Commission is the engine that drives the real estate industry. The more deals that a real estate agent can close, the more commission they earn. This is the reason they work so hard and invest so much of their time and money on each property, whether it sells in the end or not, they are waiting on that commission to survive. But the real estate industry is a crowded marketplace filled with many myths about real estate commission rates. Here are five of them.

There is No Standard Commission Rate:

On the surface, this is true. Real estate agents can choose to charge any commission rate they like, provided they can live on a lower rate or their clients (the sellers) are willing to pay the higher rate. However, as you go deeper, you will find that most agents are averse to deviating from the average of 5%.

Lower Commission Rates Will Kill Your Sale:

You will often hear people say that lower commission rates will kill your sale. The logic is that buyer’s agents will not be interested in bringing in their customers. This is not true. The commission rate agreed upon between a seller and his broker is confidential. The seller’s broker need not tell the buyer’s broker how much he’s being paid as long as the latter agrees on an amount. Therefore, a lower commission rate doesn’t necessarily kill a sale.

The Seller has to Pay the Broker a Commission:

It is true that the seller of a property has to pay the broker for the service he provides. But the payment doesn’t necessarily have to be a commission. The seller can, for example, pay the broker a flat fee regardless of the sale price. It’s between the seller and the agent to decide what mode of payment is the most suitable for the two of them.

Commission has to be Split 50/50 Between the Seller’s Broker and the Buyer’s Broker:

It is believed that real estate commission rates are split between the seller’s broker and the buyer’s broker on a 50/50 basis. Although this seems most logical thing to do, that’s not how it is usually done.

Commission Rates are too High:

According to industry sources, the average real estate commission rate in the GTA is around 4-5%, with commission rates even higher in rural areas. The agent has to share this with the buyer’s agent.  After splitting the commission and paying the broker’s fee, he may only walk away with a small percentage of the commission.

Members of the general public are often either misinformed or not told the truth about real estate commission rates.  But if you know the truth, you could become a better seller or a better real estate agent. If you find yourself in a situation where you could really use your commission in advance, contact us today!