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In the complex landscape of Canadian real estate, one of the most persistent questions and sources of confusion for both buyers and sellers is this: What percentage do REALTORS® actually make from a home sale? While 5% has long been cited as the industry “norm,” the reality is both more nuanced and increasingly negotiable.
This guide cuts through the generalizations to examine how real estate agents are compensated, how commission splits work in practice, and what sellers should know before agreeing to a listing contract. Drawing on transparent market data and regulatory frameworks, we explain the economics behind commissions and the alternatives that are reshaping the conversation.
Where 5% Comes From
For decades, the most common commission structure in Canada has been a 5% total commission with some province/location specific variation, calculated as a percentage of the final sale price.
| Home Sale Price | Total Commission (5%) | Buyer Agent Side (2.5%) | Listing Agent Side (2.5%) |
|---|---|---|---|
| $800,000 | $40,000 | $20,000 | $20,000 |
However, the split doesn’t end there. Within each brokerage, the agent usually shares that commission with their brokerage office. Depending on experience, agreement terms, and volume, the agent themselves might walk away with 60–90% of their portion.
What’s Included in That Commission?
REALTORS® are paid based on performance, not hours, and their commission typically includes:
But here’s the issue: not all agents provide the same level of service, even when charging similar rates. That’s why commission percentage shouldn’t be your only consideration — value-for-fee matters more.
CREA, Competition Law, and Commission Freedom
In Canada, real estate commissions are not fixed by law.
As outlined by the Canadian Real Estate Association (CREA), every brokerage is free to set its own commission rate. CREA’s code explicitly supports:
This aligns with the Competition Act, which prohibits anti-competitive behaviour such as price fixing or collusion among agents.
Buyer vs. Seller Agent Commissions: Who Pays What?
Technically, sellers pay the entire commission, which is then split with the buyer’s agent. This often creates the illusion that buyer representation is “free,” but in truth, the cost is embedded in the sale price.
In highly competitive markets like Toronto and Vancouver, offering a reduced co-op commission is becoming more accepted, especially for hot listings or pre-construction units where less buyer persuasion is needed.
The Hidden Dynamics of Buyer Agent Commission: What the Research Shows
While the standard commission for real estate agents in Canada and the U.S. typically hovers between 5% and 6% of the final sale price usually split between the listing and buyer agents there’s growing evidence that these percentages do more than just reflect service fees. They can subtly reshape how listings are marketed and shown.
A working paper from the Federal Reserve Bank of Atlanta (2024) reveals something few sellers consider: reducing buyer agent commission can quietly undercut your home’s chances of selling, even when your asking price is competitive.
The researchers studied more than 2.3 million transactions across three major U.S. cities and found that homes listed through flat-fee brokerages where sellers pay a low, fixed amount for MLS® access but often offer reduced or negotiable buyer agent commissions actually sold for 1% to 4% more than comparable homes listed by full-service agents.
But there’s a catch: these same listings were 8% to 11% less likely to result in a completed sale.
“These results could also be explained by buyer agents steering clients away from flat-fee listings,” the authors write—echoing the now well-known findings by Levitt and Syverson (2008), who first warned that agents motivated by commission tend to prioritize their own compensation over client outcomes.
This steering effect—where agents subtly or overtly avoid showing homes with lower commissions — is not just theoretical. It’s been further explored in recent legal cases and reinforced by the opaque fee-sharing model employed by traditional brokerages. As outlined in this breakdown of hidden brokerage costs, much of the 5–6% commission goes not to the individual agents providing service, but to a layered structure of brokerage splits, franchise royalties, and national advertising budgets costs passed along to consumers under the guise of “full service.”
Even more striking: the Atlanta Fed paper found that buyers don’t punish their agents for potentially steering them toward higher-commission homes. Homeowners who appeared to overpay were just as likely to re-hire their original buyer’s agent later on. This suggests little natural accountability in the system.
What This Means for Sellers
If you’re considering a low-commission or flat-fee listing strategy, the takeaway is nuanced. Yes, you might save on fees and even sell at a higher price. But unless you still offer a competitive commission to buyer agents, your home may get less exposure, fewer showings, and ultimately fewer offers.
Reducing the listing side commission is one thing; slashing buyer agent incentives is another. Understanding this balance is essential. As the research shows, commission decisions don’t just impact your net proceeds—they affect buyer traffic, agent behavior, and the odds of a successful sale.
Alternatives to the 5% Commission Model
Not all sellers want or need the full-service, full-fee approach. Today’s market offers several commission alternatives:
Flat Fee Real Estate Services
Traditionally, flat fee real estate models allow sellers to pay a fixed amount typically between $1,000 and $3,000 in exchange for limited services such as MLS® exposure, basic paperwork, and optional marketing tools. This model is often marketed toward DIY-oriented sellers or investors comfortable managing the process independently.
While this can reduce upfront costs, it usually comes with trade-offs: limited agent involvement, extra charges for support services, and more responsibility on the seller’s shoulders.
In contrast, our Full-Service Flat Fee model offers the same pricing simplicity but with the complete support of a licensed real estate agent guiding the entire transaction.
Low Commission Agents
Low commission agents charge a reduced rate often 1% to 1.5% on the listing side while still providing a largely full-service experience. These agents may operate independently or through brokerages that focus on volume-based pricing.
This model can be a smart option for sellers who want to lower costs while still having professional representation, especially in markets where properties move quickly. Most still offer co-operating commission to buyer agents to ensure broad exposure.
Do-It-Yourself (FSBO)
The For Sale By Owner (FSBO) model eliminates listing agent commissions entirely but puts the full weight of the transaction on the seller. This includes pricing strategy, listing creation, buyer communication, paperwork, and legal compliance.
While it can work in niche scenarios, it often lacks the market insight and negotiating experience of professional agents. A CMHC case study from Thunder Bay found that private sales typically underperformed MLS®-listed homes, fetching 1% to 5.7% less on average, depending on the price range.
Does Paying a Higher Commission Yield a Better Result?
This is one of the most persistent assumptions in residential real estate — that paying more leads to better service, better marketing, and ultimately a better sale price. But research doesn’t always support that.
According to a landmark study by Levitt & Syverson (2008), real estate agents consistently sell their own homes for more money and in less time than when representing clients. Why? Because when it’s their own deal, they spend more time pricing and negotiating — whereas the marginal financial reward for spending extra effort on a client’s listing is minimal under a percentage-based system.
📉 In short, the commission system may not always incentivize agents to push for every last dollar on your behalf — unless their own financial stake is high.
Other studies (such as Grochulski & Wang, 2024) echo this idea: higher commission doesn’t necessarily lead to better sale outcomes unless you’re working with a top-tier agent who brings unique pricing accuracy, marketing depth, and negotiation skill to the table.
What Sellers Should Ask Before Agreeing to a Percentage
If you’re considering listing your home, don’t focus on percentage alone. Ask your agent:
- “What’s your average sale-to-list price ratio?”
- “How many homes like mine have you sold recently?”
- “Do you include staging, photography, and digital marketing?”
- “Can I speak with two past clients who weren’t referrals?”
For a full checklist of questions to ask a potential agent, see this evaluation guide.
Performance Over Percentage
A seller’s success doesn’t hinge on whether they pay 1%, 3%, or 5%. It hinges on the performance of the person representing them.
Some agents deliver exceptional results at lower fees. Others charge more but offer no strategic advantage. What matters most isn’t the percentage — it’s whether the agent can price your home competitively, market it effectively, and negotiate the best possible deal.
That’s why sellers should focus on an agent’s track record, communication style, and depth of service — not just their fee structure. A flat fee or low commission agent with the right skillset can outperform a traditional full-fee agent who lacks market insight or attention to detail.