How Much Is Real Estate Commission?
This is a question that many people have asked me over the years. It is also a source of a lot of misinformation and confusion for many home buyers and sellers, so I thought I would write a quick post about the subject.
Real estate commission in Alberta is not fixed by law.
What that means is simply that there is no set rate or amount which any real estate professional is obligated to charge. This means there is no maximum and there is no minimum. Real estate commission can be any consideration which is agreed upon by the parties involved.
Now back when I started in this industry in 1993, the most commonly charged commission rate that I observed was 7% of the selling price. As home prices increased and competition among real estate people also increased, the most commonly charged commission rate seemed to be closer to 7% of the $100,000 of the selling price, plus an additional 5% on any amount over that. Now this fee was completely paid by the seller. The buyer and the buyer's real estate salesperson were most commonly offered half of that amount if they sold a listed property, and the listing agent kept the other half.
Keep in mind, this was not always the case, and there was no law or rule that made things this way, it was just simply the way the industry had evolved locally to make this common practice.
The real estate industry has changed. Many of the jobs that "a 7% agent" once did and many of the tasks an agent was once responsible for have been outsourced. Take for example a random ficticious REALTOR. This guy might do things like:
the real estate agent signs up the contract with you, then.........
a sign guy puts up the for sale sign
a photographer goes to take pics
a videographer makes a virtual tour
a drone company takes some aerial pictures
a staging company improves the decor
a landscaping company improves the curb appeal
an appraiser determines the market value based on sales data
a home inspector checks for condition and problems
a lawyer checks the land title for issues
a mortgage broker will verify the outstanding mortgage terms
a marketing assistant will put the property on the internet, make flyers, post ads
With all this outsourcing of various tasks, many agents and much of the public started to question, Why would this real estate agent still get 7%? (unless of course he was paying all those people to do many tasks which were once things some agents considered part of their job back in the day). As a result, today we see many agents in Lethbridge real estate who are charging their clients 5% of the sale price, and we even have one company who is offering to do it for 1% of the selling price (although there are some pretty specific details with that). The actual fee paid to the real estate agent has declined significantly over the past decade in our local market.
Keep in mind, that this amount is still negotiable and not fixed by any sort of law. For me and my company, I work with my clients to set a fee that is reflective of the services provided, the actual work that will be done for the client, the real expenses which will be incurred, and the value and unique characteristics of the property we will be selling. This means that the amount may vary and fluctuate based upon a wide variety of factors.
In my opinion, this reactive and customer focused commission strategy helps to make sure that my clients pay a fair but reasonable fee to do business with me. I pride myself on helping them make profitable real estate decisions, and in return I earn a bit too. This collaborative strategy works excellent and shows my clients that we are working together, that we are on the same team, and that we are both interested in getting their house sold for the best amount possible.
Robert W May is a Real Estate Broker in Lethbridge Alberta, having now been in the industry for over 23 years. . He was also a licensed Lethbridge mortgage broker and financing expert with Canada First Mortgage of Calgary Alberta for the past 10 years. He is an industry leader always willing to help train and educate others in how to improve their business models for financial and personal benefit.