Real estate commission in Ontario: how it works, who pays

Real estate commission in Ontario is whatever you and the brokerage agree to in writing. The Real Estate Council of Ontario (RECO), which regulates agents and brokerages, says the amount is not set by RECO, government or real estate boards. It can be a fixed dollar amount, a percentage of the sale price, or a combination of the two, and 13% HST is added on top.

Who pays the buyer's agent takes a little longer to explain. A buyer owes their own brokerage's fee under their buyer representation agreement. A seller often agrees to cover some or all of it, but does not have to. Where the seller's amount falls short, the buyer's agreement decides who pays the difference.

This guide covers Ontario rules that apply the same way in Orillia, Severn, Oro-Medonte, Ramara, Barrie and Gravenhurst. It is general information, not legal advice. Your own agreement is what counts, so read it and ask a real estate lawyer or RECO if anything is unclear.

Is real estate commission negotiable in Ontario?

Yes. RECO puts it plainly: "You and the brokerage decide the amount you will pay for services." No regulator, government body or real estate association sets or approves a rate, and no agent should tell you otherwise.

That is why this guide does not quote a "standard" rate. There isn't one. Rates and structures differ between brokerages, between agents, and sometimes between properties. The only number that matters is the one written into your agreement.

The services are negotiable as well. RECO notes there is no standard set of services, and anything you expect to receive should be written into the agreement or a schedule attached to it.

What commission structures are allowed?

RECO describes three:

Structure	How it works	What to check
Percentage	A percentage of the sale price	What the percentage covers, and how much of it is offered to a buyer's brokerage
Fixed dollar amount	A set fee regardless of the sale price	Which services are included and whether any are extra
Combination	A fixed amount plus a percentage	When each part is owed

A percentage can also be set up as a decreasing series tied to price levels, for example one percentage on the first part of the price and a lower one above that.

One structure is not allowed. A brokerage cannot be paid an amount based on the difference between the listing price and the sale price. An arrangement like "we keep half of anything over asking" is prohibited.

Your agreement must set out the method used to calculate what you owe and the method of payment. It must also identify any circumstances in which the amount might change.

How much HST is charged on commission?

The HST rate in Ontario is 13%, according to the Canada Revenue Agency. It is charged on the commission, not on the sale price of your home.

People leave this out of their math more often than any other line. When an agent quotes a rate or a flat fee, ask whether HST is included. Assume it is not unless the agreement says so.

A worked example (illustration only)

The numbers below are hypothetical. They are chosen to make the arithmetic easy to follow, and they are not a typical rate, a recommended rate, or what any particular brokerage charges.

Say a home sells for $700,000 and the seller has agreed to a total commission of 4% of the sale price. The listing agreement says half of that amount is offered to the buyer's brokerage.

Line	Calculation	Amount
Total commission	$700,000 × 4%	$28,000
HST on commission	$28,000 × 13%	$3,640
Total cost to the seller	$28,000 + $3,640	$31,640
Portion offered to buyer's brokerage, before HST	$700,000 × 2%	$14,000

Now the same sale under a hypothetical flat fee of $12,000:

Line	Calculation	Amount
Flat fee		$12,000
HST	$12,000 × 13%	$1,560
Total cost to the seller	$12,000 + $1,560	$13,560

The comparison is only meaningful once you know what each option includes, and whether the flat fee covers anything for a buyer's brokerage. More on that below.

To run your own numbers, use the selling costs calculator. The costs of selling guide covers the other line items: legal fees, mortgage penalties, moving and tax.

Who pays the buyer's agent?

Start with the rule, then the common practice.

The rule: the buyer is the client, and RECO's guidance to agents says the buyer client is the party responsible for the fees associated with their representation. A buyer representation agreement must clearly state the amount the buyer agrees to pay their brokerage, or how it will be calculated.

The practice: a seller may agree to compensate the buyer for some or all of those fees. There are two ways this shows up.

1. In the listing agreement. A seller's agreement must state the amount, if any, that the seller agrees to pay toward the buyer's brokerage fees, or how it will be calculated. That amount is stated separately from what the seller pays their own brokerage.
2. In the offer. The buyer and seller can agree, in a remuneration clause in the agreement of purchase and sale, that the seller will pay some or all of the buyer's brokerage fees. RECO describes this as an agreement between the buyer and the seller, not between the seller and the buyer's brokerage. The clause should spell out the amount, the timing, how it is paid and whether tax is included.

A seller is not required to offer anything. RECO warns buyers directly: "A seller might not offer any amount to cover the fees you owe to your brokerage under your agreement."

What if the seller offers less than my buyer agreement says?

Then your buyer representation agreement decides what happens, which is why you should read that clause before you sign.

RECO's guidance is that a buyer agreement should be clear about what happens when the seller's amount is less than the amount owed. It gives three possibilities:

• you owe the shortfall,
• your brokerage accepts the seller's amount with no further payment from you, or
• some other arrangement you have agreed to.

The agreement should also cover the opposite case, where a seller offers more than you owe: whether you keep the excess, whether the seller's payment is reduced to match, or whether the brokerage is entitled to the full amount.

Here is the shortfall in numbers, again with hypothetical figures used only to show the arithmetic. Your buyer agreement says your brokerage is paid 2.5% of the purchase price. You buy a $700,000 home where the seller is offering 2% to the buyer's brokerage.

Line	Calculation	Amount
Owed under your buyer agreement	$700,000 × 2.5%	$17,500
Offered by the seller	$700,000 × 2%	$14,000
Shortfall	$17,500 − $14,000	$3,500
HST on the shortfall	$3,500 × 13%	$455
What you could owe, if your agreement makes you responsible	$3,500 + $455	$3,955

That is cash due on top of your down payment and closing costs. RECO notes that you may not be able to afford a property where the seller does not agree to pay your brokerage fees, so this belongs in your budget conversation at the start, not on offer night.

Your agent cannot steer you toward higher-paying listings

RECO has said that recommending listings based on how much the seller is offering the buyer's brokerage is a breach of the rules. An agent representing a buyer must tell the buyer about properties that meet the buyer's criteria without regard to the amount of remuneration. RECO suggests that agents confirm with buyers in writing how they want properties presented, including whether to flag homes that would require the buyer to pay their brokerage directly.

When can a buyer owe commission directly?

A buyer can end up paying their brokerage out of pocket in a few situations:

• The seller offers nothing or less than the agreed amount, and the buyer agreement makes the buyer responsible for the difference.
• The seller has no brokerage. In a private sale there is no listing agreement offering anything. The buyer's agent may ask the seller to cover the fee through a remuneration clause in the offer, but the seller can refuse.
• A purchase during the holdover period. If you buy after your agreement expires but within its holdover period, you may still owe the brokerage.
• A deal that fails because of you. RECO's guidance for clients says to pay the fees you have agreed to, even if a sale or purchase later falls through because of your default or neglect.

Each of these depends on the wording of your agreement. If you are not sure what yours says, ask your agent to walk you through it, and ask a lawyer if the answer matters to a decision you are about to make.

What is a holdover clause?

A holdover clause can require you to pay the brokerage for a purchase or sale that happens after your representation agreement expires, during a set period. RECO's own example: you might be obligated to pay commission if you sell your home during a 30-day holdover period after the listing ends.

RECO says the clause is designed to protect the brokerage. It also tells agents that holdover clauses are not required and often give rise to consumer complaints, and that an agent should point out the clause and explain it before you sign. There is no minimum or set holdover period.

So treat it as a negotiable term. Ask how long it is, what triggers it, and what happens if you sign with a different brokerage after the agreement expires. The representation agreements guide goes through the rest of the contract.

What do you get for the fee, and what should you compare?

Since there is no standard set of services, two agents quoting the same rate may be offering quite different things. Ask each one to put the proposal in writing and compare:

• the total fee, its structure, and whether HST is included,
• the amount, if any, offered to a buyer's brokerage,
• the services included, in writing: pricing analysis, photography, video, floor plans, staging advice, marketing, showings, offer negotiation,
• who does the work: the agent you met, or other people at the brokerage,
• the length of the agreement and of the holdover period,
• the terms for ending the agreement early, and any cost for doing so,
• what happens to the fee if the brokerage ends up representing both you and the buyer.

That last point matters. RECO expects a listing agreement to state separately what applies when the buyer is represented by the same brokerage, and the disclosure you receive before consenting to multiple representation must explain any change to how much you pay.

The questions to ask guide has a fuller list for the interview, and how to choose a REALTOR® covers what to weigh besides cost.

Discount brokerages, flat fees and selling it yourself

These are all legitimate choices. Each trades cost against service in a different way.

Flat-fee and reduced-commission brokerages

Because the fee and the services are both negotiable, a brokerage can offer a lower rate or a fixed fee, sometimes with fewer services. Some full-service agents will also negotiate. What to check is the same as with any proposal: exactly which services are included, and what, if anything, is offered to a buyer's brokerage.

Listing-only services

RECO notes that some sellers sign an agreement solely to have their property advertised on a local listing service such as an MLS® System. Since December 1, 2023, any agreement with a brokerage to provide services, even a limited one such as a posting, is a representation agreement, and you are that brokerage's client. The agreement must still describe the services you will receive, so read what the brokerage will and will not do for you on showings, offers and negotiation.

Selling without a brokerage

You can sell as a self-represented party. You pay no listing commission, and you take on the work and the risk. RECO lists what that includes: researching the property details, estimating value, handling competing offers, choosing the terms and preparing the documents. It recommends getting independent professional advice before going ahead.

Two things surprise private sellers. First, a buyer's agent works for the buyer. They cannot give you services, opinions or advice, and anything you tell them goes to their client. Second, a buyer may ask you to pay their brokerage's fee as a term of the offer. You can say no, but it becomes part of the negotiation. A brokerage cannot enter into a side agreement with a self-represented seller to provide assistance or charge for it.

How Jordan can help

Jordan Rossman is a REALTOR® with Real Broker Ontario Ltd., Brokerage, and has worked in Orillia real estate since November 2014. Commission is negotiable, and he will put his proposal in writing: the fee, the HST, what is offered to a buyer's brokerage, the services included and the holdover period. If you are buying, he will go through the fee clause in the buyer agreement with you before you sign, including what happens if a seller offers less. His number is 705-345-0797.