Real estate brokers do more than simply help you find a new home; they act as valuable advisors and skilled negotiators, guiding you through every step of the buying or selling process. It’s only fair to compensate these professionals for their expertise and assistance.
Real estate brokers, often called real estate agents, typically earn their income through commissions, which are a percentage of the final sale price of the property. This article will explore why commission percentage can vary and whether there’s room for negotiation in the area.
A real estate agent: more than just an expense
When faced with the commission fee, some may feel hesitant and consider selling their home without an agent to save money. However, focusing solely on potential savings is a mistake. A real estate agent offers much more than just a fee!
In Quebec, working with a real estate agent provides several key advantages, including:
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Experience and in-depth market knowledge.
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Guidance to help you maximize the value of your property.
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Legal protection that ensures a secure transaction.
While you need to compensate the agent for their work, the benefits they bring make the costs well worth it.
How is a real estate agent's salary calculated?
A real estate agent's salary is based on their commission. However, it's important to note that this commission is not set by any law or regulation from the Organisme d’autorégulation du courtage immobilier du Québec (OACIQ).
In Quebec, the commission for a real estate agent is determined by market competition and is generally calculated as a percentage of the property’s sale price.
What is the commission percentage of a real estate agent in Quebec?
In Quebec, a real estate agent’s commission typically ranges from 4 to 7% of the sale price. However, due to market competition, the most common commission percentage tends to be around 4 or 5%.
Here is a comparative table illustrating some examples of possible commissions and their variations:
| Value of the property | 4% | 5% | 6% | 7% |
|---|---|---|---|---|
| $200,000 | $8,000 | $10,000 | $12,000 | $14,000 |
| $400,000 | $16,000 | $20,000 | $24,000 | $28,000 |
| $800,000 | $32,000 | $40,000 | $48,000 | $56,000 |
The commission charged by a real estate agent can vary based on the services offered. Generally, the more comprehensive the services, the higher the commission rate will be.
Additionally, specific agreement with the agent, such as signing an exclusive mandate, can also influence the commission percentage charged by the agent.
What is the commission for a luxury real estate agent?
The commission for a luxury real estate agent typically ranges from 5 and 7%. This rate can sometimes be higher than the standard agent’s commission, due to the unique nature of the luxury market and the personalizes services offered to clients.
As with traditional real estate agents, the commission charged by luxury agents can vary from one professional to another, depending on several factors.
What about commercial real estate agents? What is their commission?
If you’re dealing with a commercial real estate transaction, such as income properties or commercial spaces, you might be curious about the commission structure.
Despite the differences between commercial and residential transactions, the commission for a commercial real estate agent is typically similar to that of a residential agent. The commission usually ranges from 4 to 7%.
Additionally, it’s often possible to negotiate the compensation before signing the brokerage agreement.
Taxes to pay
It’s important to keep in mind that you will need to pay taxes (GST and QST) on the amount you pay the agent. Be sure to factor in these taxes when calculating the total commission you’ll need to pay.
What fees are paid by the real estate agent?
The commission amount does not go directly into the agent's pockets. In fact, the agent uses the commission to cover a variety of expenses, including:
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Advertising
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Photos and/or virtual tours
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Professional insurance
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Employee salaries
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Office rental fees
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Contributions to the real estate agency network
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And other operational costs
Who pays the real estate agent’s commission?
In a real estate transaction, it is typically the seller who pays the real estate agent’s commission,
If the buyer also works with an agent, the two agents share the commission paid by the seller. Each agent usually receives half of the agreed percentage.
How to negotiate a real estate agent’s commission?
Generally, the commission rate charged by the agent is negotiable. However, it’s advisable not to push too hard on the negotiation, as you want to establish a good relationship with the agent from the start.
Consider all the expenses your agent must cover and the amount of work they will invest in selling your property. If you think there’s room for flexibility, you can make an offer, but it’s important to remain reasonable and open.
Instead of negotiating with just one agent, it can be beneficial to compare offers from multiple agents. This allows you to select the one who best suits your needs, while ensuring you get the best value.
Real estate agency vs. independent agent: which is more expensive?
There are several well-known brands in the real estate brokerage field such as RE/MAX, Royal LePage, Sutton, etc. In general, agents from these large real estate agencies and independent agents offer similar services and pricing.
Some real estate agencies also offer very low commission rates, around 2 or 3%. However, it’s important to note that you may not receive the same level of service as you would with a higher commission rate of 4 or 5%
Generally, agents from these large real estate agencies and independent experts offer comparable services and prices.
Some real estate agencies also offer very low commission rates, around 2 or 3%. However, you should not expect the same level of service as you would receive if you paid 4 or 5%!
Agency fees
To become a franchise member at a real estate brand, agents must pay a fee, which can vary depending on the plan (percentage-based or monthly fees).
While these fees used to be quite expensive, competition has driven prices down. As a result, there is typically no significant price difference between agents working at real estate agencies and independent agents.
Are commission rates for agents going up or down?
In recent years, commission rate for real estate agents in Quebec have been trending downward. This decline can be attributed to several factors, including:
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Increased competition
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The rise of selling without an agent
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The current dynamic market
As a result, agents have a greater incentive to offer more competitive rates.
Should you work with a real estate agent: yes or no?
Whether you should hire a real estate agent to buy or sell your home depends entirely on your specific situation. To make an informed decision, be sure to weigh all your options.
Ultimately, remember that by hiring a skilled agent, you not only increase your chances of selling or buying quickly but also ensure you get the best possible price.
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