Once upon a time, real estate was considered a stable but not particularly lucrative investment.  In these quaint times, people bought homes to live in, with the hope that they would appreciate somewhat over time.

Starting in the late 1990’s, real estate in Toronto and the GTA began an upward climb that continued, more or less uninterrupted, until 2022.  It was in that year that we saw the cumulative effect of many years of price appreciation and rising interest rates finally put a stop to the rapid price growth to which we’d grown accustomed.

Take a look at the chart below to see our average price in the GTA since 1994.

Back in July, 2016, we did a review of how long it takes to recover the transaction costs of buying and selling a property in the GTA.

We did this analysis because we were curious if a piece of commonly held wisdom – that it takes about five years to recover the costs of buying and selling real estate – was still accurate.  Our analysis found that depending on the housing type, it was taking just between about five months to 13 months to pay for the transaction costs of buying and selling real estate.   Clearly, what was once the case was no longer true!

Given that review was almost nine years ago, we thought it would be nice to update it so we could see how long it takes these days.  We almost immediately realized that we can’t do an updated version of the same analysis now.  Let’s go over why we can’t do as detailed an analysis in these current market conditions and then we’ll review what it actually costs to buy and sell real estate now.

We’ll start with how long it takes to recover transaction costs these days.

Let’s see, how does never sound?

Our analysis back in 2016 took place in a time where the average annual price increase for real estate ranged from about 7% per year for condo apartments up to almost 20% per year for detached homes.  With some reasonable assumptions about costs and projecting prices continuing to increase at the same level in the next year, we could calculate how long it would take to fully recover the costs of buying and selling real estate.

If we tried that now for each of the four major housing types, we’d have a range of year over year price changes going from -1.6% for condo apartments to 2.1% for detached homes.  If we segmented it further by Toronto vs the 905, we’d have stats like semi-detached homes dropping in value by 3.7% in Toronto, yet the same type of home rising by 2% in the 905 area.

With so much of a range between housing types and parts of the market, the average becomes far less reliable as a proxy for your home’s past performance and any predicted value.

For semi-detached homes and condo apartments, the negative price appreciation (or loss in value to be clear) means that if you wanted to calculate how long it would take to recover the costs of buying and selling, the answer would be never.  After all, you need your home to increase in value in order to cover the real estate commissions, land transfer taxes, bank fees and legal fees.  If it is going down in value, then you’ll never recover those costs.

Gimme the big picture review.

While it’s clear that the market differences in housing types and location mean the overall average isn’t as applicable as it once was, we can still do some basic analysis.

When we take the likely-not-applicable-to-your-home average price increase in 2024 and forecast it forward, it looks like this.

The above includes the Toronto Municipal Land Transfer Tax, so if you don’t buy in Toronto, it won’t be applicable.  We put in a 2.5% realtor commission on both the buy and the sell side, but if you think it would be lower for your case, then the above is a bit overstated.

The analysis tells us that, using the latest average prices and recent market history, it now takes about six years to recover the transaction costs.  Put another way, if you buy a place and sell it six years later, you’d have the same amount of money as when you bought it.  If you’re paying CMHC mortgage insurance premiums or breaking a mortgage term with a lender, then those costs would mean you’re actually losing a significant amount of money.

So, how much of my value is being eaten up by fees?

It is very expensive to buy and sell real estate and we often find clients who are unhappily surprised by how much it actually costs when you add in all the expenses, fees and taxes.

Let’s go through an example of what it costs, using a $1M home in Toronto.  That’s pretty close to the average price in the city as of January, 2025.

First off, let’s look at additional costs for when you buy.

• On a $1M purchase price, the Ontario Land Transfer Tax payable by the buyer is $16,475. That’s about 1.7% on top of your purchase price.
• In Toronto, you have the additional Municipal Land Transfer tax, which is the same as the Ontario LTT, namely $16,475. So, add another 1.7% in taxes onto your purchase.
• Bank and legal fees will likely be around $2,500 for most typical purchases. This does change somewhat based on the purchase price, but if you budget between a quarter percent to half a percent of your purchase price, you’d likely be in the right area.  Note that if you’re using a Class B or C lender, they will likely charge additional fees far in excess of what a major bank would likely charge.  It is not uncommon to see 1% fees on the mortgage amount!
• If you’re putting down less than 20% of the purchase price, you will also have to pay CMHC Mortgage Insurance fees. These range from 2.8% to 4% of your total mortgage cost, plus HST.  While the HST on the CHMC fees has to be paid up front, you can typically add the CMHC fees themselves onto your mortgage amount, so you get to pay interest on the fee you were charged!

Put it all together and you’re likely to see between 3.5% to 4% in taxes and fees on top of your purchase price.  If you use an alternate lender for your mortgage, add 1% onto to that and if you buy with less than 20% down, you’re looking at somewhere in the 3% to 4% range in additional costs from CHMC.

When your transaction costs are between 3.5% to 4% for a typical purchase and double that if you have a low down payment or don’t qualify with an A lender, you can see how expensive it can be to buy!

Now let’s turn to the sell side of the equation.  For our purposes here, we’re going to say you’re selling for the same $1M you paid when you purchased the home.

• Real estate commissions in Ontario are not set and can vary considerably. There are many different approaches that you can take, including private deals with no commissions, flat fee brokerages and so forth.  In addition, different parts of the GTA have slightly different typical commissions being charged by listing agents and offered to buying agents.  In our experience, real estate commissions of between 4.5% to 5% of the sale price are common.  HST is due on top of that, which adds another 0.65% to these costs.  For our $1M home example, it would cost about $60,000, including HST, in real estate commissions.
• Bank and legal fees are similar on the sell side as they are on the buy side, so for a typical sale, with one mortgage to discharge, somewhere around the $2,500 mark is likely a reasonable estimate. That works out to the same quarter of a percentage of the value of the home for the sale as it did on the purchase side.  Note that if you have a mortgage and you are breaking that mortgage before the end of the term (and not porting – or transferring – the mortgage to a new purchase) you will likely incur breakage fees from the lender.  These can be as little as three month’s interest or they can be a significantly more expensive amount based on what is called the Interest Rate Differential calculation.  Make sure you speak with your lender well before you make a transaction to understand the costs.

When you add the real estate fees and the bank and legal fees, along with the HST on both, you’re looking at costs that equal around 5% to 5.6% of the sale price.

If we combine the costs from buying and selling, most people end up paying transaction fees that equal 8.5% to 9% of the value of the home.  While some of these costs vary depending on the approach taken – and the professionals involved – make no mistake, it is expensive to transact in real estate in Ontario!

If you’re considering buying or selling real estate, then we’d love a chance to show you why our clients choose to hire us to help them through the process.  We believe that hiring the right agent means you pay less when you buy and get more when you sell.  This goes a long way to helping alleviate the transaction costs.  If that sounds appealing, get in touch with us to chat further.

We’ve been helping clients buy and sell real estate for a while now and real estate commissions remain one of the most misunderstood aspects of our job. The most popular article on our website remains this one about what is the average real estate commission in Ontario. Spoiler alert, there isn’t one, real estate commissions are not set, are fully negotiable and vary based on location, type of property and price points.

We wanted to focus on a different aspect of real estate commissions for this article, namely the commission offered to the agent who represents the buyer in a transaction. A reminder that while listing brokerages are paid whatever commission is agreed upon with their seller client, they are also to pay the buyer’s agent brokerage out of that total commission.

Almost all listings on the market specify how much of a commission the buyer’s agent will receive if they bring an offer from their buyer client that is accepted by the seller. Just like the total commission paid to the listing brokerage, these buyer commissions are also not set and vary within any given area, neighbourhood, building and price point.

When we work with our clients on either side of a deal, we have the ability to see how much the buyer’s agent and their brokerage (the co-operating brokerage in our real estate terminology) is to be paid. If you’re thinking of selling your home, your agent can (and should) show you what is being offered to the buyer’s agents in the area. While these tend to find an equilibrium, with most commissions being similar, there are often sellers that are offering less or more than the majority of other sellers.

A client considering selling their condo apartment recently asked us if we would recommend a higher commission for the buyer agent than is typical in their building. We decided to look into it before answering and this article is the result. Let’s get into it!

First, a look at the number of agents out there.

We’ve previously written about how Toronto and the surrounding areas are very well served when it comes to real estate agents.

Sorry, let us try that sentence again, as it sounds as if we’re saying how lucky you are to receive such tremendous, professional service from agents if you live in Toronto and the GTA.

We meant to say, we’ve previously written about how Toronto has one of the highest levels of licensed real estate agents for our population. As of about three years ago (December 31, 2021 to be exact), there were just under 63,000 real estate agents licensed with the Toronto Regional Real Estate Board (TRREB).

That seems like a lot. Is it a lot?

In the absence of other numbers, it can be hard to determine if 63,000 realtors is a lot or realtors. We’ll get into the numbers but from a practical perspective, have you ever heard someone talk about how hard it is to find a real estate agent these days? The answer to that is almost certainly no, unless they were asking it in a sarcastic fashion.

The 63,000 licensed realtors we had in TRREB back at the end of 2021 worked out to one real estate agent for every 59 people working in Toronto. As a comparison, for teachers, it was one teacher for every 226 workers in the city, so there were about four times as many real estate agents as teachers.

If that sounds like realtors would win easily in a fight, keep in mind that some of those teachers are gym teachers and they’re in very good shape. Actually, come to think of it, a number of those teachers are also probably real estate agents on the side, so it might be difficult to know which side they’d choose!

All jokes aside, back then we had an awful lot of real estate agents that are licensed to work in Toronto and the GTA.

Things have surely gotten better.

Despite all the turmoil of the past few years, we haven’t seen the number of agents drop to a number that is more reflective of our population.

In fact, since we last looked at these numbers, we’ve seen even more real estate agents get licensed and the number is now considerably higher! This is despite the fact that we’ve also seen a significant decline in real estate agent licensing renewals recently. As we started 2024, we have had 8% fewer memberships renewed this year compared to 2023. Despite that recent decrease, right now we’ve got around 76,000 realtors licensed with TRREB, which works out to about a 20% increase in the number of real estate agents in our area.

How about sales? We have lots more sales right?

After a super busy 2020 and 2021, the past few years have been less active in terms of real estate transactions. In fact, at the same time as we’ve seen an increase in the level of real estate agents in the city and GTA, we’ve also seen a decrease in the number of actual transactions taking place. At the start of 2024, TRREB projected that we would see about 77,000 sales in Toronto and the GTA during the course of the year.

As of the end of October, we have had around 58,500 transactions. Will we see over 18,000 sales in November and December to hit that projected 77,000 sales? When we look back over the past 10 years, the average number of sales in the final two months of the year was about 11,700, so it seems highly unlikely we’ll hit that 77,000 level of transactions that were projected for this year. Personally, we think we’ll be about 10,000 sales short of that projection.

With more agents and fewer sales, you’d think it would lead to even more agents leaving the industry. Let’s take a look at some numbers to see how much an agent makes, on average.

Gross income of $43K isn’t too bad.

We did some quick number crunching and here’s what we found.

With 58,433 sales so far this year, there has been about $65 billion dollars worth of real estate sold in Toronto and the GTA this year. That works out to about $1.1M on average per transaction and if we assume a commission rate of between 4% to 5%, we have somewhere between $2.6 billion to $3.3 billion in commissions being paid out to real estate agents.

With 76,000 real estate agents licensed to trade with the Toronto Regional Real Estate Board, that means if all the deals were divided equally, each agent would have made about $43K this year at the high end, or about $34K this year at the low end.

Of course, the deals aren’t spread evenly across all the agents.

While annual income so far this year of between $34K to $43K isn’t a lot, that is based on the silly idea that all the commission revenue was split equally amongst all licensed agents within TRREB.

If we look at statistics gathered from third party data aggregators, about a third of licensed agents do no deals at all. Whether they are brand new and not having any luck, part-time agents who do a family or friend deal every couple of years or someone who has their license but isn’t actively working, these agents are not getting a single penny of the real estate commissions earned so far this year.

When we remove those agents, the average commission for active agents works out to between $52K to $65K so far this year. Again, however, that’s if everyone who was working each took an equal piece of the commissions, which is definitely not the case.

We know from this third party data aggregators that about another 18% of agents only do one deal per year. That means more than half of the agents who are licensed to do real estate deals in Toronto and the GTA do one or fewer (i.e. none) deals.

If we kept going down this path, the “average” commission income for the remaining agents would keep going up, but it will still very much be a silly exercise. This is because the reality is that a very small percentage of active agents do a very high percentage of the deals and as such earn a lot of that commission income.

What’s this got to do with getting a place sold?

We started off this article with a question from a client about whether offering a higher than typical commission in their building would be helpful in getting their condo unit sold. Now that we’re up to speed on the break down of number of agents licensed within TRREB and how many actually do deals, we can answer the question.

If we’re talking about the more than a third of agents who do no deals, then the commission offered is irrelevant. They aren’t bringing a buyer client to the table, so the commission doesn’t impact them.

If they are part of the 18% of active agents who do one deal a year, then it seems logical that they would be impacted by the offer of a higher commission. After all, if they can effectively increase their annual income by 20% by steering a client to a property offering 3% commission rather than 2.5% commission, it seems logical some agents would do so. This is despite the fact that it is against our code of ethics and is a punishable offence.

Using the same logic, what happens as we move up the ladder of active agents? Logic dictates that the more deals an agent does, the less impactful any one deal (even one that offers a higher than typical commission) will be on their compensation for the year. In addition, the more active an agent is, the more likely they are to be interested in a long, successful career in real estate. Such agents value their reputation and are focused on doing deals that result in happy clients who refer other clients and who become repeat clients over time. An agent who steers their buyer clients towards a property that gets the agent paid more is likely not working in the best interests of their client and over time, that most certainly results in a less successful real estate career.

Logic, schmogic, what actually happens?

While thinking through whether a high commission being offered is helpful, we wanted to look at some datasets to see if the logic holds up.

We pulled the data for condo apartments in the Kensington-Chinatown MLS Community in Toronto and looked for sold listings this year. There were 115 sales in that area so far this year and all but 8 of those sales were offering 2.5% commission to the buyer agent. On the lower commission side, three sold units offered 2.25% commission and one offered 2% commission.

If we look at the units that were offering higher than that commission rate, one was offering 3.5% commission to the buyer agent, two were offering 3% commission and one was offering 2.75% commission.

Let’s see how those attempts worked out.

3.5% Commission

Let’s look at the 3.5% commission unit first. The unit was initially listed for $680,000 with a 2.5% commission. After 91 days on the market, that listing expired and it was relisted for $678,000, offering a 3.5% commission. They dropped the list price to $668,000 after a bit and eventually sold it for $655,000 after 62 days on market. That’s neither a speedy sale nor a higher than asked for sale price, so the extra 1% commission they paid to the buyer agent (compared to the more typical 2.5% in the area) didn’t seem to do much.

3% Commission

Listed for $739,900 with a 2.5% commission being offered, eventually dropped down to $724,800 but with no impact, this listing was terminated after 96 days on the market. It was relisted at $699,000 with 3% commission and was then further reduced down to a list price of $669,900 before being sold for $650,000 after 37 days on the market. Once again, a long listing period with multiple attempts and even with the higher commission being offered, it still sold for less than asking after a lengthy additional listing period.

2.75% Commission

Listed for $589,000 with an offer date, offering 2.5% commission. No takers, so relisted at $668,000 and after a few days with no action, increased the commission to 2.75%. A month later, they dropped the price to $658,000 and three weeks later, after a told of 68 days on the market, it sold for $636,000. Again we see the same story of a long list period and a significant discount on the eventual sale price compared to what the buyer wanted earlier in the listing period.

There are a few insights that stand out to us from this review.

First, a higher commission that is offered after the market has already seen and rejected the property is not very effective. In all cases, it didn’t result in a quick sale after the higher commission was offered.

Secondly, a higher commission is not the way to get your asking price. These three examples all sold for between 2% to 3% below list price and in all cases, that was after they had already lowered their list price from their initial hoped for price.

While it is impossible to know all the specifics that went into these eventual sales, it is clear that a higher than typical commission being offered to the buyer agent is not a panacea for being priced too high. We’d wager that in the above cases, the sale price they received was probably what they could have got if they priced it properly to begin with – and instead they had to pay additional commission.

We think that a higher than typical commission could be effective at generating a quicker sale if it was done from the start. Despite that, we certainly think that the price needs to be realistic and in keeping with market conditions.

A final thought on this commission discussion. When we work with buyer clients within our team, the level of commission offered to us isn’t a consideration. If it is lower than might be typical in for the type of property, we shrug our shoulders. If it is higher than is typical, we raise our eyebrows in surprise. The analogy we often give is that of a store putting things on sale and failing to advertise the sale. Customers who show up to buy their regular items are pleasantly surprised to find they have to pay less, but with no increase in new customers as it wasn’t advertised effectively, they’re just selling the same products they would have, but for less money.

If you’re thinking about selling a property and you want to make sure you get the best price, in the quickest time, with the least amount of stress, then get in touch with us!

In the past few weeks we’ve seen a lot of headlines about a recent US lawsuit as well as what is being described as the Canadian equivalent – both focused on real estate commissions.

We’ve had some clients ask us what it’s all about so we thought we’d write up a summary of the situation as well as our thoughts on what it means here in Canada. It’s complicated and we’re not lawyers, so this is our attempt to explain what happened and what the impact will be in Canada.

Let’s get to it!

The US Lawsuit

Back in October, 2023, a Missouri court found the U.S.-based National Association of Realtors (NAR) and two brokerage firms, Homeservices of America and Keller Williams Realty, liable for $1.8 billion in damages for conspiring to keep commissions artificially high in the states.

The cornerstone of the lawsuit was that the NAR was forcing home sellers to pay an inflated commission that was then split between their agent and the buyer’s agent. The home sellers argued commission sharing as a condition for access to the Multiple Listing Service (MLS) was unfair and kept commissions artificially high.

In the states, typically, when a home goes on the market for sale, the seller offers their broker a set commission. For decades, the commission has consistently been around 6% of the sale price, usually with a 3% split for the buyer’s and seller’s agent.

In a competitive market, the home sellers argued, the cost of the buyer’s agent’s commission would be paid not by the seller, but by the buyer who received the service. The sellers said that the buyers should be able to negotiate the fee with their agent, and that the sellers should not be on the hook for paying it.

What happened next?

In the months following the verdict in October, 2023, a number of the defendants agreed to settle. As those announcements were made, the story again popped up in the media.

In February, 2024, Keller Williams Realty agreed to pay $70 million to settle the lawsuit. RE/MAX and Anywhere Real Estate had earlier agreed to pay a combined $138.5 million. NAR and HomeServices of America initially refused to settle but NAR agreed this month to pay $418 million US to end the legal claims. This means that HomeServices of America is the final defendant left in the case, though HomeServices’ parent company, Berkshire Hathaway Energy Company, is appealing the verdict.

The decision by the NAR to settle reignited the story and the news reports here in Canada have often tied this settlement decision in the states with an ongoing lawsuit here in Canada.

What’s changing in the US as a result of the lawsuit and the settlements?

The NAR, which denied any wrongdoing in the case, has agreed to eliminate the standard six per cent sales commission and do away with other commission rules.

As part of the settlement, the NAR is mandating that all buyers must enter into a buyer’s agency agreement before viewing a listing, specifying compensation for their buyer’s agent. This compensation could be paid upfront by the buyer or come from various sources but crucially, it cannot be communicated through the Multiple Listing Service (MLS). Additionally, the buyer’s agent cannot receive compensation exceeding the agreed-upon amount.

Those are significant changes to how the US real estate market conducts transactions, but are they likely to impact how we do things in Canada? The answer to that is pretty clear when you look at the Canadian rules.

How’s it work in Canada?

If you’re reading about buyers having to sign a buyer’s agency agreement prior to seeing a listing, you may be thinking “Don’t we already do that?” and the answer is yes. Agents in Canada are already required to discuss compensation with clients, typically through Buyer Representation Agreements. Recent changes to legislation in Ontario (the Trust in Real Estate Services Act, or TRESA) have further bolstered the requirements to explain representation and clarify who works for who in a deal.

Canada has very different regulations and industry associations than the US and in a number of ways the changes taking place in the US have been here in Canada for many years. Commission rates have long been negotiable in Canada and Canadian law surrounding competition differs from that of the US. As such, the NAR settlement’s direct impact on Canadian realtors is minimal.

While media stories have tended to imply that two Canadian lawsuits here may have similar results and impacts, the differences between how the US did real estate and how we already do real estate is considerable.

So, what is the lawsuit in Canada about?

Back in April, 2021, the law firm Kalloghlian Myers LLP commenced a class action lawsuit against the following associations, brokerages and franchisors:

Toronto Regional Real Estate Board, The Canadian Real Estate Association, Re/max Ontario-Atlantic Canada, Inc. O/a Re/max Integra, Century 21 Canada Limited Partnership, Residential Income Fund L.P., Royal Lepage Real Estate Services Ltd., Homelife Realty Services Inc., Right At Home Realty Inc., Forest Hill Real Estate Inc., Harvey Kalles Real Estate Ltd., Max Wright Real Estate Corporation, Chestnut Park Real Estate Limited, Sutton Group Realty Services Ltd. And iPro Realty Ltd.

The lawsuit alleges a “conspiracy, agreement or arrangement to fix, maintain, increase, or control the price for the supply of real estate buyer brokerage services in connection with the purchase and sale of residential real estate listed on the Toronto multiple listing service.”

The lawsuit maintains that this arrangement has caused the Plaintiff and class members, who are sellers of residential real estate, to pay commissions to buyer brokerages. Absent the arrangement, buyer brokerage commissions would have been paid by residential real estate buyers who use buyer brokerage services, rather than the Plaintiff and class members. The arrangement has also thwarted competition in the market for buyer brokerage services, causing the Plaintiff and class members to pay a price for buyer brokerage services that is in excess of what they would have paid absent the arrangement.

The Canada-wide class action suit claims that the Canadian Real Estate Association (CREA) helped brokerages facilitate the alleged price-fixing scheme. CREA says the allegations are “without merit.”

What’s the point of the Canadian lawsuit?

The crux of the lawsuit seems to be that sellers have to pay not only the commission to their listing brokerage but also to the buyer brokerage. It seems like it is saying if sellers just paid their listing agent and buyers paid their buying agent themselves, it would be cheaper to sell a house.

Real estate commissions aren’t set in Canada, so we can’t do an exact calculation on the savings, but if we look at most markets in the GTA, we see commissions offered to the buying brokerage (out of the listing brokerage total commission) are typically in the 2% to 2.5% range.

The lawsuit seems to be saying, if the seller didn’t have to pay that 2% to 2.5% commission out of their pocket, and it was paid for by the buyer to their own agent, the cost of selling would decrease. At the same time, the lawsuit suggests that if that was the case, buyers would end up paying less than what sellers were paying, as if buyers were paying out of pocket, they’d negotiate for lower fees.

Does that make sense?

Let’s review the two key points of the lawsuit in as simple language as possible.

First, the lawsuit says that if sellers didn’t have to pay the buyer’s agent commission, it would cost less to a seller to sell their home. That is both obvious and accurate. If you push a cost you were paying onto someone else, your cost goes down. If we went out to dinner and instead of paying I asked you to pay for your meal, my bill would be less.

The second key point is where things get a bit murky. The lawsuit alleges that if buyers were paying their agent’s commission themselves, they would pay less commission. This is predicated on the idea that buyers would hire an agent who offers the lowest fee to represent them in the purchase of a home. The reality is that we already have agents who are paid less to purchase a home, as they rebate a portion of the commission paid to their brokerage from the listing brokerage to their buyer client. It is perfectly legal, and buyers who see little value in the assistance of an agent in finding, assessing and negotiating a purchase already find agents who willingly rebate some of their commission.

In short, the two key aspects of the class action lawsuit are:

1. If sellers don’t have to pay for the buyer commissions, it will cost them less in commissions. Yup, that’s how math works.
2. If buyers have to pay for their agent’s commission themselves, they will negotiate for a lower commission. Sure, some buyers will pay less to agents who don’t provide value in the purchase transaction. They can already do that now.

The specifics of this lawsuit aside, we regularly talk with our clients about commissions and how we earn them on the buy and sell side.  As part of that conversation, we talk about one of the key aspects of all compensation models.

Impact of Errors

One of the cornerstones of compensation models is the impact of errors. The reason why the CEO of a company makes more than the receptionist isn’t only based on how hard each works or the difficulty of the job. The CEO can cost the company a lot of money if she makes a mistake, much more so than any mistake the receptionist could make.

As real estate prices have increased, your real estate agent can make a mistake that costs you a lot of money.

On the sell side, pricing the listing wrong (either too high or too low) can result in the loss of tens or even hundreds of thousands of dollars. Poor marketing that presents the home in a less than ideal light can reduce showings and thereby offers, lowering the sale price significantly. Finally, an inept negotiator can leave a lot of money on the table when faced with an expert negotiator on the other side.

On the buy side, the same arguments hold true. If you work with an agent who doesn’t understand your market and who fails to find and show you all suitable properties, you can have a mistaken understanding of what is available and what is fair for a price. If your agent can’t assess an individual property and determine what the fair market value would be for the property based on it’s specific attributes you can over pay or miss out because you wrongly assume it is worth less. Finally, transactions only take place when successfully negotiated between the two parties, and a poor agent who doesn’t understand negotiations can cause you to either overpay or to be rejected completely.

Now, back to the lawsuit!

What’s happening with the Canadian lawsuit?

On September 25, 2023, Chief Justice Paul Crampton issued a citation where the defendants motion to strike was dismissed in part and granted in part.

As we discussed earlier, the plaintiff alleges that certain defendants and their “co-conspirators” contravened subsection 45(1) of the Competition Act, RSC, 1985, c C-34 (the “Competition Act”). They have allegedly done so by “conspiring, agreeing or arranging with each other to fix, maintain, increase or control the price for the supply of buyer brokerage services (“Cooperating Broker Services” or “Buyer Brokerage Services”) that they provide to purchasers of residential real estate in the Greater Toronto Region (“GTA”).

Chief Justice Crampton concluded that “the Statement of Claim discloses a reasonable cause of action against the Brokerage Defendants with respect to the alleged arrangement to “control” prices for the supply of Cooperating Brokerage Services in the GTA during the Relevant Period. However, it does not disclose a reasonable cause of action with respect to the claimed “fixing, maintaining, or increasing” of those prices. Accordingly, the latter allegations will be struck from the Statement of Claim.”

Our understanding of the above is that the first aspect of the lawsuit, that sellers paying the cost of buyer’s agents’ commissions means it costs more to sellers, is reasonable. The second key aspect of the lawsuit that the current model means the cost of commissions are higher than they would be if the buyer’s paid their agent directly, is not reasonable.

The lawsuit will continue and we’ll be watching closely to see the result. Regardless of the decision, we believe that any comparison to the US lawsuits and their impact are deeply flawed as we have a much different set of regulations and structures here in Canada.

If you think working with real estate agents who are focused on providing value to both their buyer and seller clients makes sense, get in touch with us. We’d love to help you move forward!

We’ll start off by apologizing.  It’s not that what we’re going to say is offensive, but as good Canadians, we feel awkward about talking about our accomplishments.  So, we’re sorry if anything we say here makes you think “Someone thinks highly of themselves, don’t they?”

In general, Canadians can find it difficult to talk about success.  Pointing out when we’ve done something very well can come across like we’re highlighting that other people didn’t achieve the same results.  As a Canadian, that feels a bit rude and we tend to prefer people who just do their jobs well, who think that is how it should be and don’t make a big fuss out of it.

The real estate industry tends to take a very different approach than this and it could be one reason why real agents are sometimes viewed with a certain level of scepticism.  Constantly shouting about how great you are can make the general public wonder if its actually true.

There is a good reason why some real estate agents choose to aggressively promote their results and that’s because it is one way to stand out from the crowd when you’re working in an industry with lots of competition.

Take a look at the chart from Better Dwelling on the number of workers per real estate agents in a few selected geographies.  The below can make it seem as if we don’t have as many agents per the population as other areas, but it is actually the other way around.

As of the end of last year (December 30, 2021) there were 62,687 real estate agents licensed with the Toronto Regional Real Estate Board.  That means that 1 out of 59 workers in the GTA are working as Realtors.  In contrast, teachers make up 1 out of every 226 workers, so you’re about four times as likely to encounter a Realtor than a teacher.

If you leave the GTA, you start to encounter far fewer people working as a real estate agent.  For Canada as a whole, we have 1 out of every 146 people working as a Realtor.  If you pick a well-known US city like New York City (1 out of every 164 people) or Los Angeles (1 out of every 257 people), it is apparent we have more than enough Realtors to go around.  Feeling peckish?  Take two!

With competition, cost for services can lower, and real estate is no exception.  While there is no aggregate data on real estate commissions (check out our article here on the average commission in Ontario for more detail), there are lots of discount options out there.  A large number of those 63,000 Realtors are happy to sell your house for less than 5% commission.

We’re actually in favour of a range of options for sellers, including these lower-cost options.  Choice is a very good thing, whether it is where you want to eat, who you want to cut your hair, or who you hire to sell your house.

Where we find it difficult, as polite Canadians, is when people equate the results they can get with a low-cost option with the results they can get if they hire us.  We hope this doesn’t come across as impolite (sorry), but if you’re treating a service with varying aspects as if it is a product with no differences, then you’re making an error (sorry) and we think you should reconsider (sorry).

If you are buying a chocolate bar, then price is the only consideration.  Actually, let’s be specific.  If you are buying a Snickers chocolate bar, because you want a Snickers chocolate bar, and you have multiple places where you could buy it, and there is no difference in the process (in terms of proximity of the store to you, payment options, etc.) and no difference in the product (all are in pristine Snickers condition, not melted, not expired, etc.), then naturally you pick the cheapest option.

At the risk of being impolite, selling your house is not the same as buying a Snickers bar.  It involves many variables and if the agent you hire doesn’t price it properly, market it effectively and negotiate it aggressively, you end up with a worse result.

We choose to work within the Keller Williams real estate company, not just because it is the largest real estate company in the world (with all the benefits that brings to us as well as our clients), but because the training and approach our agents receive means we get the best results.  By best, we mean we sell real estate quicker and for more money.

You won’t see the below charts on any other real estate company’s website, because it makes them look bad.  We don’t blame them, it would be awkward to put up a chart that shows how they’re second place or worse.

First off, how much do you get when you sell with Keller Williams?

Let’s look at what percentage of sale price to list price different real estate brands were able to get their seller clients.  The below stats are for the last 12 months (October 2021 to September 2022) in the GTA.

We’re not permitted to actually put the other real estate companies that make up the six other firms on the above chart, but in alphabetical order, they are:

• Century 21
• Homelife
• Re/Max
• Right at Home
• Royal LePage
• Sutton Group

When you look at the numbers, the range doesn’t seem that huge.  The lowest place real estate brand sold for 107.95% of ask price on average, or put another way, their sellers got almost 8% over their asking price.

Keller Williams agents sold for 110.55% of ask price on average, so our clients get about 10.5% over their asking price.  With an average sale price in the GTA of $1,086,000 as of September, 2022, a relatively small difference in percentage over asking translates into big money.  How big?

If you hired a Keller Williams agent, you would have received, on average, $14,000 more on the sale of your home than if you hired the 2^nd best firm out there.  If you made the mistake of hiring the lowest achieving firm out there, you would have lost out on over $28,000 on your sale.

Sure, more is better, but how long did it take?

The next chart you won’t see anywhere else is the average days on market.  Again, the below stats are for sales in the last 12 months (October 2021 to September 2022) in the GTA.

It’s not a coincidence that Keller Williams again tops this list.  The longer a home sits on the market, the lower the price it receives.  While a day and half between us and the 2^nd place real estate company doesn’t seem like a lot, it translates to higher prices.  You can bet that the bottom achieving real estate company on the chart that takes 15 days to sell also gets less money for their clients.

There is a lot more to selling a home than simply uploading the listing to the MLS system.  Our clients choose to hire us to sell their homes because we price them properly, we market them effectively and we negotiate them aggressively.  If that sounds appealing to you, get in touch so we can talk about your next move.

By the most popular article we’ve ever written is this one.

What is the average real estate commission in Ontario?

It’s not surprising as people like to know how much it costs to sell a home.

In real estate, the compensation model for realtors is simple and the math is simple.  Listing agents negotiate a commission rate, typically a flat percentage, based on the sale price of the property.  Buying agents are paid a commission rate out of that commission.

It can get more complicated, but the above is basically the case in most real estate transactions.  Since the compensation model is simple, the math is simple as well.

If a house sells for $1M and the listing agent gets paid 5% commission, their brokerage gets paid $50K.  If they’re offering 2.5% commission to the purchasing agent, that brokerage gets paid $25K of the $50K.

Simple.

Now, of course the negotiated commission can and does vary.  It can be any percentage of the sale price that the agent and the seller agree upon, it can be a fixed amount (a flat dollar amount such as $X thousand) or it can be a combination of both.

It can even vary on how much of the listing commission is shared with the buying agent for the property.  An agent can charge a seller a 5% commission, keep 3% and offer 2% to the buying agent.  The question that has to be asked though, is while it’s true that they can do that, should they?

Let’s take a look at what happens when a listing brokerage offers lower than the most common commission rate to a buyer’s agent.  We pulled data from some live listings right now on the MLS where this is happening and ran the numbers.  On average, it turns out that by trying to save $10K in commission, these sellers have so far had to drop their list price by about $154,000.

Here’s how it plays out.

The Listings

We looked at listings currently (as of June 24, 2022) for sale in Toronto and narrowed down to 16 properties that:

1. Are offering a lower commission rate than the majority of the listings in the area
2. Have had to lower their price due to not selling

How much were the sellers hoping to save by cutting the commission offered and how much have they already had to lower their price by as a result of their approach?

The Savings

With initial list prices ranging from $1.15M all the way up to $3.3M, the average initial list price of the homes was just over $2M.

The typical commission being offered to the buying agent from the listing brokerage for homes in Toronto in this price point is overwhelmingly 2.5%.  These sellers chose to try to save half a percent in commissions to the buying agent, and are offering 2%, which equals a saving of approximately $10,000.

We do not know what commission the sellers agreed to with the listing agent, but let’s be generous and assume that they agreed to a 4% total commission, and the listing agent split that 4% to offer 2% to the buying agent and keep 2% for their work.  That would double the effective savings on commission from $10,000 to $20,000.

The Cost

These 16 homes have all lowered their list price after failing to sell at the original list price.  The specific amount varied, but the lowered average list price went from about $2M to just over $1.85M.  On average, the homes are now $154,000 cheaper than the initial list price.

We know that blaming that lack of sales completely on the lower than typical commission is simplistic.  The homes may have had other things that impacted their appeal to the market.  They may have been priced inaccurately, they may have been marketed ineffectively and they may have been negotiated ineptly.  It isn’t a coincidence that listing agents who allow their sellers to disadvantage themselves by offering a less competitive commission may also not be skilled at pricing, marketing and negotiating.

We will take the $154K average price drop with a grain of salt and cut it in half and say the lower than typical commission being offered is only partially responsible for the homes not selling, leaving us with a cost for the decision of approximately $77K.

The Result

When we take our projected savings on commission of 4%, which is 1% lower than the typical total commission of 5%, these sellers planned on saving on average about $20,000.

After failing to sell at their original list price, they’ve lowered their list price by, on average, about $154,000.  Even if we say that the lower than typical commission to the buying agent is only responsible for half of that, it amounts to a cost of about $77,000.

By choosing to “save” on the commission being offered, these sellers have now lost about $57,000.  That number is of course hypothetical, as these houses have not yet sold.  They may need to lower their price again or they may accept a lower sale price than what is currently listed.

We can take a few lessons from the above review, even if we won’t ever fully know the exact impact of the lower than typical commission on the eventual sale price of these homes.

The first and biggest lesson is that offering a lower than typical commission can be a false economy.  With the vast majority of real estate agents doing one or two deals a year, you can be certain that a lower than typical commission being offered to them will cause some agents to steer clients away from the home.  It’s unethical, it’s against our code of conduct and it absolutely happens.

The second lesson is that whatever gain you see in paying lower commissions can often result in a lowered sale price that far outstrips your commission savings.  Saving $20K on the sale of your $2M home is far less appealing if it costs you up to seven times that in lowered sale price.

If you’re thinking about selling your home, let’s have a talk about what makes the most sense, so we can get you the most money in your pocket.  It’s not what it costs, it’s what it’s worth.

The below article was written in February, 2014 by the Managing Partner of the Refined team, Jeffrey Luciano.

It hasn’t been updated but has remained quite popular as the question of commission is definitely of interest to those looking to buy and sell real estate.

While the date on the article may be more than seven years ago, the situation hasn’t changed.  In June, 2022, we’re still in the same boat.

If you’re interested in talking further about commission and learning why our clients hire us (and pay a 5% commission), get in touch!

Otherwise, enjoy the article and comment with any thoughts or questions.

Pretty much everybody knows the answer to this question.

• Your friend who just sold their house knows.
• Your favourite news site knows.
• Your uncle the contractor knows.
• There are 37,000 agents in Toronto and they know, as do the 58,000 agents in Ontario.

Everybody knows the answer.

The answer is 5%.  Wait, no, it’s 4%.  Well, around here we pay about 6%.  Actually, it’s 3.5%.  No, no, for sure it’s just over 4%.

Everybody knows the answer.

Unfortunately, everybody has a different answer.

So what’s the right answer?  Who do you trust when you have all these conflicting answers?

Who actually knows the answer?

I am pleased to say that I know the answer.

As of today, February 4, 2014, the average real estate commission in Ontario is…shoot, I knew this.  It’s…uh…damn.  Time to tell the truth I guess.  I don’t actually know.

I can see you shaking your head.  Some real estate agent you are Jeff, if you don’t even know the average real estate commission in Ontario.  Isn’t that your pay?  Wouldn’t that be of interest to you?

I understand the frustration, I really do.  If it helps, I can tell you the average real estate commission for my selling clients in 2013.  It was 5%.  Every single one of them paid a commission of 2.5% to me as the listing agent and 2.5% as commission to the purchasing agent.

That’s not a guess, or an estimate, or somehow based on anecdotal evidence.  It’s a fact.  I know it for sure.

When it comes to the average for Ontario though, I don’t know for sure.  I know you expected an answer so I will give you an answer.

My answer is somewhere between 4% to 5%.  Is that a fact?  Absolutely not.

I base my answer on my own experiences, my perception of what impact discount listings have had on the market (limited, by the way) and my discussions with hundreds of agents about commission.

My answer is informed by my work as a full time Realtor, but make no mistake, it’s not the answer.

Why don’t I know the answer?  Well, I could blame it on government rules, the economy, the great ice storm of 2013, but in truth, I don’t know the answer because nobody does.

In order to give us the answer, we need to know how much the listing agent got paid and how much the buying agent got paid – and we need to know it for every transaction in Ontario.

It’s actually easy enough to see what buying agents get paid.  Every listing on MLS has a mandatory field that the listing agent fills in with the commission the seller is willing to pay.

While there are variations depending on what time period you are looking at, what type of home or what area, you can ask for the average buying agent commission and get the answer.  Give a good agent a little bit of time to look into it and he or she could absolutely tell you fun facts like:

• There were 191 detached homes sold in Brampton in December of 2013.  172 of these 191 sales offered 2.5% plus HST.  So about 90% offered 2.5% plus HST.  Nine of the houses offered more than 2.5% and the other nine offered less than 2.5%.

Or:

• There were 68 duplexes sold in Toronto in all of 2013.  59 of these 68 sales offered 2.5% plus HST.  So about 87% offered 2.5% plus HST.  Two of the duplexes offered more than 2.5% and the other seven offered less than 2.5%.

This data for the purchasing agent’s commission is available and a good agent can tell you exactly what is going on here so you can make an informed decision.

It is the other half of the data we need, on the listing side, that poses the problem.

Unlike the commission paid to the buying agent, the commission paid to the listing agent isn’t a field that is required to be filled out on MLS.  It doesn’t even exist as a field, actually.  This information is known to only three parties.

The Seller knows.

They decide how much of a commission they are willing to pay their agent to list their home.  Every real estate transaction that uses a real estate agent signs a listing agreement, and this listing agreement says it in black and white.

The Listing Agent knows.

He or she is the one who does a listing presentation for the Seller.  He or she explains why they should be hired, what they would do for the Seller, and how much of a commission they charge.  When the Seller signs that listing agreement, that agent knows exactly how much they will be paid when they sell the house.

The Listing Real Estate Brokerage knows.

The first field that is filled in on the listing agreement is the brokerage for which the listing agent works.  Brokerages are responsible for ensuring that all transactions, funds and paperwork are handled in accordance with the Real Estate and Business  Brokers Act, as well as any other laws, rules and regulations.  They receive and then remit funds to the listing agent after any splits on commissions are applied.

These three parties (the Seller, the Listing Agent and the Listing Brokerage) are the only ones who know how much the listing agent is paid in commission.

Individual sellers are obviously not getting together to share that data anytime soon and neither are individual agents.  Listing brokerages could in theory ask all their franchises to provide that data in order to aggregate it and find the average, but to my knowledge, none of them do.

Even if they did, it would only show what sellers pay who hire Keller Williams Realty agents, or Re/Max or Royal LePage, etc.  I happen to think Keller Williams’ agents are the best agents in business, so I wouldn’t be surprised if sellers paid more for that expertise and skill.

This leaves us pretty close to where we started.  Namely, that there is no definitive answer to the question of what the average real estate commission is in Ontario.

This is a real shame, as it’s an important question.  If you are planning on selling your home, interviewing agents and trying to make a choice between them, you need to know what’s normal to pay for their help.  No one likes the thought of being taken advantage of and we all want to compare our cost against others to make sure that isn’t happening.

Given the difficulty in comparing realtor fees, I suggest you keep two things in mind that will make the decision process easier.

Firstly, when you hire a realtor to sell your home, remember you aren’t buying a product.  You’re hiring a service.

We all know that products can reasonably be expected to be similar.  Not identical, but pretty damn close.  If you buy a pair of scissors, you know it will cut paper.

Services, on the other hand, can vary wildly.  If you need your house painted and you hire a professional painter, the service they provide is hopefully tidy, thorough and high quality.  If you hire your friends with the promise of pizza and beer afterwards, your house will still be painted, but probably more of it than you wanted.

Compare the service each realtor is offering against what commission they are charging and you will find it far easier to make your decision.  A good agent does so much more than fill out a form on MLS and  tell you where to sign an offer.  Ask a good agent what they do for you and then sit back and get comfy, because they will be talking for a while.

After you interview agents, make your decision based on what is most important to you, not simply on the commission rate they charge.

Secondly, you now know that there is no such thing as the average real estate commission in Ontario, and this is powerful information.

No one can second guess your choice of a realtor and the commission charged with comments about how the average is “actually much lower than what you paid.”  They don’t know that.  They can’t.  They are misquoting, mistaken or flat out making it up.

Knowing this makes it easier to focus less on what other people are paying or have paid and instead on finding the realtor that is the right fit for you and your needs.

If you are considering selling your home, I hope this helped shed some light onto the murky world of real estate commissions.  If you know someone who is considering selling their home, please pass on this article to them.