What Kinds of Commissions Are There When Selling a Home?
If you’re thinking of selling your home, you should know that there are commissions associated with selling your home. They are one of the many costs involved in selling a property and can cost you tens of thousands of dollars. You probably know that real estate agents charge for their services, but do you know how much, how you can get a cheaper rate, and what alternatives there are to them?
Full Commission Real Estate Agents
Full commission realty is the traditional model for selling a house through a real estate agent. The agent, usually from a local company, assumes the responsibility for selling your home and provides the skills, knowledge and contacts for doing so. For being able to sleep with minimal worry during the selling period you will pay this real estate agent a standard commission rate – around 5% (in Canada) and 6% (in the US) commission (based on the selling price of your home), of which 50% usually goes to the buyer’s agent.
These are just averages, however. In Canada, commission rates differ from province to province and even from city to city. For example, real estate commissions in Ontario are a flat 5% in total but real estate commissions in Vancouver are more complex at 7% for the first 100K of the home’s price and 2.5% for the rest.
Up until now, using a full commission real estate agent has been the option in which you are able to expend the least time and energy in selling your home.
Flexible Commission Real Estate Agents
A new real estate commission model has arisen to deliver the advantages of a commission-based model but at a lower cost – flexible commission. The concept behind flexible commission realty is that selling houses is just like selling any other item: the commission should be flexible depending on factors surrounding the agent and the sale. For example, the experience of the agent; the breadth of their contact network; their knowledge of the geographic area; their skills in marketing; their past successes; their client reviews and so on. In addition, the time of year and the demand for homes in the surrounding area can also affect the negotiation of the commission rate.
Now platforms such as Wowa give an option to real estate sellers to hire agents at a different commission rate. Along with real estate agents offering flexible commissions, on Wowa you can find agents advertising a lower commission rate than other agents to attract new clients (as in any other business). But do not be confused by the ‘flexible” term; these agents are usually full-service real estate agents who will do all the work for you.
The Range of Commissions
If you’re thinking of selling your home, you’ll probably start to notice “For Sale” signs on properties wherever you go. Some will have the name of a real estate agent on them, others may have a company name and yet others may have “For Sale by Owner” handwritten on them. All of these options of people to sell your home come with an associated commission or fee, from $0 if you do it yourself up to the industry standard percentage commission for full commission real estate agents.
For Sale by Owner
This is the option for selling your home in which you do everything – from deciding how to price your home to marketing and advertising to arranging open houses to the legal and financial investigations and contracts to weeding out unqualified buyers to whatever is needed. Not only is all this a significant investment of your time and energy but it is also very stressful as you are selling something in which you are probably very emotionally invested.
But you do save the commission or fee that you would have otherwise have paid to a real estate agent.
If selling by yourself sounds just too much, you can hire an expert in these matters – a real estate agent – to do some or all of the work for you.
The fee that a fixed-rate platform company charges you for selling your home is less than you would pay a full commission real estate agent. It is an agreed-up-front amount and not a commission. For example, Purplebricks charges $799 CAN to sell a home in Ontario and $699 in Manitoba, Canada, and £999 throughout most of the UK (except for London).
However, fixed-rate real estate companies vary in the services that they provide for the fee, and it is not always clear from their website what is included. You will probably receive a free home evaluation but may have to organize the showings for your home yourself. Extra services are often available from the fixed-rate platforms for a price.
While you do work with a local real estate agent affiliated with the platform under this option, you will still have to do some of the work and carry some of the stress yourself.