by 
With discreet academic insights and trusted data integration
As a licensed broker, I’ve spent years helping clients navigate one of the most confusing costs in real estate: commission. It’s often accepted as a given 5% split between agents but few sellers realize how much flexibility and strategy actually exist behind that number.
This guide is written with sellers in mind. It breaks down how commission works in Canada, what options are available beyond the traditional model, and how to assess value based on performance — not just price. For buyers, I’ve also included a high-level look at how agent incentives shape the transaction from the other side.
What Is Real Estate Commission?
Real estate commission is the fee paid by the seller to compensate the agents involved in the transaction. Typically, this is split between the listing agent and the buyer’s agent.
The most commonly cited total commission is 5%, but there’s no fixed rate. Actual commission ranges from 3% to 7%, depending on region, property type, and service scope. The 5% figure persists largely due to industry convention — not regulation.
How Much Does That Actually Cost?
Here’s how a 5% commission plays out in Ontario when HST (13%) is factored in:
| Sale Price | Commission (5%) | HST (13%) | Total Deducted |
|---|---|---|---|
| $500,000 | $25,000 | $3,250 | $28,250 |
| $750,000 | $37,500 | $4,875 | $42,375 |
| $1,000,000 | $50,000 | $6,500 | $56,500 |
Do Higher Commissions Deliver Better Results?
Summary for sellers:
Higher commission doesn’t automatically lead to better outcomes. Multiple studies show that performance depends more on the agent’s strategy than the amount they’re paid.
For Readers Who Want the Full Picture:
A peer-reviewed Dutch study comparing traditional and flat-fee brokerages found no disadvantage in final sale price for flat-fee listings.
In fact, homes sold 2.7% faster on average using fixed-rate agents (Gautier, Siegmann & van Vuuren, 2023). The Netherlands, like Canada, relies on shared listing platforms and dual-agent commission splits—making its market structure broadly comparable.
Germany offers another insight.
There, regulatory efforts to force buyers to pay their own agents led to unintended consequences. Listing agents simply raised their rates to compensate. The overall cost to consumers rose, proving that agent behavior is more responsive to incentive structures than to regulatory intent (Stoll, 2023).
In North America, the Richmond Federal Reserve modeled percentage-based commission systems and concluded that they introduce inefficiencies and misalign client-agent interests, especially on high-value transactions. Their estimates suggest that moving toward cost-based or hybrid models could result in billions in annual consumer savings (Grochulski & Wang, 2024).
So what does this mean in Canada?
While many sellers default to 5%, the commission amount is not a reliable indicator of agent performance. Instead, sellers should evaluate agents based on:
- Sale-to-list price ratio
- Days on market
- Track record in similar homes
- Service detail (e.g. staging, negotiation skill, digital marketing)
Real estate has evolved. Agents who adapt to modern tools and market data and not just those charging full price are often the ones who deliver the strongest results.
Commission Is Negotiable in Canada
Despite industry tradition, commission is entirely negotiable. There is no law requiring sellers to pay a set rate.
You can:
- Offer less than 5%
- Adjust buyer-agent compensation ~ not always recommended
- Choose flat-fee or hybrid options
A review of North American transactions by Brookings found that buyer-agent fees remained remarkably consistent over decades, regardless of home value or complexity—suggesting market inertia, not merit-based pricing (Barwick & Wong, 2019).
What Are the Alternatives to 5%?
| Model | What You Get | Cost Range |
|---|---|---|
| Traditional | Full-service marketing, staging, negotiation | 5% (or more) |
| Low Commission | Licensed agents with reduced rates | 1–2% listing side |
| Flat-Fee Listing | MLS® exposure, optional add-ons | $1,000–$2,000 |
Alternative models aren’t just cheaper—they’re structurally different. You pay based on services provided, not a flat percentage tied to your home’s value.
In practice, they’ve worked. The Richmond Fed notes that flat-fee models align pricing more closely with effort, improving client-agent efficiency and consumer outcomes.
Why Agent Transparency Matters
In regions like Quebec, where public complaint records are more visible, agents behave differently. When their reputation is on the line, service quality increases. Transparency builds accountability.
“Agents under reputational scrutiny exhibited stronger professionalism and responsiveness.”
— Kryzanowski & Wu (2024), SSRN.
For sellers, this means choosing agents not just on rate, but on track record.
Do Buyers Pay Commission?
Not directly. In most Canadian transactions, the seller pays both agents, including the buyer’s. But this structure still affects buyers.
Buyer agents are usually paid a percentage of the sale price, which creates subtle incentive mismatches. Economic research has shown this leads to inefficiencies, as agents may prioritize higher-priced homes or longer searches:
“Percentage-based compensation introduces inefficiencies… and may misalign agent priorities with buyer goals.”
— Grochulski & Wang (2024), Richmond Fed.
In some Canadian markets, rebate or flat-fee buyer services are emerging as alternatives — but adoption remains early-stage.
Commission and Control Belong to the Seller
The traditional 5% model persists because it’s easy—but not because it’s always effective.
Sellers today have options. They can negotiate lower fees, use fixed-fee or hybrid brokerages, and evaluate agents based on service quality, not tradition. For a deeper look at how these models work in practice, see our guide on what flat fee means in real estate and how it compares to traditional commission structures.