A commission is not always paid by the seller of the house


My partner and I are looking for a home to buy and have heard that buyers don’t have to pay a real estate commission – only sellers do. Is it true?

The short answer is: it depends. It can be a bit tricky, so please be indulgent with me.

While it is true that in much of North America, the real estate commission paid by the seller often covers the brokerage commissions of the seller and the buyer, this is not always the case.

When selling their home, a seller has the right to decide how much, if any, they want to offer to cover the buyer’s brokerage commission in order to make their property more attractive to buyers. I’ll explain it in a moment.

If a buyer is represented by a real estate brokerage, he would enter into what is commonly called a representation agreement. When you enter into a buyer representation agreement, you agree to pay your brokerage a certain commission. Typically, the agreement will also include a provision explaining that if the seller offers to pay the buyer’s brokerage commission, it will impact how much you owe your brokerage.

This means that your purchase contract should clearly state how much you owe your brokerage firm when purchasing a property and how your financial obligations to your brokerage firm may change, depending on the amount offered by the seller. The agreement should also specify the start and end dates of the contract, the services and conditions, as well as a description of the property you are looking for, including the price range, type of property and locations.

The agreement also confirms that you are a client of the brokerage and that it looks out for your best interests when making the purchase. It is important to read and understand the agreement so that you know your rights and obligations. You can expect your agent to explain the agreement to you and clarify anything that you don’t fully understand.

That being said, before you begin your home search, speak frankly with your agent about the impact of buying a property where the seller may offer less than what you have agreed to pay for your brokerage. If, for example, you agreed to pay your brokerage equivalent to $ 15,000, but the seller offers your brokerage $ 5,000, you would be contractually obligated to pay the difference of $ 10,000 to the closing of the transaction. Consider if you have the amount available, as it will not be included in the purchase price.

If you know you can’t find the money at the close, you should discuss with your agent whether you want to start by focusing on properties where the seller is offering at least what you have agreed to pay for your brokerage.

Now, for those who have access to funds to cover any commission balance they may owe, there could be an additional inventory of lower commission properties that meet your needs.

Joe Richer is Registrar of the Ontario Real Estate Council (RECO) and Contributor to The Star. Follow him on Twitter: @RECOhelp. This column is for general information purposes only and is not intended as legal or professional advice on real estate transactions.


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