward results.
- Check the term and cancellation clauses. Know how long you’re committed and how to end the agreement.
- Get it in writing. Every promise about fees or services should be in the agreement.
Frequently asked questions
Is real estate commission tax deductible?
On a principal residence, commission generally isn’t deductible because the gain is usually tax-free. On an investment property, it can reduce your capital gain. Ask your accountant about your situation.
Do buyers pay commission in Ontario?
Usually the seller pays from the proceeds. But a buyer’s representation agreement may require the buyer to cover any shortfall, so read it before you sign.
Can I change my commission after signing?
Only if both you and the brokerage agree in writing. That’s why it’s worth negotiating before you sign the listing agreement.
Is HST charged on commission?
Yes. In Ontario, 13% HST is added to the commission amount.
The bottom line on commission
Real estate commission in Ontario is negotiable, written into your agreement and paid on closing. Focus on the net amount you’ll walk away with, not just the rate.
Curious what your bungalow could sell for? Get a free home evaluation and see recent sold bungalow listings near you. For legal questions about any agreement, speak with a real estate lawyer.
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