In Ontario, there are many ways to sell your home and commission models to suit almost everyone. While there’s no such thing as ‘standard’ real estate commission in Toronto, there are some typical commission models that we often see.
Today, we’re exploring the most popular service and commission models in real estate, starting from the cheapest to the most expensive.
For Sale By Owner (FSBO)
Some homeowners want to sell their own home and not hire a real estate agent to represent them – we refer to them as For Sale By Owners (FSBO).
In Ontario, if a FSBO wants to list their property on the MLS, they’ll need to contract a brokerage to do it for them and usually pay a flat-fee cost. The fee is payable whether or not the home sells.
When a FSBO represents themselves, they are responsible for setting the asking price, preparing the home, staging, photography, marketing, buyer showings, open houses, contract/price negotiations and dealing with any closing issues.
The Discount Brokerage Commission Model
Discount real estate commission models aim to help a Seller save money by discounting the upfront fees or commission typically paid.
Discount brokerages and agents limit the services and inclusions they provide and pass those savings on to the Seller. In Toronto, we often see discount commission models that:
- Exclude home preparation, cleaning or staging support
- Don’t include professional photography or floor plans
- Limit marketing to simply putting a listing on MLS
- Focus on the volume of sales instead of the client experience, by providing low-touch service and few (if any) guarantees
- Discount the amount of money offered to the agent who brings the Buyer. As we explored in our article Real Estate Commission Explained, real estate commission is almost always split between the listing agent and the agent who brings the Buyer. Some listing agents offer lower overall commission by offering less (or nothing) to the Buyer’s agent.
If you’re considering hiring a discount agent, make sure you understand what is and is not included and how that could impact your sale. If you see commission advertised as “1%”, that probably doesn’t include the commission offered to the Buyer’s agent, which might be an additional 2.5% or 3%, bringing your total commission to 3.5 or 4%.
The Full-Service Commission Model
Full-service real estate commission reflects the higher costs of including more services and providing a more client-centric experience.
These days in Toronto, “full-service real estate” usually includes:
- Assistance with home preparation or cleaning
- Professional staging
- Pre-listing home inspections
- Professional HDR photography and floor plans
- Targeted marketing beyond the MLS
- Negotiations and representation by experienced agents
Full-service agents sometimes have various commission options that reflect what’s included – for example, at the BREL team, we have a commission option that includes staging and one that does not.
Related: Read what full-service means at the BREL team.
The iBuyer Model
iBuyer companies remove the risk and uncertainty of a sale by buying a home directly from the Seller, usually sight-unseen and within hours of a being listed. The goal: no home prep or showings and quick, drama-free closings.
While the iBuyer model isn’t yet common in Canada, it’s gaining momentum in the US.
The cost of a quick, pain-free iBuyer sale? Commission in the range of 8-12% of the purchase price and offer prices that are often discounted vs at market value.
iBuyers are big venture-capital-backed companies who use computer algorithms to determine market value and aim to make a profit by flipping homes quickly. iBuying is increasingly popular in cities characterized by slow-moving real estate markets, lower price points and planned communities with homogenous or identical houses that are in need of updating.
The Full Commission (but Discount Service) Model
Full-service fees but discount services.
OK, nobody likes to talk about this, but we see it all the time: real estate agents charging the same as full-service brokers but providing discount services and/or limited inclusions. This might be the most expensive commission of all.
If you’re going to pay more commission than the ‘discounted’ services, that extra commission should be offset by the services and inclusions that result in higher sales prices. Be careful not to pay top commission for bare-bones service and a mediocre sales price.