What Are Real Estate Realtor Fees in Vancouver?

You probably don’t think much about realtor fees as a home buyer or seller, but you definitely should!

Real estate commission fees are the fees that are taken out of your home’s selling price to pay the buyer’s agent, the seller’s agent, and their brokerage firms.

In this post, I’ll cover:

• What realtor fees are
• Who pays realtor fees in Vancouver
• Why real estate agents charge fees
• What do realtor fees cover
• Can you avoid realtor fees
• Can you reduce realtor fees
• How to calculate real estate fees

What Are Realtor Fees?

Realtor fees are the commission you pay your real estate agent for their services when you buy or sell your home. It’s usually paid to your agent’s real estate brokerage firm, which they then split with your agent. These fees are sometimes also called:

• Real estate commissions
• Commission fees
• Commission rates
• Realtor commissions

In British Columbia, we don’t have a standard realtor fee, so each realtor and real estate brokerage office sets their own realtor fees. On average, these commission rates are around 7% for the first $100,000, and then 2.5% for anything after that, split between the buyer’s agent, seller’s agent, and their brokerage firms.

Who Pays Realtor Fees in Vancouver?

The seller usually pays both the seller’s and buyer’s agent commission. However, that’s not always the case. If it’s a competitive market, home buyers could offer to pay their agent’s commission fees—or even both—as a means of sweetening their deal.

Let’s say Brenda is selling her condo for $450,000 and has multiple offers. Two of them are for $470,000, but a third is for $460,000, with a contingency that they’ll pay the commission fees.

Even though the third offer is $10,000 less, they agree to pay 7% of $100,000, and then 2.5% of the other $360,000.

$100,000 x .07 = $7,000

360,000 x .025 = $9,000

$7,000 + $9,000 = $16,000

Altogether, the buyer and seller agent commission comes to $16,000, meaning that Brenda’s net profit will be $6,000 if she accepts the third offer over the other two (technically more if you include the goods and services tax, but more on that later).

Why Do Real Estate Agents Charge Fees?

Realtors’ fees are how agents get paid. Most real estate agents aren’t paid hourly or have a defined salary. Our income is solely based on our commission. We only make money when we successfully help you buy or sell a home.

What Do Realtor Fees Cover?

Let’s say you sell your home in 21 days for $400,000, and that after the buyer’s agent and your agent’s brokerage firm gets their cut, your agent nets $6,000.

Not bad for a month, right?

Well, it’s not quite that much. There’s a lot that goes into a realtor’s commission you may be unaware of. Typically, your agent is responsible for paying for:

• All your marketing materials
• Home staging, video tours, and photography
• Property listing strategies and fees
• Running or finding and attending open houses
• Negotiating and facilitating closing your real estate transaction
• Any errors made in paperwork that you’d otherwise be responsible for
• And much more

Can You Avoid Realtor Fees?

Yes, but the alternative is usually more costly.

The one way to avoid paying realtor fees is to not have a realtor. Unless you’re a real estate professional, here’s why that’s a bad idea:

Home Sellers

You can list your property as “for sale by owner,” but by doing so, you’re assuming other costs. You’ll be responsible for all your marketing materials and research, listing fees, staging, open house organizing, etc. Also, you’ll have to hire a lawyer to manage all the paperwork, including the bill of sale.

Even if you do everything right, going the “for sale by owner” route greatly diminishes your buying pool. Many agents will avoid showing your property to their clients, because they won’t make a commission on it.

During the selling process, you’ll be responsible for negotiating with the buyer’s agent, who likely knows more about the market than you. Before you know it, you could find yourself accepting a lower final sale price than you would’ve gotten with a real estate agent in your corner.

Home Buyers

Real estate professionals are equally important for home buyers. They bring their knowledge of neighborhoods and market trends to the table. While you can reach out to a seller yourself, many of them will be wary of home buyers without agents. Also, you’ll still be responsible for hiring a lawyer and negotiating your offer, contingencies, and closing costs.

Working without a real estate agent is time-consuming, adds more stress to what’s often an already stressful process, and is rarely worth saving a couple percentage points in the long run.

Can You Reduce Realtor Fees?

According to the Canadian Real Estate Association, or CREA, yes.

Here are a few ways realtor fees are determined:

Fixed Commission Rate

A fixed commission rate is the predetermined percentage you and your real estate agent agree upon, regardless of what your home sells for.

Flat Fee Commission

A flat fee is a fixed charge that a home seller agrees to pay their real estate agent, regardless of what the home sells for. In other words, this commission fee is based on a set amount instead of a percentage. If you and your agent agree on a $15,000 commission fee, you’ll owe them that $15,000, whether your home sells for $300,000 or $1,000,000.

Split Commission

Split commission is the most common in Vancouver real estate. Instead of agreeing to a fixed commission fee, your real estate agent may agree to take a smaller commission if your home sells for a specified amount. While it’s 7% for $100,000 and then 2.5% after that, split commissions can vary, especially in other parts of Canada.

Service Fee

Service fees are far less common, but not unheard of. Some agents may suggest an hourly or flat fee for many of the duties they perform, like open houses, marketing, and buying materials to help your home sell. If they do this, they may also agree to accept a lower commission fee when you close. You may also agree to pay a flat fee plus extra for additional services.

Negotiating Real Estate Agent Commission

Before settling on an agent, ask them what their commission rates are, what they include, and if they’re flexible. Some won’t be, because that means accepting a lower commission to sell your home. However, there may be terms or trade-offs you can agree on.

Agents from larger or more traditional real estate brokerages usually lack wiggle room, and will usually require you to pay a fixed rate. However, some services, such as staging or marketing, can be negotiable.

How to Calculate Realtor Fees

Calculating realtor fees is pretty easy, once you know what to account for. The calculator contains five components:

• Final purchase price of your home
• Seller’s agent commission
• Buyer’s agent commission
• Goods and services tax (GST)*
• Total amount the seller receives (net profit)

*Like other services, real estate brokerage is subject to GST. GST is 5% of the total realtor fees. For example, if you spend $15,000 in realtor fees, your GST is $750, making your total amount $15,750.

To show you what these fees look like, here are two examples: the first involves a fixed commission rate, while the second uses split commission rate Vancouver realtors usually use:

Calculating Fixed Commission

Eduardo is selling his home for $300,000 at a 6% fixed commission rate. His agent and the buyer’s agent will split that commission, each receiving 3%:

Item	Fee	Total
Purchase Price	N/A	$300,000
Seller’s Agent Commission	3%	$9,000
Buyer’s Agent Commission	3%	$9,000
GST	5% of fees	$900
Net Profit	N/A	$281,100

Calculating Vancouver Realtors’ Split Commission

Eduardo is selling his home for $300,000 at a 7% commission rate for $100,000, and 2.5% for the other $200,000. To make things extra complicated, it’s not at even 50/50 split. For the first 7%, the seller’s agent receives 3.875% while the buyer’s agent gets 3.125%. For the rest, the seller’s agent receives 1.3375% while the buyer’s agent gets 1.1625%.

Don’t worry. To make your life easier, we’ve created a commission calculator for you!

Item	Fee	Total
Purchase Price	N/A	$300,000
Seller’s Agent Commission	3.875% (first $100k)	$3,875
Seller’s Agent Commission	1.3375% (last $200k)	$2,675
Buyer’s Agent Commission	3.125% (first $100k)	$3,125
Seller’s Agent Commission	1.1625% (last $200k)	$2,325
GST	5% of fees	$600
Net Profit	N/A	$287,400

 

Thanks to the split commission fees, even though Eduardo is spending a high commission rate on the first $100,000, he nets more overall in this pricing model.

Conclusion: Paying Realtor Fees

No one enjoys paying fees. However, realtors are well worth their commission. An agent in your corner relieves of your added stress and liability, and can usually broker a better deal than you’d get without one. To learn about our realtor fees and how we can help you buy or sell your next home, send us a message!

We also recommend checking out some of our other recent posts. Are you a first-time home buyer? You might qualify for the first-time home buyer incentive, or can benefit from some of these smart strategies.

source https://www.kimlee.ca/what-are-real-estate-realtor-fees-in-vancouver/