If you’ve been following along, you’ll know that there are countless different reasons as to why people decide to hire a specific Realtor (see 1,000,000 Reasons Why People Haven’t Hired Me). But even though we’re all very different, that doesn’t mean there aren’t things we all share in common. For example, almost everyone asks “How much is your commission?”.

Unfortunately, there isn’t a comprehensive guide to commission structures that you can turn to when you want to know your options. That’s because commission isn’t something we Realtors generally sit around and discuss as we’re all basically competitors of one another. So to help you out, I’ve compiled a list of things I’ve gleaned about the various residential commission options in Toronto. This list isn’t exhaustive. There’s a huge number of options and I don’t profess to be aware of all of  them, but this should give you a good idea of what you can expect to hear if you speak to different Realtors. Here goes:

• You can always sell your home yourself without the help of a Realtor. If you choose to go this route, you’ll have to decide if you’re “cooperating with agents”. When you “cooperate with agents”, it means you’re willing to pay a commission to a Realtor if that Realtor brings you a buyer who buys your home. You would negotiate the amount of this commission with that particular Realtor, either in advance of the Realtor showing your home to the buyer or at the time of  the offer. Most Realtors will want to know the commission up front. If you don’t cooperate with agents, they likely won’t show your home to the large number of buyers with whom they are working and that isn’t a good thing when you’re trying to sell your home. I’ve had several clients over the years who have successfully sold their homes without the help of a Realtor, and I’ve had other clients who were less than successful and swore they’d never try to buy or sell a home without a Realtor again;
• There are also companies that will help you sell your home on your own without a Realtor. I don’t know anyone who’s ever dealt with one of these companies, but I understand that they charge on an a la carte basis – you pay for the services you require i.e. writing feature sheets, offer negotiation, etc.;
• Next up is the Mere Posting. This is when you retain the services of a Brokerage to list your home on MLS and do nothing else. I’ve heard that these companies charge between a few hundred to $1,000 for this service. In most cases, they list your home on MLS and you’re responsible for doing everything else – getting your home ready for market, preparing marketing materials, advertising, doing open houses, arranging appointments, dealing with Realtors, negotiating offers, liaising with lawyers, handling issues that result from home inspections and appraisals, etc;
• Another option available to you is a company which advertises that it will charge you a minimum commission. [Time for a a little  background information about how things generally work when a home is listed on MLS. It used to be the case that all Realtors were paid by the sellers. How so? Well, the sellers would pay their Realtor’s company (the “listing company”) 6%, for example, and the listing company would then give 3% of this 6% to the company of the Realtor working with the buyers (the “buying company”). The listing and buying companies then split this commission with their respective Realtors according to the specific commission sharing agreement each company has with every Realtor. Things still tend work this way most of the time even though buyers now have the option of paying their buying companies directly. Now back to the minimum commission company.] With the minimum commission company, the commission can be anything the company chooses. If the company charges its sellers a commission of 3%, for example, it would keep .5% for itself and pay 2.5% to the buying company. The reason it pays 2.5% to the buying company, which is so much more than it keeps for itself, is because most sellers, whether listed on MLS or not, offer 2.5% to the buying company. A seller who offers less than this to the buying company runs the risk of Realtors choosing not to show their home because they’d prefer to show other homes that are offering a commission of 2.5% so they can earn more money. If you’re a seller, it’s important to remain competitive with what other sellers are offering or you’ll be at a disadvantage;
• The options described above aren’t seen all that often in central Toronto at this point in time. In fact, they’re pretty rare. In central Toronto, it’s more common to find what I’ll refer to as full commission, but full commission can have many different meanings because all Realtors are free to charge whatever commission they see fit. Full commission is usually in the range of 4% to 6% and, most of the time, the listing company will pay 2.5% of the total commission to the buying company. The companies will then share these commissions with their respective Realtors in accordance with the commission sharing agreements they have with each Realtor. In the old days, all Realtors charged basically the same commission, but that’s no longer the case. Different Realtors charge different amounts, just like lawyers, accountants, plumbers, painters and everyone else whose rates aren’t regulated. And just like these others, Realtors’ rates depend mostly on how much the Realtor believes his or her services are worth.
• Apart from the commission a Realtor charges, you should be aware that some Realtors will charge all their clients the same commission and some will have different arrangements with each client.  It’s also important to know that some Realtors may offer their clients a discount of .5% to 1% if the clients use their services to buy AND sell, if the Realtor finds a buyer for his sellers’ home, if the sellers’ home is over a certain dollar value, etc. Other Realtors may offer their clients a commission rebate at closing. Anything is possible so don’t be surprised no matter what you hear. And of course, you’ll also meet Realtors who will be very straight up to deal with – they’ll tell you that the commission will be X and there won’t be any side deals or contingencies to negotiate. Not matter what deal you strike with your Realtor, make sure you get every last detail in writing because your deal isn’t enforceable if it’s not in writing. It’s never a bad idea to avoid misunderstandings that could lead to lawsuits over commission.

What should you make of all this? Here are a few questions to ask yourself that may help you choose the option that’s right for you:

• How much time do you have to devote to selling your home?
• How much real estate expertise do you have?
• Do you think that all Realtors are created equal or do you believe that some Realtors are worth more money than others?
• Are you a firm believer in You Get What You  Pay For?

So there you have it. If you want to know what I think, take a look at Demand Excellence. My advice is to hire the Sidney Crosby of Realtors to give yourself the best chance of achieving the best results possible. But you may have different ideas regarding whom to hire or even whether to hire a Realtor (for more on how people hire their Realtors see 1,000,000 Reasons Why People Haven’t Hired Me). No matter which option you choose, I hope you’re now better prepared to make the decision that’s best for YOU!