Posted by: Nick Fundytus

Question of the week:

Are broker fees standard?

We recently sold our old house and bought a new one. We used an agent and during closing I noticed we were charged a $299 fee that went to her brokerage. For some reason that fee really ticked me off. Our agent made over $20K from our sales, I am unclear why this wasn’t included in her commission.

Is this a standard thing these days? We’re getting ready to list my mom’s condo and have a few agents lined up to see it this weekend. Can we negotiate the broker fee out if there is one or am I just being petty?

Nick's Answer:

In short, you can likely negotiate that fee out, especially as you’re interviewing a few agents (and have a few options).

In my province (but it’s likely similar in many places), there’s no “standard” commission or broker fees that’s set by law or by the bodies governing Real Estate. In fact, our bylaws expressly forbid telling a client that a certain commission is “standard” or “required.” That said, each broker/Realtor is typically able to set the amounts and fees that they charge, and it’s up to the client to decide whether they see enough value in that Realtor to hire them at that rate.

Generally, brokerages fall under three categories:

  • Full-service Realtors: Commissions are the highest (in my market it’s often 2.5% for the listing side with 2.5% offered to the Buyer’s agent) but so is the level of service to be expected. Knowledgable pricing and marketing and a lot of prep (staging, cleaning, repairs, photography, videography and 3D tours, etc) are generally included. These are often brand-name brokerages such as Re/Max, Keller Williams and Royal LePage (Canada).
  • Discount Brokerages: Charge a lesser commission (we often see 1% on the listing side for these in my city) with a lesser level of service and included items. Some things, like video or staging, might be available a la carte for a bit extra. Because these brokerages charge a lower listing commission, they often rely on the buyer sides of those moves and working on a volume basis (attracting lots of listings). Redfin doesn’t have a big presence in Canada, but they’d be something like this from my understanding. Here in Ottawa, these brokerages often have names like 1% Realty or something that advertises their model.
  • FSBO (For Sale by Owner): These brokerages charge a highly discounted fee (think $1000 or .5%, for example) in exchange for putting the property on the MLS. Sometimes photos are included but other services are generally a la carte. Some of these brokerages use an online auction model for the sale. Generally, these brokerages count on volume of clients and that the client can manage the listing and negotiation themselves.

There’s no right or wrong brokerage to hire, only the one that suits your requirements best. As a homeowner, it’s useful to know the models so that you know what options and what leverage you have when negotiating out fees from your own listing.

Source: I’m a Realtor in Ottawa, Ontario.

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