How Much Does It Cost to Sell a Home in Canada?
For most people, the costs involved in selling their home are for the real estate agents’ commissions, penalties for closing out their mortgage early, as well as legal fees. Depending on where you live, the total real estate agent commission is typically between 3% and 6% of the selling price and is split between the seller and the buyer agents. The mortgage prepayment penalty can differ between lenders and specific mortgages, but it’s usually around three months’ worth of interest. As for legal fees, they vary with the complexity of the sale but are generally around $1,000.
Do sellers pay the buyer’s agent commission?
Yes, sellers pay the buyer agent’s commission, but indirectly. The seller pays their total commission to the selling agent who then splits it with the buyer’s agent. The agents can negotiate how much each agent gets. Typically, the fee is divided equally. But if the seller agent gives a discounted commission to the seller (usually to attract more clients), the discount comes out of the seller agent’s commission. In general, the buyer agent charges a 2% to 3% commission. In British Columbia, however, the buyer’s agent receives 3.125% on the first $100,000 and 1.1625% on the remaining balance.
What is the typical real estate agent commission?
Typical total real estate agent commissions are between 3% to 6% depending on where you live in Canada. The commission rate is not set by law; it’s up to you to negotiate with your agent what their commission will be. While the selling agent can give you a discount, you will likely still have to pay a full commission for the buyer’s agent.
We took a quick look at the websites of popular real estate agents to see what commission rates they were charging. Most agents didn’t reveal their commission rates. On the WOWA platform, however, you can find agents with lower commission fees.
Remember that you’ll also have to pay GST or HST on the commission!
Typical real estate agent commissions in major Canadian cities
BC – Vancouver
A 7% fee is charged to the first $100,000 of the sale price and 2.5% for the remaining balance.
For a $500,000 home you’ll pay $7,000 (7% of $100,000) plus $10,000 (2.5% of $400,000) for a total of $17,000 commission.
Alberta – Calgary
A 7% fee is charged on the first $100,000 of the sale price and 3% on the remaining balance.
For a $500,000 home you’ll pay $7,000 (7% of $100,000) plus $12,000 (3% of $400,000) for a total of $19,000 commission.
Ontario – Greater Toronto Area (GTA)
A 3.5% to 5% fee is charged on the total selling price. Higher commissions are possible, but the typical rate is 5%.
For a $500,000 home with a 5% commission, you’ll pay $25,000.
Quebec – Montreal
An average of 4.5% with a range between 4% and 7% is charged on the final sale price.
For a $500,000 home with a 4.5% commission, you’ll pay $22,500.
Can you negotiate your real estate agent’s commission?
As a seller, you can always negotiate your own real estate agent’s commission but the buyer agent’s commission will often be fixed. Sellers pay a total commission that covers both the buyer agent’s and the seller agent’s commission. The buyer’s commission rate is usually fixed at around 2% – 3%. The seller agent’s commission could be as low as 1% and go up to about 2.5% in Canada and 3% in the US. To find out about local agents who are willing to charge a lower commission, you can use Wowa to find agents that are willing to give discounts.
We covered the different types of real estate agent commissions in a recent blog post where we explained the commission you pay when you sell your home yourself, with a fixed-fee real estate platform, or with a real estate agent. We also discuss the availability of flexible commissions.
An online alternative to working with a local real estate agent is to use an online platform such as Purple Bricks and pay a fixed fee. Purple Bricks, which sells homes in Ontario, Alberta and Manitoba, offers a fixed fee rate for selling your home. Purplebricks is also active in Quebec under the name “duProprio”.
The rate varies by location: in Ontario, you’ll pay $3,000; in Manitoba, you’ll pay $2,500; and in Alberta, you’ll pay $3,000. Take caution though, in the small print it says that the fixed fee doesn’t include the buyer agent’s commission. If you go this route, ask carefully what services the fixed fee includes. You may find that they expect you to do some of the tasks usually done by a real estate agent. Their business model is volume-based and they are incentivized to sell homes more quickly rather than for the best price.
Can I sell my home without an agent?
It is certainly possible to sell your home without using a real estate agent, but we don’t recommend it. A real estate agent provides skills and knowledge that most people don’t have about the financial, marketing and legal aspects of the real estate selling process. Not to mention, you don’t have access to the listing services that agents have, and it’s much harder for you to get potential buyers aware of your property.
Selling your home without an agent is time- and energy-consuming. Not only do you have to do all the typical home-owner tasks such as any outstanding maintenance, you’ll have to research the prices of equivalent homes in your neighbourhood, handle all the marketing, organize the open houses, negotiate with the buyers’ agent and conduct all the financial and legal transactions, as well as weed out any unsuitable buyers.
Of course, you can always put up your own “For Sale” sign and handle everything yourself. But definitely check our post about 5 Unforgivable Sins when Selling to make sure you don’t make any major mistakes.
If you do decide to hire a real estate agent, as do more than 90% of sellers, check out our post on real estate agent interview questions to ask them before hiring.
Are there penalties if I end my mortgage?
There is usually a prepayment penalty if you end your fixed-term mortgage early, like when you sell your home. If you have an open mortgage (one without a fixed end date), you can pay it off without penalty whenever you like.
Closing your mortgage is like making one large pre-payment for the outstanding mortgage balance. This may be greater than your maximum allowed prepayment and may incur a penalty.
Banks and other lenders have different penalty charges. For example, for fixed-rate mortgages, the Royal Bank of Canada uses the greater of the cost of three month’s interest or the Interest Rate Differential (IRD). The IRD is based on the amount you are prepaying and the difference between your mortgage rate and the current posted mortgage rate is.
If you’re buying another home, you can save on fees as transferring your mortgage to your new property usually doesn’t incur a penalty.
Please check with your mortgage lender for the exact penalty you’ll incur.
What legal fees are the seller responsible for?
You need a real estate lawyer when selling your home to ensure that everything is done correctly financially and legally. Handling your own legal paperwork won’t give you the certainty that everything is in place when you sign the contract. If you do it yourself, you’ll be fully responsible for any mistakes that could occur.
The seller is responsible for paying for the lawyer’s time (e.g. reviewing documents), any expenses they incur (e.g. phone calls, faxing etc.), and for any government filings or other transactions that have a fee (e.g. title search). The buyer will also likely have their own lawyer, but you will not be responsible for their fees.
The lawyer’s fees depend on the complexity of the sale and on how much work is involved. A useful amount to put aside for this is $500 – $1,500. In some provinces such as Ontario and Alberta, you are required to have a real estate lawyer for your home sale.
The bottom line
The majority of the costs associated with selling a home are related to hiring a real estate agent and closing out your mortgage. While the costs differ from sale to sale, according to its complexity and location, you can use our estimates to give you some idea of how much to save for them.
- Costs to expect when buying, selling a house. MoneySense.
- Selling a Home. Government of Canada.
- Selling a Home in British Columbia. Real Estate Council of British Columbia.
- Commission Rates: Real Estate Commission Rates and the Truth. Re/Max Mississauga.
- Selling A Home. WOWA.ca
- Alberta Real Estate Commissions. WOWA.ca
- Ontario Real Estate Commissions. WOWA.ca
- BC Real Estate Commissions. WOWA.ca
- Highlights from the Profile of Home Buyers and Sellers. National Association of Realtors.
- Mortgage Prepayment Charges. RBC.
- Interest Rate Differential (IRD). Canadian Mortgage Trends.
- How much does it cost to sell your home? Sun Life.
- 11 Unknown Costs of Home Ownership. Genworth Canada.
- Real Estate Broker Salary – Average Salary of Quebec Real Estate Brokers…OUCH! McGill Real Estate.
- Selling your Home Yourself: Here’s some advice. CAA Quebec.