by Faiza Ahmed (Broker) 
Home sellers paying for buyer agents: Is it injustice or simply misunderstood business logic?
Disclaimer:
I am Faiza Ahmed, a licensed real estate broker. The analysis presented in this article is unbiased and strictly based on publicly available documentation, industry-standard forms, and legal references. My perspectives are also shaped by my own experience as a consumer impacted by real estate commissions prior to joining the industry. While I support reforms to the current real estate commission structure, my aim is to provide a balanced, factual critique of the ongoing class-action lawsuit.
Introduction: A Lawsuit Shaking Foundations or Just a Misunderstanding?
Canadian home sellers have long accepted that paying both the seller’s and buyer’s real estate agent commissions is simply how things are done. But recently, a dramatic class-action lawsuit launched by Kalloghlian Myers LLP (Commissions Canada Lawsuit) emerged, alleging that home sellers have been unfairly forced into paying buyer-agent commissions by rigid MLS rules. The lawsuit calls this practice anti-competitive, asserting it’s a significant contributor to Canada’s affordability crisis.
At first glance, this lawsuit (driven by bold claims of industry collusion) seems like a consumer-friendly crusade against hidden costs. But dig deeper, and the foundations begin to crumble.
Is Canada’s largest-ever real estate lawsuit genuinely seeking justice, or is it fundamentally misunderstanding how the industry operates, risking a costly misuse of court time and public resources?
What Exactly Does the Lawsuit Claim?
According to Garth Myers of Kalloghlian Myers LLP, quoted prominently in a January 2024 Business Wire release:
“This practice needs to end. The cost of housing is a major problem in Canada. Unfortunately, the real estate industry is contributing significantly to this crisis.”
Specifically, the lawsuit targets what’s described as the entrenched “buyer brokerage commission rule,” allegedly enforced through MLS boards like TRREB and CREA. Court filings state explicitly:
“These rules apparently oblige a seller of residential real estate listed on the Toronto MLS to make an offer of commission to any Cooperating Brokerage acting for a prospective buyer, thereby making the seller responsible to pay for the Cooperating Brokerage services used by the buyer.”
But is this truly accurate?
The Critical Flaw: What the Industry Actually Says
Contrary to the lawsuit’s foundational claim, official documents widely used in Ontario real estate transactions, specifically OREA forms 200 (Listing Agreement) and 300 (Buyer Representation Agreement), paint a different picture:
This language distinctly illustrates that:
The seller voluntarily “offers” commission as part of their contractually negotiated agreement to attract buyers through the MLS.
Buyers themselves explicitly agree to pay their own agents directly in the absence or deficiency of a commission offered by the seller.
Thus, while it is common industry practice for sellers to cover buyer agent fees (often considered practical or strategic for attracting buyers) it is not legally mandated by CREA, OREA, or any real estate board. The existing practice stems from contractual agreements voluntarily entered by sellers, rather than imposed by law or industry regulation.
In simple terms, no mandatory rule exists that legally obligates a seller to pay the buyer’s agent fees. Sellers choose to offer these commissions voluntarily because doing so attracts more buyers—it’s a strategic, contractual decision, not a regulatory obligation.
The Buyer-Pays-Own-Agent Model: A Problematic Alternative
The lawsuit proposes shifting buyer agent costs entirely to buyers. On the surface, this seems fair—but practically, it risks unintended negative consequences:
Consider the Recruiting Industry Analogy:
When companies hire employees through recruitment agencies, the company—not the candidate, pays the recruiter’s fee, despite recruiters working directly with and offering services to both parties. Even though prospective employees clearly use and benefit from recruiters’ guidance, it’s universally understood that the primary beneficiary is the employer, who acquires the employee through the recruiter’s expertise.
Similarly, in real estate, buyers benefit from professional representation, but the seller is the primary beneficiary of buyer-agent services because they directly facilitate the sale. Without buyer agents, sellers face increased complexities:
- Buyers might bypass professional representation, increasing dual-agency conflicts.
- Buyer confidence and market fluidity could decline, slowing transactions and potentially reducing market efficiency.
- Confusion and disputes around who represents whose interests could skyrocket, harming both buyers and sellers.
Clearly, a “buyer-pays-all” solution, while seemingly straightforward, would actually make the home-buying process far more convoluted and uncertain, creating new problems rather than solving existing ones.
A Better Path Forward: Balanced and Realistic Alternatives
While the existing commission structure can indeed benefit from reform, the lawsuit’s proposed shift to a buyer-pays-all model might create more issues than it solves. As previously discussed in our investigative piece “Unmasking the Hidden Costs”, the industry could embrace more practical and innovative solutions, including:
- Transparent & Flexible Commission Models:
- Flat-fee or graduated commission structures that reflect the actual complexity and effort required in different transactions.
- Hybrid Representation Systems:
- Allowing both parties (seller and buyer) to clearly negotiate commission splits, with explicit transparency, creating opportunities for fairer deals and competition.
- Enhanced Consumer Education:
- Educating sellers and buyers about commission flexibility, contractual rights, and industry norms, enabling informed and empowered decisions without compulsory regulatory overhaul.
These alternatives already exist in various forms and, with greater promotion, can offer more effective and immediate benefits to consumers without the unintended consequences of the buyer-pays model proposed by the lawsuit.
Is This Really Worth the Court’s Time?
While the lawsuit rightly highlights genuine affordability and transparency issues, its central premise, claiming home sellers are forced by regulation into paying buyer commissions—appears fundamentally flawed upon examining industry-standard forms and actual practices. Pursuing this lawsuit may represent a costly misuse of court time and public resources, potentially distracting from more practical, immediate reforms that genuinely serve consumer interests.
The question Canadians should ask is not merely whether real estate commissions need reform (they clearly do), but whether the approach chosen by this lawsuit serves the public good—or simply adds unnecessary confusion, complexity, and cost to an already challenging market.
Conclusion: Reform Is Necessary, but the Lawsuit’s Approach Misses the Mark
The current lawsuit rightfully highlights valid concerns—commission transparency, competitive pricing, and housing affordability; but fundamentally misunderstands critical contractual and operational realities. The claim that sellers are forced by regulation to pay buyer-agent commissions is demonstrably contradicted by existing industry-standard agreements.
Rather than replacing one flawed system with another potentially problematic model, the industry would better serve Canadian consumers by embracing transparency, competition, and consumer education. This balanced path offers a viable solution that maintains market efficiency, protects consumer interests, and strengthens housing affordability, benefiting everyone involved in the process of buying or selling a home.